Canadian Immigrating to US TFSA, RRSP and Condo

[Makersmark]

I am a Canadian resident / citizen that is married to an American resident / citizen. We were married ~ 1 year ago but I am still living and working in Canada while my IR / CR1 visa (marriage) is processed. When completed, I plan to move to the US as a permanent resident.

My situation….

• I have a TFSA containing only Canadian equities (current value ~35k)
• I have an RRSP that is self directed and contains mostly US equities in US dollars (current value ~ 100k)
• I have a condo

Questions…

1 - TFSA - Sell assets within the account, close account and move money into my Canadian savings account? I have read that this is the best choice to eliminate the reporting and tax implications.

2 - RRSP - Keep it in tact? and wait till I am of age to withdraw (~25 years away)

3 - RRSP Holdings - I know there are no further contributions, but can i continue to hold US domiciled equities and receive dividends? Should i keep my individual equities or sell them within the account prior to leaving and buy something simple like a US domiciled broad market ETF? Do i have to report each holding and its gain each year? Will I be able to change the holdings within the account while I am a US resident?

3 - Condo - Should i sell the condo or rent it out? obviously a complicated question, but generally it is a headache tax and reporting wise? or does it make sense and have any benefits to keeping it?

4 - Condo selling - If my visa approval happens but I have not yet sold the house, is it wise to leave Canada prior to actually selling my condo? I hope to sell it quickly and close the deal but the reality is a long possession time may push back the closing of the deal and therefore my cash from the sale. If i leave Canada and then close the deal, is there a tax consideration that wouldn’t be there if i closed before i left?

5 - Money sitting in a Canadian bank savings account. Once i move to the US and money is sitting in a Canadian bank, can i move over the amount at any time without tax implications? For example, if i left the TFSA proceeds in a savings account and waited a few years until the Canadian exchange rate was more favourable, then moved it to an american bank, would there be any tax implications?

6 - When do i start filing a US return? I have only ever filed a Canadian return. If i leave Canada November 1st, Next spring, do i file a return in Canada for Jan to November then in the US from Nov - Dec?


Great site and great info,
Thank you

[victoriaguy]

Hey Makersmark,

I don't know the answers to all your questions but I can take a stab at a lot of them...

1. I think you can take the securities out of your TFSA in Canada with no Cdn tax consequences (BUT SEE 4. BELOW), but no point in selling your securities and trigger capital gains/losses unless you wanted to do that anyways.

2. You can continue to hold your RRSPs, and collect dividends, buy/sell the equities, etc., without reporting income in them until you retire, per Canada-US Tax Treaty. We used to file a form 8891 as an informational return on RRSPs, but that has been obsoleted. Google "Revenue Procedure 2014-55" to find out what the procedure is for you now. Basically, you don't have to report them if you've ever filed a US tax return, but you haven't, so I'm not sure what you have to do there.

3. No reason to sell your condo, but know that if you rent it, the rental income is taxable by Canada FIRST as the property is in Canada. You have to report the income on your US tax return, then get a foreign tax credit for the tax you paid on it in Canada. (Note, the US divides foreign taxable income into passive (rentals, etc.) and "general" (wages, etc.), and you can't use taxes paid for one type of income against US tax owing for the other, but that shouldn't be a problem... just check off "Passive Category" on your form 1116 (foreign tax credit).

3a. If you DO sell your condo after moving south, if it was your primary residence in Canada, I believe you can get a $250,000 exemption on any gain realized in selling it, for two years or almost two years after moving out. Google "IRS sale primary residence" to find the appropriate "pub" to read. Having said that, if there is no gain, you won't owe anything anyways. Make sure you have all your records or purchase and any renovations that increased its value, as you will subtract that and all purchasing and closing costs from your sale amount to get the gain.

4. Having said all that, be aware that when you leave Canadian residency, you will be subject to a Canadian exit tax. All your assets will be "deemed" sold, and you will have to pay any net capital gains to Canada resulting from that deemed sale (one disadvantage of de-registering your TFSA). It may be that you can avoid that on your TFSA securities by leaving them in there for a year. Of course you then have to file the 3520/3520a forms for the TFSA for that year. It may be that you can deregister the TFSA after you become a US resident and the exit tax is all handled, but I could be totally wrong with that. Check with an accountant on that. Also check with CRA whether you can count losses from securities and the condo against each other... I suspect you can, and that would reduce your exit tax.

5. You might also want to check with US immigration to see how long you live in the US before becoming a resident, and find out if that has anything to do with when you lose Canadian residency.

6. You won't have any US tax consequences for closing a Cdn bank account, but you might owe exit tax on any interest/gains/etc. HOWEVER, you DO have US REPORTING consequences for HAVING a bank account or other assets (even securities) held in institutions outside the US. Add up the maximum values each account attained at any time during the year, and if this "aggregate" value exceeds US $10,000 (using year end conversion rate), you have to file FBARS to the department of treasury. If the aggregate value exceeds $200,000, look into the rules for form 8938 to see if you have to file an 8938 to the IRS as well.

7. Your last question is a good one. You can phone the IRS international tax hotline, options 4, then 4 to find out. Once you HAVE filed in the US though, you must file US returns reporting your *worldwide* income from then on, even if you leave the US permanently, unless you "expatriate" using form 8854.

Note that depending on the state you are moving to, you may be required to file returns for that state on worldwide income for the rest of your life as well, even if you move. There are four such states. California is one. You should find out for your state.

Good luck in your new home!!

[victoriaguy]

Sorry, forgot to include international tax hotline number: 1-267-941-1000. Option 4, then 4.

[nelsona]

and condo rent income is subject to MONTHLY tax withholding.

[nelsona]

btw, lots of misinformation in Victoria post, so read other threads before moving on these.

Too many to correct right now....