Canadian Stocks in Roth IRA for Dividends

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
kev_indigo
Posts: 7
Joined: Fri Apr 17, 2015 4:18 pm
Location: Canada

Canadian Stocks in Roth IRA for Dividends

Post by kev_indigo » Sun Jul 21, 2019 1:49 pm

Situation is as follows:

John Doe is a dual citizen CA/US, dual resident CA/US, originally from US, lived in Canada 20+ years, worked in both countries.
John Doe has a Roth IRA in a US account that is taxable in Canada due to making contributions after arriving in Canada.

The idea is to purchase Canadian qualified securities in the US based Roth IRA account that generate dividend income as qualified Canadian dividends.

Earned dividends would not be reportable or taxable in US because it is a Roth. Strategy is to take advantage of the Canadian dividend tax credit to reduce taxes owed to CRA on the Canadian return.

Questions:

(1) Is it possible to get a T5 produced for the US based Roth IRA, to report the grossed up dividends and tax credit on a Canadian return? My guess is no, that no US brokerage would be willing (or able?) to do this.

(2) Short of having an official T5, is there other documentation that can be submitted with the Canadian return that the CRA will accept in lieu of a T5? Can a taxpayer do their own calculations on the gross-up and credit and just use those values on their return?

(3) Has anyone on here ever done this, or know of someone who has successfully done this?

Thanks!

nelsona
Posts: 16045
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian Stocks in Roth IRA for Dividends

Post by nelsona » Mon Jul 22, 2019 8:13 pm

1. No. The income in the Roth ois not reportable, so the there will be no dividend tax credit in any case.

There is no "income" to gross up.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

kev_indigo
Posts: 7
Joined: Fri Apr 17, 2015 4:18 pm
Location: Canada

Re: Canadian Stocks in Roth IRA for Dividends

Post by kev_indigo » Sat Jul 27, 2019 3:03 pm

The dividend income in the Roth IRA is not reportable to the IRS in the U.S. so it is unlikely a US brokerage will generate any special statements or T5, other than regular brokerage account statements.

The Roth IRA is taxable in Canada so the dividend income in the Roth is taxable in Canada and self-reported only to the CRA (no 1099 or T5 available).

A friend of mine is trying this, to claim the dividend tax credit on qualified Canadian dividends in his Roth. We shall see if the CRA will accept this.

nelsona
Posts: 16045
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian Stocks in Roth IRA for Dividends

Post by nelsona » Thu Aug 01, 2019 10:19 am

How is the Roth taxable in Canada? Did he fail to obey the rules on contributions? If not it isn't taxable, by treaty.

And if this is the case, I *believe* the income is reportable as "ordinary" pension income, much like reportable income in an RRSP, not as cap gains and dividends
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Post Reply