Canadian citizen that became a tax resident of the USA in 2013 while I was a student and eventually decided to stay. Had left a bank account in Canada with a non-negligible content thinking I might return and also since I make frequent trips to visit the parents. Got worried that maybe I should have been figuring the foreign currency gain/loss into my taxes since 2013....
The question is, how to treat the bank account? Everything I found focuses on foreign currency *transactions* where there is a clear purchase and sale amount and the examples are so simple: money leaves USA, no spending or income in the interim, money comes back to USA, pay on the foreign exchange gain/loss. Easy enough. But in my case the money never entered the USA, so there is no purchase per se (should it have been a deemed purchase in 2013?). Also, there are many transactions in and out, making it complicated to calculate a basis.
Any recommendations?
Appreciate your guidance
Mike
Canadian personal bank account, FOREX in USA?
Moderator: Mark T Serbinski CA CPA
Unless you are changing LAGE quantities of Cdn currency into other things at one monet in time (like in 5-figures) the currency gain/loss is not reportable.
It doesn't matter if the money *enters* US or not however. If you had $50,000 of Cdn cah, it had a US values in 2013, and if you, say bought $50,000 car, ofr Cdn house, or brought it to US, it would still be the same result: You SOLD $50K CAD which was worth XX in 203 and wort YY in 2017. If the difference was more that $200 it is a capital gain or loss.
So, as you see, many transactions in and out are good, as long as they are small, since the (a) don't reach the threshold of reporting a gain, and (b) are bringing your cost basis closer to the current exchange rate, making a reportable gain unlikely.
Unless you make a BIG purchase/exchange (anywhere) with those funds, I would not worry about it
Now, of course, you should have been reporting any interest in this account on your US return, as well as declaring the account a foreign account to IRS.
It doesn't matter if the money *enters* US or not however. If you had $50,000 of Cdn cah, it had a US values in 2013, and if you, say bought $50,000 car, ofr Cdn house, or brought it to US, it would still be the same result: You SOLD $50K CAD which was worth XX in 203 and wort YY in 2017. If the difference was more that $200 it is a capital gain or loss.
So, as you see, many transactions in and out are good, as long as they are small, since the (a) don't reach the threshold of reporting a gain, and (b) are bringing your cost basis closer to the current exchange rate, making a reportable gain unlikely.
Unless you make a BIG purchase/exchange (anywhere) with those funds, I would not worry about it
Now, of course, you should have been reporting any interest in this account on your US return, as well as declaring the account a foreign account to IRS.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Thank you for the detailed response. Yes, interest income reporting and FBAR/8938 have been done. Keeping the transactions small seems like the way to go to avoid Forex gain/loss work.
If you would indulge for general theoretical understanding, lets say for argument that we do a single large transaction ($50k), such as convert and move all the money to USA.
(1) Regarding the initial basis, is it the USD value of the account balance on the day I became a USA tax resident? Or would it need to reach into days where I was in Canada only? From your response it sounds like the former.
(2) Regarding the basis to use for the large transaction, how does this work theoretically if there have been many smaller transactions in the interim? My guess would be convert every transaction in the account into USD using forex on the day it was received/spent and adjust basis accordingly. For received, this means increase the basis by the USD value on the day received. For spent, I am not really sure. What does one use as the USD basis against which to calculate the USD gain? The money could have come in at different times. Do we use a FIFO scheme? Accounting seems complicated. Or maybe it is simple and I am making it complicated...
Thank you for your guidance.
Cheers,
Mike
If you would indulge for general theoretical understanding, lets say for argument that we do a single large transaction ($50k), such as convert and move all the money to USA.
(1) Regarding the initial basis, is it the USD value of the account balance on the day I became a USA tax resident? Or would it need to reach into days where I was in Canada only? From your response it sounds like the former.
(2) Regarding the basis to use for the large transaction, how does this work theoretically if there have been many smaller transactions in the interim? My guess would be convert every transaction in the account into USD using forex on the day it was received/spent and adjust basis accordingly. For received, this means increase the basis by the USD value on the day received. For spent, I am not really sure. What does one use as the USD basis against which to calculate the USD gain? The money could have come in at different times. Do we use a FIFO scheme? Accounting seems complicated. Or maybe it is simple and I am making it complicated...
Thank you for your guidance.
Cheers,
Mike