Canadian Taxation of US IRA Assets - Art XVIII US Caanda Tax Treaty =-

My_question_is: Applicable to both US and Canada
Subject:        Canadian Taxation of US IRA Assets
Expert:         [email protected]
Date:           Wednesday May 30, 2007
Time:           12:15 AM -0400

QUESTION:

I have invested funds from my US self directed IRA retirement account to purchase stock in a private company in Canada.  The Canadian private company is going to be taken out by another company.  I realize I will have to pay capital gains tax in Canada on the stock gain, however since it's my IRA retirement account funds in the US, is there any way to recover these taxes that I pay to Canada? 
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david ingram replies:

If the funds are within an American IRA, they do NOT form part of your Canadian tax return although the reverse is not true with American holders of Canadian RRSP accounts being required to report the internal earnings on their US 1040.  Thankfully, all these internal earnings can be exempted from current tax by filing IRS form 8891.

You have no current tax liability to Canada on the Capital Gain.

When you cash in the IRA or take it out as a pension, you will be taxable on 100 percent of the gain in both countries as you withdraw the money.  However, Canada will then give you a tax credit for the tax paid to the US.  If you are living in Canda at the time of withdrawal as a pension, the maximum tax the US can take is 15% under Article XVIII of the US Canada Tax Treaty.

If you are living in the US at the time, Canada will not have any right to tax the IRA.
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David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
 
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
 
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,000 would be the same with one rental
 
$1,200 would be the same with one business no rental
 
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
 
With a Rental for $350
 
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
 
Just a guideline not etched in stone. 
 
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