# Money within family; could this look bad?



## james4beach (Nov 15, 2012)

I'm wondering if the following could raise any flags with CRA, IRS, FINRA.

I work in the US and earn US income. My banking is pretty simple, I have a US bank that receives payroll deposits, and I move money to Canada using cheques written to myself. All the money in my US bank has already been taxed and my Canadian accounts are also reported to the US using FBAR. I have no worries about this part.

I have a family member in the US who borrowed some money from my parents in Canada. That US borrower wants to repay her debt for some large amounts (10K to 50K). My parents had the idea that she could send the money to me, and I can lump it in with my cross-border money flows and efficient gambits. It would save us some fees, both on wire transfer ($50+) and FX fees ($500)+. Basically I already have an efficient way to do all this.

Is this a bad idea? My US bank would show large deposits from someone else, *not my usual payroll*. After I gambit etc, I'd write a cheque to my parents.

Dangerous? Not worth the fee savings?


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## humble_pie (Jun 7, 2009)

james4 i think it's not a good idea. I have friends & neighbours who'd like to exchange their $$ via gambit trades that i would carry out for them in my own accounts. I imagine many of us do. Receive such requests, that is.

but i can't & won't, of course. I offer to teach them how to do it themselves, but u know what? so far, they don't want to learn .each:

there may not be any huge risks with family transactions, but how many of these would it take before the tax authorities might think that one might be running a currency exchange business ...

PS in your parents' case, do they not have discount broker accounts themselves? perhaps the relative could send her cheques directly to your parents & you could coach them exactly How to Gambit?


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## james4beach (Nov 15, 2012)

Thanks humble_pie, I was leaning towards that as well (should teach them to do it themselves).

My setup is a bit difficult to replicate. I have a borderless TD USD$ account and TD is familiar with my regular deposits, so they don't hold my personal US cheques at all! Normally banks might want to hold US cheques for as much as 30 days.

My parents have a USD account with another bank and as far as I know, their incoming cheques get held quite a while. I'll double check this though... perhaps I'm overcomplicating things.

lol it's like "teach a man to fish". But rather, "teach a man to reverse gambit"


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## Just a Guy (Mar 27, 2012)

You may run into trouble because of the different laws between Canada and the USA. For example, there is a gift tax in the states, but not in Canada. 

However, I'm with humble on this, teach people how to do things, don't do things for them. They have to take some responsibility for themselves. Nothing you're doing is beyond their abilities.

You wouldn't believe the number of people who want me to do all the work for them in real estate, but they are willing to take all the money. I'm willing to help most people, even to the point of helping them find a place, negotiate on it, set up the tenant, and even answer questions...but for some, even that's still not enough...


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## humble_pie (Jun 7, 2009)

james4beach said:


> My parents have a USD account with another bank and as far as I know, their incoming cheques get held quite a while.



i'm not sure they'd need a USD bank account, per se?

what they definitely would need is a USD discount broker account, along with its CAD counterpart. Then they would just take or send USD cheques to the branch, for deposit into the broker USD account. At least, that's how i'd do it.

if the broker imposes a long hold period such as 30 days because the 'rents don't have or need a USD-favoured banking setup, well, that's standard & normal. I'm sure you guys can live with it!


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## scorpion_ca (Nov 3, 2014)

Guys....they are his/her parents and don't compare his/her parents with other people. Have some respects to the parents.


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## Just a Guy (Mar 27, 2012)

Everything could be set up and done in the parent's name, even done for them...in the parents name. There could be serious tax implications if it was done in his own name scorpion, and I'm sure his parents don't want that happening to their children...

It's got nothing to do with respect, there are proper ways to do things and there are lazy people who try to cut corners...cutting corners usually has consequences no one thought about.


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## OhGreatGuru (May 24, 2009)

You shouldn't be funneling debt repayments (that don't involve you or your business) from one third party through your personal/business accounts to another third party, especially to another country. You are just inviting all kinds of questions, both for yourself and your parents.

(Picture yourself trying to explain this to an IRS auditor. _Q: What is all this undeclared income you received? A: Oh, that's from my relative, but it's not really my income, I immediately passed it on to my parents. Q: So, you think sending it out of the country to your parents means it isn't taxable? What kind of fools do you take us for? A. But it's just money my relative is repaying my parents. Q. So tell us more about this relative who is laundering money through your account to foreign relatives..._
Or your parents trying to explain this to FINTRAC. _"Q - what are these large payments you are getting regularly from the USA? A: Oh - that's from our son. Q - You rely on your son for support? A. Oh no, the money is from another relative. Q. But the transfer is from your son, from his bank account, so who's this mysterious alleged relative?"_)

Help them figure out an economical way to make these payments. But don't become the middle man.


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## james4beach (Nov 15, 2012)

I'm convinced. Thanks OhGreatGuru and others... I already told my parents this is a bad idea, so I won't carry the money for them.


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## heyjude (May 16, 2009)

Glad to hear you saw the light, James. This has the appearance of all sorts of red flags (money laundering) that could bring unwanted attention. Best keep out of the way.


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## houska (Feb 6, 2010)

Sounds as if you have more than enough feedback, but in case helpful, my 2 cents:

a) Many things can be done one-off, with appropriate paperwork. I have 2-3X done fx conversions for my parents (one-off) but confirmed in writing with an email explaining what I have done. Never had to explain myself, but I figure if I have written down -- and shared with the other parties -- an honest description of what precisely I have done, with no funny business, and something I would be happy to share and if needed elaborate on if asked, then I should be fine. Remember that zillions of payments happen through the international banking system all the time quite legitimately. The issue is to be able to document this is not a money laundering operation.

b) If such things generate minor tax gains or losses, so be it and I'll cover it from my side. What's +-$100 in eventual tax payable between family members?

c) If things become regular/repeated, then yes I try to teach friends/family instead.


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