Suppose you are a Canadian citizen and have a TFSA in which you bought stock for $10000 in 2009. The value of the stock increases to $30000 by January 1, 2015. You move to the United States in 2015 and you plan to stay for 3 years before moving back to Canada.
1. If you sell your TFSA stock in 2016 for $35000, you pay capital gains tax on $35000 - $10000 = $25000. Correct? (Any way around that?)
2. If you sell your TFSA stock in 2018 after you return to Canada, you pay no tax whatsoever; you just have to do a bunch of paperwork (3520, 8938, FBAR). Correct?
3. So for taxpayers in the US who plan to eventually return to Canada, and who have TFSAs that bear minimal or no interest or dividends but have high unrealized capital gains, the most tax-advantageous strategy would be to keep, not sell, TFSA funds. Correct?
Sidenote: Even if a taxpayer is not planning to return to Canada, there's always the chance that someday the US-Canada tax treaty will be revised to allow favourable treatment of TFSAs, which is even more reason to hold on to your TFSA?
Selling TFSA if planning to eventually move back to Canada
Moderator: Mark T Serbinski CA CPA
1. Correct. Because there was no deemed disposition on TFSA, there in no adjusted cost basis. That is whey planning is needed BEFORE moving,
2. Maybe. Don't forget that PFIC may apply to your holdings when may may year-over-year taxation, but otherwise correct.
3. No, the best strategy would have been to (a) collapse the TFSA before moving, or (b) trigger the gain before moving. What you propose is remedial due to lack of planning. You could simply have bought these stocks back in US and not pay gains when you left.
It took about 20 years for Roths to be recognized, and in the meantime your holdings could plummet.
2. Maybe. Don't forget that PFIC may apply to your holdings when may may year-over-year taxation, but otherwise correct.
3. No, the best strategy would have been to (a) collapse the TFSA before moving, or (b) trigger the gain before moving. What you propose is remedial due to lack of planning. You could simply have bought these stocks back in US and not pay gains when you left.
It took about 20 years for Roths to be recognized, and in the meantime your holdings could plummet.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best