# Canadian mutual funds



## byline (Dec 5, 2011)

Question: In past years my Canadian tax-preparer had me submit year-end statements for my mutual funds, due to the interpretation that non-U.S. mutual funds were considered by the U.S. to be corporations. For that reason she had me provide her with year-end statements for my spousal RRSP. This tax preparer has since retired, and sadly the one I have now is not nearly as helpful in answering my questions.

My understanding is that the U.S. no longer considers Canadian RRSPs to be taxable. So I take it that means I no longer need to submit a year-end statement to my tax preparer for my U.S. tax return. I know that I still need to report that account, and all the others, on my FBAR. But what about my tax return?


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## BBCWatcher (Dec 28, 2012)

byline said:


> My understanding is that the U.S. no longer considers Canadian RRSPs to be taxable.


No, that's not quite correct. Per the U.S.-Canada tax treaty, Canadian RRSPs are (generally) U.S. tax _deferred_.

If you didn't take any _distributions_ from your RRSP in 2014 then you shouldn't have anything to report on your 2014 U.S. tax return. The IRS now exempts RRSPs from Form 3520/3520-A reporting as well.

If you're an extra cautious sort of person you could attach IRS Form 8833 ("Treaty-Based Return Position Disclosure") to document your treatment of your RRSP for the IRS. There'd be some merit in that for statute of limitation reasons at least.


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## byline (Dec 5, 2011)

That's what I meant. I haven't taken any distributions from my RRSPs.


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## maz57 (Apr 17, 2012)

byline said:


> Question: In past years my Canadian tax-preparer had me submit year-end statements for my mutual funds, due to the interpretation that non-U.S. mutual funds were considered by the U.S. to be corporations. For that reason she had me provide her with year-end statements for my spousal RRSP. This tax preparer has since retired, and sadly the one I have now is not nearly as helpful in answering my questions.
> 
> My understanding is that the U.S. no longer considers Canadian RRSPs to be taxable. So I take it that means I no longer need to submit a year-end statement to my tax preparer for my U.S. tax return. I know that I still need to report that account, and all the others, on my FBAR. But what about my tax return?


It sounds like what your former tax-preparer could have been doing with the Canadian mutual funds was PFIC reporting, which to the best of my knowledge is not required if those Canadian mutuals are held within an RRSP. As BBC mentioned, tax on the income within an RRSP is deferred until such time as you make a withdrawal (a distribution in IRS speak). The IRS doesn't really care what holdings are inside of the RRSP or how much or what kind of income they generate; they only want to know about the existence of the account and if there are distributions.

Canadian mutual funds held outside of a registered account would definitely fall under the PFIC rules; you don't want to go there.

The RRSP definitely gets reported on FBAR. It may also need to be reported on Form 8938 now that Form 8891 has been eliminated. (Previously you just made a note on 8938 to refer to 8891.) Hopefully the 2014 instructions for Form 8938 will clarify this.


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## BBCWatcher (Dec 28, 2012)

If you meet the threshold for filing IRS Form 8938 ("FATCA").


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## byline (Dec 5, 2011)

BBCWatcher said:


> If you meet the threshold for filing IRS Form 8938 ("FATCA").


I'm pretty sure I don't. If I understand correctly, the threshold is $200,000, and I'm nowhere near that.

Maybe I'll go ahead and submit the year-end statements, anyway, so that my tax-preparer is aware that my balances don't meet the Form 8938 threshold.


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## BBCWatcher (Dec 28, 2012)

Correct. If you're living outside the U.S. the _lowest_ filing threshold for IRS Form 8938 ("FATCA") is US$200,000.

Maz57 is apparently wealthier than most of us.


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## byline (Dec 5, 2011)

Thanks everyone! I found the IRS's explanation page, and it's fairly clear.

By the way, yes, my pair of mutual funds are RRSPs. Fortunately I never went outside of that. This question occurred to me as I was looking at last year's tax return and pulling together my information for this year's FBAR filing.


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## maz57 (Apr 17, 2012)

BBCWatcher said:


> Correct. If you're living outside the U.S. the _lowest_ filing threshold for IRS Form 8938 ("FATCA") is US$200,000.
> 
> Maz57 is apparently wealthier than most of us.


Ha, good one, BBC. Apparently you haven't been keeping track of the US/Cdn exchange rate!

Now if they'd just adopt a similar reasonable threshold for FBAR or better yet drop it altogether. Just think, a perfect opportunity to eliminate a whole government department and I don't think there is anyone would mourn it's passing.


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