U.S. Citizen and permanent resident living in Canada

[nelsona]

Liek Isaid, don't struggle, just accept what the software gives you.

[mlesone]

I am a long time resident of canada, and a US citizen. I still have a US brokerage account that is held in the US and received a large capital gain last year.

Do I report this on 1116 as "passive income" or "income resourced by treaty".

[mlesone]

The software is also telling me there is an error in form 1116 It is asking me to complete form 1116 Part III line 12 manually. I am not sure if I should ignore this.

[nelsona]

I don't do mechanics, but If you used 2555, you will need to do something on line 12.

[mlesone]

You may have missed my question about "Income resourced by treaty"

I swear, this is my last question today


Thanks ever so much for your help

[nelsona]

Non-real estate capital gains are sourced in canada regardless of where the brokerage is, so the capital gain is passive income. Any dividends however would be US-sourced if coming form US companies.

Re-sourced by treaty income is US-sourced income for which canada will not give a US citizen full foreign tax credit (like US-earned dividends and interest). This does not apply to your cap gain.

You really should not have a non-retirement US brokerage account if you live in canada

[mlesone]

One more question

Is there a problem with having a US Brokerage account? I have had it for more than 20 years while I have lived in Chanda. As a general rule, US held mutual finds outperform Canadian funds b/c the MER's are much lower.

[nelsona]

Unless your broker is licensed in your province he is in violation of your provincial Secuities Commission. Also, mutual funds can only be sold in to residents of your province if they have applied to do so. That is why some residents of NB or BC for example cannot by certain MFs only sold in Ontario.

Retirement accounts benefit from a special agreement between teh US and Cdn authorities. Ordinary investement accounts do not.

What address have you bee using on your account?

[nelsona]

Where is Chanda?

[mlesone]

I keep a P.O. Box in the US. I travel there frequently and check on it.

As to your question, Chanda is my bad typing for Canada -sorry.

[nelsona]

So you inherently know that your US brokerage needs to be held by a US resident, thus the subterfuge.

[mlesone]

I suppose so.

I do expect to return to the US one day and maintaining financial ties is important to me. I do report all income. dividends, interest, etc. on both tax returns. This is not an attempt to dodge taxes. All of my transactions are conducted on-line.

This also allows me to maintain US based credit cards, and to maintain a credit score. I am not sure that I am really breaking any laws by doing this.

It is not an excuse, but I would not be surprised if many others do likewise.

[nelsona]

Your only concern is the brokerage. And to be clear, really it is THEY who are breaking the law (provincial securities regs). It's just not very ethical for anyone to make someone else break the law unwittingly.

Look at bylo.org for a Cdn's historical perspective on this.

[nelsona]

... as to credit cards, I suspect that you could have your address changed to Cdn and it would not matter one bit. I have had several Cdn accounts with a US address.

[mlesone]

Thanks for this info. You have certainly given me much to consider.