Hi,
This is my situation:
- I am a Canadian Citizen who received US permanent residency on July 20th, via my USC wife (who is also a Canadian PR).
- I am moving my job stateside on say Oct 1
- I will continue to maintain an RRSP and Investment through my RBC broker, who is also SEC licensed via RBC PC USA and can trade anything other than mutual funds
- I recently closed my TFSA and we will move all mutual funds out of accounts prior to Oct 1.
- I will file 2012 Cdn tax return with deemed departure date of Oct 1 and do deemed dispositions, etc
- We were planning to file full year MFJ 1040 for 2012 US taxes
Questions:
1. If I file 1040 full year then how do I deal with the TFSA and mutual fund (=PFIC) reporting for period of Jan 1 - Oct. 1? Do I have to report all of these things as if I were a US resident owning canadian mutual funds during this period? i.e. a really really big headache???
2. Likewise, do I report all capital gains between Jan 1 and Oct 1 on my US taxes regardless of what happens on Canadian Taxes? I have some capital losses that I can carry forward on the Canadian side to 2012 to offset all gains this year, but of course they don't exist on the US side, so would I have to pay US capital gains taxes for Jan 1 to Oct 1?
3. The fifth protocol from 2008 now allows one to use a cost basis going forward on the US side as of the date of deemed disposition on the Cdn side ... i.e. my cost basis when selling items after Oct 1 would be based on deemed disposition when I "left" canada ... that seems somewhat contradictory to #2 above as it implies that gains prior to deemed disposition are not carried forward to US side, but on the other hand under #2 I would have to otherwise report gains prior to moving to US.
4. Would it therefore be easier to file dual status in the US for 2012, losing benefits of MFJ for most of the year, but not having to deal with reporting headaches and capital gains for the time I was still in Canada ...???
I think I am probably not "getting" something here ...
Thanks!
IRS taxes on Cdn funds/gains during year of move to US
Moderator: Mark T Serbinski CA CPA
1. Unfortuantely, you will ahve all the TFSA, PFIC ets reporting to do igf you file jointly. You may wish to simply file dual.
2. Aagin, if you file jointly, you will need to report tha tcap fgains and losses as if you were always a US resident, and then take credit for the Cdn tax you paid on a passive income form 1116. Anothereason to file dual.
3. correct, but you would have sold (moved) everything, not deem sold it. In effect you would be treating yourself like a US citizen who leaves canada in October. Whatever he sells before october is straight taxed. whatever he sells after octobver has a special treatment which is outlined in the Rev Proc for that process. In essence you would deem it sold in US as well and pay the tax now, and get bumped up cost basis for future.
4. that is my thought, but really only because of the TFSA/PFIC/foreign reporting, not so much the cap gains Also, if you make your US tax date jan 1, that means your RRSP book values on that date determine future taxation, not those on your departure date.
they key that you are missing if you file joint for the year, you are treated like a US citizen living in canada and then moving to the US: you get no "non-resident" tax breaks and your 2012 return would look like a 2011 return with all its foreign holdings.
2. Aagin, if you file jointly, you will need to report tha tcap fgains and losses as if you were always a US resident, and then take credit for the Cdn tax you paid on a passive income form 1116. Anothereason to file dual.
3. correct, but you would have sold (moved) everything, not deem sold it. In effect you would be treating yourself like a US citizen who leaves canada in October. Whatever he sells before october is straight taxed. whatever he sells after octobver has a special treatment which is outlined in the Rev Proc for that process. In essence you would deem it sold in US as well and pay the tax now, and get bumped up cost basis for future.
4. that is my thought, but really only because of the TFSA/PFIC/foreign reporting, not so much the cap gains Also, if you make your US tax date jan 1, that means your RRSP book values on that date determine future taxation, not those on your departure date.
they key that you are missing if you file joint for the year, you are treated like a US citizen living in canada and then moving to the US: you get no "non-resident" tax breaks and your 2012 return would look like a 2011 return with all its foreign holdings.
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
Just a reminder that because you meet the grren card test, you are required to file as a resident from AT the latest July 20th, 2012, so if you had TFSA PFICs etc on that date, you are still on the hook for all that, so joint filing may still be the better way.
And if you ALSO meet the SPT for the year, your residency starting date is usually the FIRST DAY you were in US for that year. so if you spent last new years in US, you are required to file full year anyways.
So, it looks like you will be filing joint. It'll be expensive.
And if you ALSO meet the SPT for the year, your residency starting date is usually the FIRST DAY you were in US for that year. so if you spent last new years in US, you are required to file full year anyways.
So, it looks like you will be filing joint. It'll be expensive.
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
The only out you have is a treaty claim stating that although you were US resident from July, you were by treaty a Cdn resident and therefore should not be considered as US tax resident until October. Its not explicitly spelled out in the treaty for particla years, but would probably work.
I'm almost thinking it would be better to delay moving until Jan 01, 2013
I'm almost thinking it would be better to delay moving until Jan 01, 2013
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
thanks for your comments.
I would not pass the 183 day SPT as we have been living in Canada and only visiting US on irregular basis.
Your comments about my tax residency since July 20 are disconcerting. I had assumed that I would fall under tax treaty tie-break rules because since July 20th I was both a US permanent resident and Cdn resident respectively. I have an abode in both but my center of vital and financial interest is most certainly canada until I move to the US arm of my company.
Now, assuming that I could use this to claim Cdn tax resident (and thus not a us tax resident) until Oct 1, then what would be the harm in filing dual (part-year) in the US? Why would it be better to delay my move until Jan 1? (Either way I will MFJ for 2013 of course). Is it just to avoid the eye of the IRS regarding the above tie-breaker issue?
Getting away from my specific situation, does it not therefore hold that anyone who is moving from Canada to the US and wants to MFJ full year should make sure that they close TFSA's and Cdn mutual funds *prior* to Jan 1 of the year they are moving? (In my case I should have done so before Jan 1, 2012). There seem to be number of posts on here suggesting that most people file MFJ during year of move if they can ... but I would think that almost everyone has TFSA's and Cdn mutual funds up until the time they move? Or maybe not ...
I would not pass the 183 day SPT as we have been living in Canada and only visiting US on irregular basis.
Your comments about my tax residency since July 20 are disconcerting. I had assumed that I would fall under tax treaty tie-break rules because since July 20th I was both a US permanent resident and Cdn resident respectively. I have an abode in both but my center of vital and financial interest is most certainly canada until I move to the US arm of my company.
Now, assuming that I could use this to claim Cdn tax resident (and thus not a us tax resident) until Oct 1, then what would be the harm in filing dual (part-year) in the US? Why would it be better to delay my move until Jan 1? (Either way I will MFJ for 2013 of course). Is it just to avoid the eye of the IRS regarding the above tie-breaker issue?
Getting away from my specific situation, does it not therefore hold that anyone who is moving from Canada to the US and wants to MFJ full year should make sure that they close TFSA's and Cdn mutual funds *prior* to Jan 1 of the year they are moving? (In my case I should have done so before Jan 1, 2012). There seem to be number of posts on here suggesting that most people file MFJ during year of move if they can ... but I would think that almost everyone has TFSA's and Cdn mutual funds up until the time they move? Or maybe not ...
A followup point - from the tax treaty, I can only be a tax resident of either Canada or the US at any given time, not both, right? So if my deemed departure date from Canada is Oct. 1 (or Jan. 1 2013 if I delayed), then how could I also be US tax resident prior to Oct 1?
The only alternative argument is that one immediately becomes a deemed non-resident for tax purposes in Canada on the day that they acquire US permanent residency ... and I have not heard of this concept/rule before.
The only alternative argument is that one immediately becomes a deemed non-resident for tax purposes in Canada on the day that they acquire US permanent residency ... and I have not heard of this concept/rule before.
I already said you could use the treaty to make your residency starting date October 1, didn't I?
You can be resident of 2 countries, but that is not the point: US citizens an GC holders are fully taxable in US regardless of where they live, so while you could argue that by treaty, even a GC-holder can be resident of canada, filing a 1040NR as a GC holder is not looked upon too favorably. And that only covers income tax, not foreign reporting requirements.
as to foreign reporting, it is not clear whether a part-yar GC holder requires PFIC, TFSA reporting (a full year GC-holder certainly would).
The reason I suggest delaying until jan is to get all the foreign stuff out of the way. If you have control over this, I would delay until January. If you are going to make a treaty claim to be Cdn residnet until October, you might as well get the full relief and claim it until january (by remaining in canada of course)
You can be resident of 2 countries, but that is not the point: US citizens an GC holders are fully taxable in US regardless of where they live, so while you could argue that by treaty, even a GC-holder can be resident of canada, filing a 1040NR as a GC holder is not looked upon too favorably. And that only covers income tax, not foreign reporting requirements.
as to foreign reporting, it is not clear whether a part-yar GC holder requires PFIC, TFSA reporting (a full year GC-holder certainly would).
The reason I suggest delaying until jan is to get all the foreign stuff out of the way. If you have control over this, I would delay until January. If you are going to make a treaty claim to be Cdn residnet until October, you might as well get the full relief and claim it until january (by remaining in canada of course)
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
"The only alternative argument is that one immediately becomes a deemed non-resident for tax purposes in Canada on the day that they acquire US permanent residency ... and I have not heard of this concept/rule before."
This exact situation DOES occur, if one has already established significant ties in US before getting GC, If he moves to US the day he gets GC (which is technically what you were supposed to do), you would become deemd non-resident of canada on that day, regardless of what you had left behind in canada.
This exact situation DOES occur, if one has already established significant ties in US before getting GC, If he moves to US the day he gets GC (which is technically what you were supposed to do), you would become deemd non-resident of canada on that day, regardless of what you had left behind in canada.
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
.... and yes, it does mean that if you plan to move mid-year and claim MFJ status, you do need to take care of everything (RRSP bump up, TFSA, PFIC) the previous year.
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
Thanks.
I am not sure what the difference is in waiting until Jan. 1, 2013 to move. Wouldn't I have to file a 1040NR for 2012 and claim tax treaty benefits through to Dec 31, 2012?
vs. moving Oct 1, filing dual-status 1040 for 2012 and also claiming tax treaty benefits through to Oct. 1.
Are you suggesting that by filing a 1040NR I could get away without reporting the PFIC's ... but if I reported dual-status 1040 I would have to report the PFIC's for the time prior to start of residency?
I am not sure what the difference is in waiting until Jan. 1, 2013 to move. Wouldn't I have to file a 1040NR for 2012 and claim tax treaty benefits through to Dec 31, 2012?
vs. moving Oct 1, filing dual-status 1040 for 2012 and also claiming tax treaty benefits through to Oct. 1.
Are you suggesting that by filing a 1040NR I could get away without reporting the PFIC's ... but if I reported dual-status 1040 I would have to report the PFIC's for the time prior to start of residency?
That is exactly what Isaid. You need to claim treaty rights, you might as well make it so that you avoid all the extra filing.
If you have no US income in 2012, would you even have to file 1040NR at all. You could just submit a treaty claim.
If you have no US income in 2012, would you even have to file 1040NR at all. You could just submit a treaty claim.
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
right gotcha. i am thinking i will just do MFJ for 2012 and do the filings. Maybe I am crazy but I don't think it's too onerous:
- a 3520 for a TFSA that was shut down in Feb. 2012 and held a single equity and actually had a capital loss.
- 8621 for an income fund I have held. I would elect to mark to market, sell it all at once as a single disposition and pay ordinary income tax on the gain.
- I have two other funds that are simply cash holding savings accounts and generated some interest. Even if I have to do 8621's for them, I would again sell them all at once for a single disposition on 1 form each.
Am I crazy??? Am I missing something in terms of complexity of filings? The paperwork doesn't seem too bad and the while paying the ordinary tax rate on the gain isn't great it will likely be more than offset by MFJ deductions.
- a 3520 for a TFSA that was shut down in Feb. 2012 and held a single equity and actually had a capital loss.
- 8621 for an income fund I have held. I would elect to mark to market, sell it all at once as a single disposition and pay ordinary income tax on the gain.
- I have two other funds that are simply cash holding savings accounts and generated some interest. Even if I have to do 8621's for them, I would again sell them all at once for a single disposition on 1 form each.
Am I crazy??? Am I missing something in terms of complexity of filings? The paperwork doesn't seem too bad and the while paying the ordinary tax rate on the gain isn't great it will likely be more than offset by MFJ deductions.
In your original post you mention your TFSA containing mutualfunds. each would require a PFIC report. Same for each fund in your non-RRSP account(s).
Don't forget your RRSP (8891) and FBAR reporting, which you will have every year, regardless, and to nail down your DEcember 31, 2011 (last year) book values for your RRSP to figure out your taxable basis.
Don't forget your RRSP (8891) and FBAR reporting, which you will have every year, regardless, and to nail down your DEcember 31, 2011 (last year) book values for your RRSP to figure out your taxable basis.
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
Sorry, my original post must have been unclear. As per above, My TFSA only had 1 equity in it during 2012 before i closed it. And there were the 3 other income funds outside of my rrsp.
When you say to nail down my rrsp book value as of dec 31, 2011 is that for when i pull money out of the rrsp at some later date? Or is there another purpose?
Final question - if I were to wait until jan 1, 2013 to move, and not even file a 1040NR as you suggest, what would I submit to the IRS? Just a single form 8833?
Cheers and thanks again.
When you say to nail down my rrsp book value as of dec 31, 2011 is that for when i pull money out of the rrsp at some later date? Or is there another purpose?
Final question - if I were to wait until jan 1, 2013 to move, and not even file a 1040NR as you suggest, what would I submit to the IRS? Just a single form 8833?
Cheers and thanks again.