Have you heard?
@WhiteKat and calgary411, I can’t understand what they are talking about, and I can’t see how it could possibly be rational for the IRS to expect that an ordinary person living in Canada, with a Canadian mutual fund should have to study US tax law and accounting in order to ‘comply’. That in addition to their antics with delaying any clarifications, and refusing to provide definitive opinions, rulings, etc.
So, with this issue, and for our TFSAs, we are/were forced to jump through hoops that assume for safety sake that they are US taxable, pay professionals to fill out the lengthy and incomprehensible forms, assess US tax on ourselves, and eat up the balances of our Canadian earned and locally held savings so that we end up with less than we started with.
The punitive treatment of Canadian mutual funds apparently came about because of complaints by US banks who did not want the competition for investment and US accountholder dollars by Canadian banks and products. The TFSA and RESP and RDSP ‘foreign trust’ BS is because the US is paranoid, and works from the base assumption that everyone outside the US is a criminal already, and if not, we are all criminals in waiting. So their solution is to deny us any real ways to save or prosper which are offered in our home country of tax residence.
The same thing happened with Canadian RRSPs, it is just that many of us who didn’t even know about US CBT and FBAR etc. missed the convoluted and tortured history of the US treatment and sudden decision of the IRS to treat them retroactively as ‘taxable foreign trusts’, and then after a period of public outcry, prescribed the 8891 and annual treaty election in order to recognize them as non-taxable or tax deferred – but only if the election was made annually.
It’s very hard to understand the injustice of U.S. citizenship-based taxation unless you have lived it. What follows are two tweets that reference articles written by a top U.S. based tax lawyer. They are written with surgical precision.
I once heard it said that:
“The only minor surgery is surgery that happens to somebody else!”