# US Portfolio in US Bank: Tax implications for a Canadian Citizen



## Letran (Apr 7, 2014)

I have two US properties already. So I already file US tax returns.

I'm building up USD from rental income. It's currently sitting in TD Bank (US Bank) earning minimal interest. I'm thinking of moving it to RBC Bank (US Bank) where they can actually sell me CDs.

So I'm thinking why not go all out and dump some money in and open up a full US portfolio (50k-100k USD) and create some relationship with a US bank.

Then the question of taxes come in. Is there an advantage and disadvantages of holding investment potfolio in the US? taxes or otherwise.

My thoughts are if and when I relocate to warmer climate in the US that I already have my banking relationship fairly established.

Your thoughts and input is appreciated.


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## AltaRed (Jun 8, 2009)

What do you mean by a US portfolio? I do not know of any brokerage that will allow a non-resident alien to open up a brokerage account that trades in stocks, etc.


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## fatcat (Nov 11, 2009)

assuming you have no trouble opening the account i would say you only need to worry about the 100K reporting requirement to revenue canada

if you are required to file a us return, i assume you don't have a tfsa, correct ?


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## Letran (Apr 7, 2014)

fatcat said:


> assuming you have no trouble opening the account i would say you only need to worry about the 100K reporting requirement to revenue canada
> 
> if you are required to file a us return, i assume you don't have a tfsa, correct ?


fatcat: I already file US taxes because of the properties I'm holding in the US. I'm just thinking of any advantages and disadvantages of holding them outside of Canada. And yes my TFSA and RRSP are maxed out yearly


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## Letran (Apr 7, 2014)

AltaRed said:


> What do you mean by a US portfolio? I do not know of any brokerage that will allow a non-resident alien to open up a brokerage account that trades in stocks, etc.


I do have an ITIN number but I guess that would answer my question. 

I haven't tried in the US but I seem to recall that I'm always asked when I do my taxes if I have investments outside of Canada. I just assumed I could open one. Maybe my LLC could?


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## james4beach (Nov 15, 2012)

You should inquire with an accountant to find out whether you are required to disclose your TFSA to US authorities. It needs 3520 and 3520A forms, both of which are complex to fill. The first one is due March 15.

I'm not sure whether you are subject to that requierment. US tax policies are extremely complex and non-intuitive.

Personally, I think it's crazy to be more financially exposed to the US than you have to. My suggestion would be to minimize your financial and tax footprint in the US. Although I'm living in the US, I exclusively use my Canadian brokerages rather than American ones.

Keep in mind there's also a risk that the US may create new tax rules that create penalties, or limit, your ability to move assets out of the US in the future. Given their recent history of tax legislation changes regarding foreigners, this could be a natural next step for the US. American tax laws are very aggressive towards foreigners, and this has rapidly changed in the last 3 years. I would discourage you from opening accounts in the US.


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## Letran (Apr 7, 2014)

james4beach said:


> You should inquire with an accountant to find out whether you are required to disclose your TFSA to US authorities. It needs 3520 and 3520A forms, both of which are complex to fill. The first one is due March 15.
> 
> I'm not sure whether you are subject to that requierment. US tax policies are extremely complex and non-intuitive.
> 
> ...


That's a definitive answer. That clears things up for me. Thanks for your response james


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## fatcat (Nov 11, 2009)

i have always assumed that if you have a us address and are a us citizen or green card holder you can open a brokerage account in the usa
you need a tax number basically and an address

and yes, you better get clarity on that tfsa quickly because if you are required to file you have a big ongoing reporting problem on your hands that will make you want to either dump the tfsa or sever your us ties


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## AltaRed (Jun 8, 2009)

Letran said:


> I do have an ITIN number but I guess that would answer my question.
> 
> I haven't tried in the US but I seem to recall that I'm always asked when I do my taxes if I have investments outside of Canada. I just assumed I could open one. Maybe my LLC could?


Lots of non-resident aliens have ITIN numbers. It is a question of your residential address. Resident aliens, that is, people like Canadians who live in the USA can have active US domiciled brokerage accounts, but non-resident aliens such as Canadians living in Canada cannot have active US domiciled brokerage accounts.

When I lived and worked in the USA, i opened and traded in a US brokerage account. Once I returned to Canada, I could no longer trade in my US brokerage account. However, I did keep and actively use my US domiciled Wells Fargo bank and credit card accounts.

That is the reason I asked for clarification on what you meant by 'investments'. There are several different types of investments. Some are okay to hold by non-resident aliens while others are not.


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## fatcat (Nov 11, 2009)

AltaRed said:


> Once I returned to Canada, I could no longer trade in my US brokerage account.


could you clarify ? ... if you have say a td ameritrade account why couldn't you go online and trade ? and move money into and out of through your us bank account ?


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## Guban (Jul 5, 2011)

I think that AltaRed's advice is most correct.

I am guessing that you are filing a 1040NR return showing just your rental income presently. Since you don't pass the substantial presence test, you are not a US person for 3520/3520A problems and other TFSA issues. James is correct about talking to a cross border accountant, but I think that you should be ok. You may also ask about estate taxation problems.

One reason that opening a US brokerage account is desirable is that cheaper mutual funds (such as Vanguard's) become available to you.


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## Eclectic12 (Oct 20, 2010)

^^^^

With all the discussion of where to hold US based ETFs for tax purposes - I was under the impression that a Canadian could buy Vanguard ETFs in their brokerage accounts.

Now I'm sure a US based account will have a lot more choices and may have cheaper trading fees but it would seem the main ones are already available.


Or am I missing something?


Cheers


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## Guban (Jul 5, 2011)

Vanguard ETFs yes. Vanguard mutual funds, no.


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## james4beach (Nov 15, 2012)

I'm still not grasping the appeal of the US based brokerage. They are market traded instruments, right? At a Canadian brokerage you have access to everything that trades on US and Canadian stock markets.

I'm just not sure what the advantage of the US brokerage is. Slightly lower fees, perhaps, but I suspect you're also going to have more hassles to deal with as a non-resident (or as they say in America, non-resident alien)


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## Guban (Jul 5, 2011)

I find it ironic that you actually have the ability to open a US based brokerage account, James! With a US address, you have access to lower cost mutual funds, whle we only can buy individual American stocks or ETFs. You can buy QEF PFICs easily. How do you invest US$ cash? We have limited options.


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## james4beach (Nov 15, 2012)

I have a brokerage account with Schwab as part of my US retirement plan. I hold SCHX which is similar (but not identical) to an S&P 500 index ETF, with 0.04% fee, and no trade fees.

I agree the no-trade-fees is great, but you could of course still buy SCHX in Canada if you want to. In the case of stock trades, the same US stocks are available whether you're in Canada or US, and commissions may be comparable too


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## Guban (Jul 5, 2011)

Actually, I was referring to how you invested the cash component when held in US$.

Many people here at CMF dislike mutual funds, but I suspect that their opinions would be tempered a bit if we had access to US funds. There is an article about some of the positive aspects of funds in a recent Moneysense by, of all people, the author of couch potato blog, Dan B., I believe.


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## james4beach (Nov 15, 2012)

> Actually, I was referring to how you invested the cash component when held in US$.


I don't like mutual funds either  I store my retirement plan US cash amounts in SCHO because it holds treasury securities, which I think are nil risk. No trade fees at Schwab. The MER is 0.08% which is much less than what money market mutual funds charge. You can also use SCHO in Canada, and I've posted in these forums about it already.

No cash instruments in the US yield anything, because they have zero interest rate policy.

Over in Canada, I store my US$ in a TD US chequing account where it is not CDIC insured, but very liquid.


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## james4beach (Nov 15, 2012)

Guban: perhaps I missed some other opportunity for where to store USD cash? Let me know. One might think 'money market mutual funds' are the right place, but their expense ratios are much higher than SCHO


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## Guban (Jul 5, 2011)

Sorry, I missed any of your previous posts about SCHO, and just had a look, and see that it yields less than 0.5%. With trade fees and taxes that's not worth anything to me. I just leave my US$ as cash, earning nothing so sigh, that's not going to change. Didn't realize that cash yields were so bad on US$, and thought that US people had better options than we do. Not much, I suppose.


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## Eclectic12 (Oct 20, 2010)

^^^^

It was a shock to be in New York State two years ago and see what the local banks were advertising as "great rates" to get people to move/open an account.
All of a sudden - the pedestrian HISA funds looked great in comparison.


Cheers


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## fatcat (Nov 11, 2009)

Guban said:


> Sorry, I missed any of your previous posts about SCHO, and just had a look, and see that it yields less than 0.5%. With trade fees and taxes that's not worth anything to me. I just leave my US$ as cash, earning nothing so sigh, that's not going to change. Didn't realize that cash yields were so bad on US$, and thought that US people had better options than we do. Not much, I suppose.


the rates are much worse (i have a us bank and i was looking to buy a cd) ... the fed is really screwing savers in the usa


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## james4beach (Nov 15, 2012)

Guban said:


> Didn't realize that cash yields were so bad on US$, and thought that US people had better options than we do


Well this is what "zero interest rate policy" (ZIRP) gets you. Japan has had it for decades.

It's the consequence of a broken financial system that needs perpetual stimulus. Many worry that, just like Japan, these zero rates will be here for a very long time.

I'm afraid that Canada is heading that way too. 7 years after the crisis and our benchmark rate is just 0.75%, barely above zero.


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