US citizen in for short period -

I have a rather complex situation. I am a US citizen working in Canada under a 3 year work permit. 
First, the company transferred me (and my non working wife) to Canada in the beginning of 2007. The process involved creating a separate Canadian employee account since the division I was working for was a separate U S owned division. This meant that I had to severe all my ties to my existing 401k since I had no US income. When I transferred to Canada, I was told I could keep my Social Security and Medicare from the States and not contribute to the CPP; no problem but, I could not continue to contribute to my 401k since it is not recognized as a retirement plan in Canada After investigating the company Defined Contribution RSP and personal RRSP's,   I am still without a place to put my retirement contributions (including any company match of funds). Am I am missing something?  There doesn't appear to be any advantage to these plans since I would need to claim the income when I return to the US and pay up to 25% to close out my account if I emptied it earlier than retirement 
age. (I do not plan on retiring in Canada).  My income is about $150K Cdn (plus $50K Cdn bonus which is taxed at a capital gain rate). With no options to shelter my money I am subject to a substantial tax burden. 
Are there any tax shelters or deductions available to US citizens working as temporary residents in Canada?
Second, I enrolled in the company stock purchase plan (after tax purchase) when I arrived in Canada. This plan was eliminated when our US entity bought out the minority share holders.
The good news was a nice return on my stock purchases, the bad news is that I may have to give up every dollar made to capital gains.  As I understand it, US citizens must submit returns where ever they live but having to pay capital gains to both CA and the US seems a bit much.  My initial calculations indicate I may owe the US about $15K US, and I haven't even figured out what my hit will be from Canada.
Do I actually have to pay capital gains to both? What is the capital gains tax rate assuming I earned $200K Cdn in 2007 and my net gain from the sale of the stock was $30Cdn.
Last question, I sold my house in NY when I moved to Canada and purchased a house in Oakville with intent to honor my 3 year stay. But, as situations have it, the company may want me to relocate back to the states (So. Carolina) in a couple of months. This will mean that I will not satisfy the 2 year residency requirement for avoiding capital gains on my house.
Are there exceptions to the 2 year rule? And will I have to pay capital gains on the profit from my Canadian house to the US?
Thanks for entertaining these questions and any advice given.
david ingram replies:

1.        In your position, it is a normal situation for your company to apply tax equalization to your in come.  that means we calculate the tax in Canada and the tax you would have paid in the US with the same savings potential, etc., and the company makes up the difference plus the tax on the difference pus the tax on the difference, etc.

2.        The Canadian company defined contribution is what you should have participated in.  You would have needed to file US form 8891 to deal with it. As part of the equalization, the company should pay you their share of what they were putting in your 401(K).

When you put money into a Canadian RRSP at your income level, you save tax at about 44%.  After you returned to the US, Canada would have withheld 25% as their tax.  That is a saving of 19%.  You do not pay tax to the US on the total withdrawal.  You pay tax to the US on the internal earnings only as defined on form 8891 (see it at

3.        Canada taxes 50% of capital gains at your marginal tax rate.  The most that would work out to is about 22/23% of whatever the gain is at your income level.  The US taxes short term gains at your marginal rate and long term gains at a reduced capital gains rate.  In both cases, you can claim the tax paid to Canada as a foreign tax credit on US form 1116.                   

4.        If you short sell the house (less than 24 months) because of a job transfer, you get to prorate the tax free capital gains at $10,416.67 per month.  If you and your wife only owned the house for 10 months, you could claim $104,166.70 each tax free on the sale of the Canadian house.

I suggest that your returns should likely be sent here for preparation.  If you have prepared them in some manner, they should likely be sent here to be checked.

goto and read

1.        The November 1995 newsletter in the top left hand box, and 

2.        the US/Canada Taxation section in the second box down on the right hand side for information about what you have to do as a US citizen living in Canada.

Make absolute sure that you file your TDF 90-22.1 forms if you have more than $10,000 combined in your Canadian accounts.


Canadian resident US citizen owns many Canadian mutual funds, what are
the filing requirements? I heard some people have recorded on their
1040 returns the same allocation as per T3; others have put the total
distribution as income on Schedule B so have reported the capital gain
distribution as straight income along with the return of capital. Some
have suggested that Form 3520 needs to be prepared. Others have said no
instead prepare Form 8621 and a QEF election should be considered. So
what are you thoughts and how have you been handling this mutual fund

david ingram replies:

Treat a T3 or a T5 as a 1099-Div or 1099.  convert the figures to US
dollars if in Canadian and put in the proper place on Schedules B and D.

Calculate the tax you paid to Canada and claim it as a foreign tax
credit on form 1116

There is no reason to fill out a form 8621 or QEF (Qualified Electing
Fund)  because the Canadian taxes will just about always wipe out any
US tax by filing form 1116.

You can see Form 8621 here -

Assuming all of your accounts total more than $10,000 US, you will then
fill out forms TDF 90-22.1 for every financial account including RRSP,
RRIF and RESP accounts, AND any mother or father or sister or brother's
or company accounts yo may have signing authority over.  See Question
7  at bottom of Schedule B.

Form TDF 90-22.1 -

For your RRSP, RRIF and RESP accounts you should file form 3520.  The
good news is that for the RRIF and RRSP accounts you can substitute the
much easier form 8891.

Form 8891 -

The penalties for failure to file these forms are immense.
This older question explains penalties:


I would like to put some money away for retirement. I'm a 
U.S. citizen living in Canada for the near future, but I know 
I'll be living in the U.S. again before I retire. Should I put my money in an RRSP or an IRA?


david ingram replies;

This would be a great question for the Sunday morning radio program on
CKBD 600AM  from 9:00 AM to 10:30 AM.

The answer,though, is that you would likely be better putting after tax
dollars down on your mortgage if you have one.  Other than that, you
can only buy an RRSP for a tax deduction.  Of course, you then have to
make sure that you fill in forms TDF 90-22.1 and 8891 as follows:

The following question deals with a US resident but you have to fill
in the same forms living in Canada - failure to file them can mean big
big big penalties.

TDF 90 rules here 

I am a Canadian citizen and legal US resident. I've lived in Florida for 25 years and now, at 65, I'm considering taking distributions from a spousal RRSP with Royal Bank.
Unfortunately, income tax information I've received from different sources is terribly conflicting and, at worst, indicates that my nest egg will be gobbled up by governments. Is this something you can steer me straight on?
david ingram replies: If you roll the RRSP into an RRIF (Registered retirement investment Fund), The payer will have to deduct 15% non resident withholding tax under the terms of Article XVIII of the US . Canada Income Tax Convention (Treaty). You will then report it again on form 8891 of your 1040 and there may or may not be US tax to pay.  If your income is high enough that you are in a federal 28% tax rate, there 'will' be tax to pay on the RRIF.  You will claim the 15% tax paid to Canada on US form 1116. --------------------------------------- Now, you have been supposed to report the existence of that account to the Department of the Treasury in Detroit on form TDF 90-22.1 since 1989 when that law was passed and shown in bulletin 89-45.  Failure to report can be a penalty of a minimum of $10,000 to a maximum of $500,000 PLUS up to 5 years in jail for each year you did not report it.  See the bottom question on schedule B of your 1040 where your foreign trust requires the preparing and filing of a 3520. Thankfully, you do NOT have to do a 3520.  the 8891 takes it place and is much easier. The penalty for not also reporting the RRSP and its internal earnings to the IRS (it was the Dept of Treasury above)  is 35% of the principal plus 5% for each year it was not reported since 1989 when the reporting rules started.  The form 8891 is an exemption for paying the tax on those internal earnings. See form 8891 at: RELIEF Although I know of over 1,000 people who have paid $10,000 fines for not filing form TDF 90-22.1, I (at this time) do not know personally of a single individual who has been fined under the 8891 / 3520 rules.  I also have NEVER seen a person fined for filing the TDF 90-22.1 forms late and voluntarily. In my opinion, you should file the TDF 90-22.1 forms retroactively for six the Department of the Treasury. See Form TDF 90-22.1 at Note the penalty of up to $500,000 plus five years in jail for failure to file.  The minimum fine is now $10,000. You should file retroactive 8891 forms with a 1040X to the IRS for the same years.  Note that you are the BENEFICIARY so follow the Beneficiary rules.  The 8891 form is actually only 3 years old.  Before that, you just wrote out the information on a free form page but it is a convenient form to use retroactively. Hope this helps and we would be glad to assist if needed. If you are in the lower mainland, this will be of interest Every Thursday at 12 noon and 7 PM, Fred Snyder of Dundeee Wealth Management presents free Financial Seminars for his clients, potential clients and anyone who phones and asks to attend. THERE is NO CHARGE!  (I used to charge up to $999.00 for essentially the same thing) AND - NO ONE'S ARM IS TWISTED TO BUY SOMETHING. They are presented at the Dundee Boardroom (holds about 30 people max) 1764 West 7th Vancouver, BC phone (604) 731-8900 - ask for Freda to register for free. These are genuine educational seminars dealing with everything from how to buy a house to making your mortgage tax deductible to buying an RRSP to alternatives to RRSP accounts to estate planning.  What started as 13 separate seminars has now evolved into 23 separate topics. IT IS NOT UNUSUAL FOR PEOPLE TO COME TO ALL OF THEM. ONE LADY CAME TO 53 separate seminars and her husband came to about 20 with her. If you have a financial consultant, bring them.  People have brought their bankers and life insurance agents with them. Take your spouse, your best friend, your son, your daughter, your mother or your worst enemy But do phone 604-731-8900 Fred Snyder  also is the host of ITS YOUR MONEY every Sunday morning on CKBD 600AM  (600 on AM dial)  from 9:00 to 10:30.  This is a phone in financial show which I appear as a guest on most Sundays (when I get up).  (Originally I was the co-host but the program is really devoted to BC finances because of BC Securities Legislation and my practice is world wide.)  You can listen to 4 weeks back at and listen to the program live around the world every Sunday morning at the same spot.  We have taken calls from around the world.  In one case, a lady phoned from Florida, got her answer and then asked if I was the David ingram she knew in Regina back in 1959.  Small world as they say. Call (604) 280-0600 with your question on Sunday Morning.

On April 6. 2008, David Ingram wrote:

It is very unlikely that blind or unexpected email to me will be answered.  I receive anywhere from 100 to 700  unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients.  Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first.  I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. 
e bankruptcy expert  US Canada Canadian American  Mexican Income Tax  service and help
However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. For the last two weeks, I have just found out that my own email notes to myself have been spammed out and as an example, as I wrote this on Dec 25, 2007 since June 16th, my 'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have actually looked at and deleted and I have actually answered 1234 email questions for clients and strangers without sending a bill.  I have also put aside 847 messages that I am maybe going to try and answer because they look interesting. -e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and  help
Therefore, if an email is not answered in 24 to 48 hours, it is likely lost in space.  You can try and resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you will have to phone to make an appointment.  Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.  david ingram expert  US Canada Canadian American  Mexican Income Tax  service and help.
david ingram's US / Canada Services
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My Home office is at:
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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at If you forward this message, this disclaimer must be included." e bankruptcy expert  US Canada Canadian American  Mexican Income Tax  service and help.
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Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.
$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 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.
$1,600 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

$1,700 would be for two people with income from two countries

$3,000 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 $200.00 up.
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
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 $900 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.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
This from "ask an income trusts tax service and immigration expert" from or or David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention. Advice on bankruptcy  e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and help .

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