# Non-working US Spouse and Capital Gains



## Dr.G (Jun 6, 2014)

Hello,

I live in Canada and my American wife is not and has not been employed while in Canada (for decades now). I just found out about FBAR. I think we will have to file tax returns (zero income) for her and of course do the FBAR reporting. My questions: 

1. There is one investment account that has both my name and her name on the account. I received shares from my employer in that account and then sold them generating a capital gain. I claimed 100% of the amount of capital gains on my taxes and so I've paid the Canadian taxes on them. My wife has nothing to do with the account other than that she has signing authority. We did this because we hold out bank accounts jointly.
2. There are two spousal RSP accounts in her name that I contribute money to. There are almost no capital gains in those tax deferred accounts because the money is just held in money market funds.

Since she is not employed nor has been for decades, she has no earned income. I am just not sure about the tax liability on income or capital gains in the joint account. 

Can someone help me understand this? 

She has never filed US tax returns since coming to Canada but she does have a SS number and she filed taxes when she was a teenager living in the US. We have never filed an FBAR as we just found out about it. 

Any comments and/or advice are most appreciated!


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## Nononymous (Jul 12, 2011)

Don't do anything rash, she is currently off the radar and it might be in everyone's best interests for her to remain off the radar. Take your time.

Since she hasn't worked, she's not obliged to file tax returns on the basis of earned income. The RRSPs are probably reportable on an FBAR, and maybe on tax returns as well, but their existence will not be known to the US.

FATCA may be an issue. It appears that RRSPs are not going to be reported, in which case your wife's accounts are safe. Joint bank accounts are likely well below the threshold for the bank to enquire about citizenship. You've not lived in the US, had US mailing addresses associated with your Canadian accounts, or have US assets? In other words, none of the indices that would help a bank flag you or your wife as a potential US person? Do a little research, look into the terms of the IGA.

The joint investment account might be an issue. If you and she were both willing, I'd get her name off of it before 1 July, so there's no chance of it being reported under FATCA. Then she'll remain off the radar and you're both free to consider whether it makes sense for her to become compliant or not.


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## Dr.G (Jun 6, 2014)

Thank you Nononymous!

I want to be able to sleep at night so I am in favor of doing this by the book (so to speak). I just don't know which book 

My wife has no problem having her name removed from the Joint Investment account. We will do that. I don't know about FATCA. I will research that. One other piece of information. She has filed null returns in Canada for years (no income). So I would imagine that we would file null returns for her in the US.

Thank you again for your insights!


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## Nononymous (Jul 12, 2011)

If you take her off the joint investment account, that's probably 90 percent of your problems solved. Then if you and she feel compelled to become compliant (it's optional, but make the decision you feel comfortable with) then look up the streamlined program and IRS publication 54. Only tricky thing is likely to be the RRSPs, which may require some sort of declaration or form (I've chosen to remain noncompliant so am happily ignorant of the details) but likely no money owing.


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## Bevdeforges (Nov 16, 2007)

To be perfectly honest, if your wife has no income in her own name, she is not required to file a return. The situation with the jointly held investment account can be handled any of a number of ways.

I'd go with Nononymous' suggestion. Someone here on the forum, as well as a couple of people I know here in "real life" have contacted the IRS offices here in Paris, and they have consistently said that if you don't have to file a return it's best not to do so - simply because it creates too much work for the IRS. (Seriously, they actually said that - called it a "frivolous return.")

It is perfectly legitimate for the non-US spouse to claim 100% of a one-off gain like the one you describe. The key thing is that it has been reported to your local tax authority and had the appropriate taxes paid. 

Until and unless she "needs" to show that her filing is up to day - say, if she were going to sponsor you for a visa to live in the US - I'd leave well enough alone. If you want to go "by the book" then I'd file an FBAR with the RRSP information and leave it at that. 

If you aren't required to file a tax return - usually for insufficient income - then you don't file any of the FATCA forms that go with the tax return. There is no problem filing just an FBAR (which is a simple declaration of certain types of accounts). As long as her income (in her own name) is under the filing threshold - $3500 or so for Married Filing Separately - you're actually doing the IRS a favor.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Late FBARs (only) don't actually require the streamlined program, by the way.


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