Why your U.S. Brokerage Account is a Liability in Canada

Written by: Carson Hamill, CIM®, CRPC™, FCSI® & Dean Moro, BComm, CIM®, CRPC™: Cross-Border Portfolio Managers at Snowbirds Wealth Management

For many moving across the 49th parallel, the transition is seen through the lens of lifestyle: a new home, a new city, and a new community. However, the financial reality of a cross-border move is far more complex. One of the most common - and potentially costly - oversights is the treatment of U.S. taxable investment accounts.

If you are a Canadian resident holding a U.S. brokerage account, you aren't just managing a portfolio; you are managing a complex dual-tax reporting obligation.

The Math Problem: FIFO vs. Weighted Average

The primary friction points between the IRS and the CRA is how they calculate capital gains.

• The U.S. Standard: Typically uses FIFO (First-In, First-Out), where the oldest shares are sold first. The U.S. also calculates capital gains based on short-term or long-term capital gains rates depending on if shares are held for greater than a year.

• The Canadian Standard: Requires the Weighted Average method, where the cost of all identical shares is averaged out. In addition, any shares held prior to your arrival in Canada would get a stepped-up cost basis equal to the fair market value of the securities on the date you establish Canadian tax residency.

When these two systems clashes, your U.S. 1099-B becomes effectively useless for your Canadian tax return. To remain compliant, you must manually recalculate every trade using the Weighted Average method while simultaneously converting every transaction into Canadian Dollars based on the exchange rate at the time of the trade. You also need to track a separate cost basis for U.S. tax and Canadian tax purposes for shares held prior to your arrival in Canada. For a portfolio with frequent activity, this becomes a bookkeeping nightmare.

• ⚠️The Risks of the "Status Quo"
• 🌉Navigating the Bridge

🚀Ready to Plan Your Cross-Border Move?

If you are planning on moving to the USA from Canada, don't leave your finances to chance. Raymond James Snowbirds Wealth Management specialize in cross-border financial planning, investments, and wealth management, working closely with your tax accountants and lawyers to ensure a fully integrated strategy.

🌎About Snowbirds Wealth Management 

Snowbirds Wealth Management focuses exclusively on the cross-border market.
Gerry Scott, along with Dean Moro and Carson Hamill, provides investment solutions for:

• Americans living in Canada
• Canadians living in the U.S.

Licensed in both countries, our team helps minimize tax burdens when moving assets across the border.

👉 Schedule Your Introductory Cross-Border Strategy 📞Call Here

Disclaimer: Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof. Raymond James (USA) Ltd. advisors may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Investors outside the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Raymond James (USA) Ltd. is a member of FINRA/SIPC.