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Question:

Hi there Phil,

I am originally from the US, still a citizen, and the brokerage firm that holds my (US-based) SEP-IRA has informed me that they will be terminating my account due to ‘a change in Canadian securities legislation.’ I am a permanent resident here in Canada. This account is worth $10,900 US. I am trying to figure out a) how to preserve as much of this money as possible in the transfer from country to country and b) find out how to make this money work to my best advantage given my present equation. As my partner and I are working to build a business and an art practice, my income is very low right now (i.e. the account is worth more than my income last year; this year should see an improvement), therefore from what I am reading the natural course–to open an RRSP and use up a chunk of contribution room–doesn’t seem to have the advantages that just cashing out, paying off some high interest debt, and incrementally replacing inside some sort of retirement vessel does. A TFSA would be ideal, but I understand that won’t work? I’m 40.

I should add that I have been informed that I can move my account to a SEP-IRA with a US bank rather than a brokerage and the rules will be followed. However, because this can of worms has been opened, I am exploring my options in order to find the best case scenario both in regards to tax planning and the best application of this money.

Might you be able to help me sort this out? I’m in XXXXXX. I can travel down to Victoria as needed, and talk on the phone of course.

Thank you for considering,

XXXXXX

Answer

Hi XXXXX

Thanks for the email.

Considering the size of the account it might make the most sense to transfer it to a US bank and leave it alone until such time you’re ready to withdraw from the account.

You may have the opportunity to transfer it to your RRSP, however you would need to have enough other income and Canadian taxes payable in that year to make the transfer work.

Are you currently filing US tax returns and FBARs while in Canada?

Please give me a call and we can discuss further.

Cheers

Phil

Phil Hogan

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@hutcheson.ca or via telephone at 250-661-9417. You can also read more about Phil at Hutcheson.ca/phil.
Phil Hogan

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

Phil Hogan

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@hutcheson.ca or via telephone at 250-661-9417. You can also read more about Phil at Hutcheson.ca/phil.
Phil Hogan

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