Proper reporting of closure of a TFSA on 3520 and 3520A

deryn95 · Post by **deryn95** » Tue Dec 16, 2014 1:17 am

Hello,

My spouse and I are U.S. citizens living in Canada. We have recently closed our TFSAs because the reporting requirements have become too burdensome. Is the sale of the mutual fund shares held by the TFSAs considered a distribution that needs to be reported on Part III of the 3520?

The trust corpus is just our contributions which was income that was already taxed and I reported the dividends annually on our 1040 as ordinary dividends.

MGeorge · Post by **MGeorge** » Tue Dec 16, 2014 12:50 pm

Hi,
I'd recommend taking a look at an old post called "taking a stab at 3520 for a TFSA". There is some good information there.
I think the concensus was, you never have to fill out part 3 of 3520 for a TFSA. You'll see in the instructions something about "if you've completed part 2, and reported all your income, do not report it again on part 3".

The individual sales of mutual funds within the TFSA is not the distribution. The distribution from a TFSA is the removal of cash. Selling the securities within the account may generate gain. The gains are the reportable income.

Best Regards.

nelsona · Post by **nelsona** » Tue Dec 16, 2014 1:25 pm

I assume, sincce you already have the "headache" that you have been compliant with PFIC, FATCA, and FBAR requirements in the past?