Investments in Canada how to report to IRS

Is your Canadian mutual fund held at a Canadian bank or brokerage? This seems to be the case as you received a T3 form, but am just checking.

Report interest and dividends on Schedule B as usual. I'm not sure whether you can use the average exchange rate for the year or the exchange rate on 12/31/2007. As USD/CAD was dropping last year, the average exchange rate might be better.

Also, I use the typical cash rate and not the interbank rate, as that's the rate you get (it's not as favorable as the interbank rate), but it translates to a slightly smaller dollar amount and therefore less taxes. Search this group for posts by me, and I give the URL of a website you can use.

At the bottom of the page it asks you if you had a foreign financial account, and you should check yes. By June 30 you sould file the TDF form with the department of treasury (they just need the account name, number, approximate value range).

You also should look at Form 8621 as the Canadian mutual funds are likely PFICs. You may want to make a mark-to-market election to avoid the complex interest charge rules.

You may ask your bank/investment firm for a 1099 for future years. Most Canadian firms are familiar with the US reporting rules which will make your future returns earlier. (Just not this return.)

You might want to first find out what exchange rate they use to see if it is the most favorable one. Questions are: average rate or rate on last day of year, interbank rate or typical cash rate or something in- between.

Thank you for your suggestions What I have is a T3 form and on close examination of it I see that it is two incomes "Other Income" and "Captial gains" Do i still use schedule B Many Thanks Jawahar

========================================= MODERATOR'S COMMENT: Please trim the post to which you are responding.

I thought the TDF was only required if you had more than $10 K in foreign accounts (likely if you received near $1K in dividends etc, but still possible).

Han (posting from Google out of necessity, rather than my usual Verizon IP)

Capital Gains are reported on Schedule D. Other income is just that, page one of your 1040.

You are right. The instructions for the form say that you only need to file if the amount in the account exceeded 10k anytime during the year. The form has a checkbox for the account value as under 10k.