Live in USA / Selling Old Canadian Mutual Fund

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StubbornAndFearful
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Joined: Fri Mar 09, 2018 4:58 pm

Live in USA / Selling Old Canadian Mutual Fund

Post by StubbornAndFearful » Thu Dec 13, 2018 12:21 pm

Hello,

Before leaving Canada for jobs in the USA, my wife and I placed money in a Canadian Tax-Free Savings Account (TFSA) investing in a low-risk mutual fund at our local bank. This was before learning of Bogleheads, asset allocation (AA), seeking low fees, etc.

The amount invested is roughly 200k, it has made roughly 11k over the last 3 years, and has a 1.75% MER. Not great, and we think we can do a little better.

Our plan is to sell this investment, convert to USD, and invest this in the USA. In particular, we would likely live off this money for at least the next 2 years, while maxing out our IRA, 403b, and 457 accounts (both husband and wife for each type of account) from our pay cheques, and investing in line with our AA.

Two questions:

(1) Does this generally seem like a sound plan, or are we missing some significant penalty we'll be incurring by taking these actions? I realize there will be some capital gains tax, and we'll have to convert from CAD to USD (always painful, at least psychologically), but anything else?

(2) Our bank statements show a regular ``Non-Resident Withholding Tax'' of 25% on all dividends paid out by the fund. I have some understanding that, as the name suggests, this is a tax on non-residents of Canada. Does anyone have familiarity with this and, if so, should we expect to get any of this back, or (worse) pay even more upon selling?

Thanks in advance!

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Peculiar_Investor
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Re: Live in USA / Selling Old Canadian Mutual Fund

Post by Peculiar_Investor » Thu Dec 13, 2018 1:18 pm

StubbornAndFearful wrote:
Thu Dec 13, 2018 12:21 pm
Hello,

Before leaving Canada for jobs in the USA, my wife and I placed money in a Canadian Tax-Free Savings Account (TFSA) investing in a low-risk mutual fund at our local bank. This was before learning of Bogleheads, asset allocation (AA), seeking low fees, etc.

The amount invested is roughly 200k, it has made roughly 11k over the last 3 years, and has a 1.75% MER. Not great, and we think we can do a little better.
What is your citizenship? If you are American citizens and subject to US taxes then you are probably running into the fact the the US tax code doesn't recognize Canada's TFSA. More information can be found in the wiki, see Canadian tax advantaged accounts. You mention using a mutual fund, you might also want to review the wiki article Passive foreign investment company.
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mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: Live in USA / Selling Old Canadian Mutual Fund

Post by mhalley » Thu Dec 13, 2018 1:19 pm

You might try the Canadian forum for people that are more familiar with Canadian investing topics.
https://www.financialwisdomforum.org/

TedSwippet
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Location: UK

Re: Live in USA / Selling Old Canadian Mutual Fund

Post by TedSwippet » Thu Dec 13, 2018 2:05 pm

Peculiar_Investor wrote:
Thu Dec 13, 2018 1:18 pm
What is your citizenship? If you are American citizens and subject to US taxes ...
From the look of the first post, the OP appears to be resident in the US. Add both annual FBAR and annual FATCA reporting to your list of woes, then.

Topic Author
StubbornAndFearful
Posts: 11
Joined: Fri Mar 09, 2018 4:58 pm

Re: Live in USA / Selling Old Canadian Mutual Fund

Post by StubbornAndFearful » Sun Feb 10, 2019 2:09 pm

Very very late reply, my apologies. Thanks for all of your replies. We sold the mutual funds and moved things into Vanguard.

And, yup, the FBAR and FATCA will get done (sigh)

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