VTI in non-registered

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Re: VTI in non-registered

Post by IdOp »

AltaRed wrote:...and before someone asks.. is that Noon or Closing? I'd suggest it matters not. Pick one and keep using it forever more.
A reminder that the Bank Of Canada is moving soon to a single daily rate, which I think we'll all use. See for example this link, and possibly some links in that page.
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Re: VTI in non-registered

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Just looked at my T5 from IB for 2016 and it lists both foreign income and eligible dividends. I hold both VTI and VCN in IB (unregistered). Are distributions from VCN on my T5? Or did VTI suddenly have eligible dividends as part of their distributions in 2016? No sign of a T3 yet on my account for 2016.
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Re: VTI in non-registered

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crimsondr wrote:Just looked at my T5 from IB for 2016 and it lists both foreign income and eligible dividends. I hold both VTI and VCN in IB (unregistered). Are distributions from VCN on my T5? Or did VTI suddenly have eligible dividends as part of their distributions in 2016? No sign of a T3 yet on my account for 2016.
VCN should be on a T3 at the end of March. I have no eligible dividends on the T5 I got for my VTI holding. I think IB got it wrong which wouldn't be the first time I understand that IB has screwed up tax slips. Plenty of anecdotal evidence they do this annually for a number of accounts.
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Re: VTI in non-registered

Post by peter »

I only hold VTI, VWO and VEA in my IB non-registered account. My T5 slip only shows amounts in box 15 (foreign income) and 16 (foreign tax paid), all other boxes are empty (except SIN and account number boxes).
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Re: VTI in non-registered

Post by crimsondr »

ghariton wrote:If you are a resident of Canada for income tax purposes, dividends from VTI are Other Income, not dividends. Your tax slip should show the amount in USD -- it is up to you to convert to CAD. You can use the average rate prescribed by CRA.

Your tax slip should also show Foreign Tax Paid, also in USD. Work this through your tax return by hand (as I do) or let your software do it for you. You will get a part of it back as a credit, and depending on your circumstances, you should get all of it back for VTI.

George
My T5 for 2015 from IB actually shows amounts in CAD.
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Re: VTI in non-registered

Post by AltaRed »

Trust IB to do things differently. Who knows if they actually did the conversion correctly? But for what it is worth, it is best to file your tax return with the same numbers as is on your tax slip (if in CAD) to avoid CRA flagging discrepancies. As George says, it is up to the taxpayer to make the appropriate conversions for T5 slips in USD...using the BoC annual average forex rate.
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Re: VTI in non-registered

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IB's conversion of income to CAD has been very close to my own using end of day USD prices.
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Re: VTI in non-registered

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DenisD wrote:IB's conversion of income to CAD has been very close to my own using end of day USD prices.
Good to know. FWIW, it appears anything* using closing prices will need to go to NOON prices when BoC drops COB reporting in a month or two.

I also saw an official CRA response on https://taxinterpretations.com/ a few days ago on a CG question and they say NOON prices is how CRA sees it for Schedule 3 transactions.

* I've been using COB prices in the past, so will need to make that shift going forward.
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Re: VTI in non-registered

Post by crimsondr »

DenisD wrote:IB's conversion of income to CAD has been very close to my own using end of day USD prices.
I also do my own calculations and don't use the actual T5 numbers from IB. But like you said, they are very close.
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Re: VTI in non-registered

Post by DenisD »

I use the IB numbers, not my own. Why ask for trouble with CRA?

BTW, AR, IIRC, the new prices aren't NOON prices. They're some sort of average. I posted an article about the change some months ago.
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Re: VTI in non-registered

Post by johnsmith1 »

I think for small investors it really doesn't matter. I noticed that td uses 1.32480640 as the exchange rate. Even off 100 base points, 10k dividend is like 100 dollars difference. CRA's priority is to chase big fish?
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Re: VTI in non-registered

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johnsmith1 wrote:I think for small investors it really doesn't matter. I noticed that td uses 1.32480640 as the exchange rate. Even off 100 base points, 10k dividend is like 100 dollars difference.
Td's rate is the same used in UFile tax software for average annual forex rate.
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Re: VTI in non-registered

Post by johnsmith1 »

I purchased same US stocks earlier last year; Feb and May. I was trying to look up on BOC's web site for exchange rates of those trading days. But I just noticed from TD's tax receipt that it listed that exchange rate at the bottom, so I will use that instead to do my ACB.
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Re: VTI in non-registered

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johnsmith1 wrote:I purchased same US stocks earlier last year; Feb and May. I was trying to look up on BOC's web site for exchange rates of those trading days. But I just noticed from TD's tax receipt that it listed that exchange rate at the bottom, so I will use that instead to do my ACB.
I did not want to intervene in this discussion, as Altared and me have different opinions, reiterated many times over.
One can also use the annual average foreign exchange rate (1.3248 in 2016, listed by TD at the bottom of T5), as long as they do it consistently. In the long run, it's a wash either way.
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Re: VTI in non-registered

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And I will continue to disagree on capital acqusitions and dispositions. This quote (response to a question) from the CRA at https://taxinterpretations.com/
Question 5

Exchange transactions, settlement date and exchange rate to be used

By virtue of the current rules of the Toronto Stock Exchange (Rule 5-103) and the New York Stock Exchange, the "Settlement Date" for a stock exchange transaction is the third business day following the day on which the transaction occurred (which is not included in the calculation). Paragraph 2 of former Interpretation Bulletin IT-133, Stock Exchange Transactions - Date of Disposal of Shares (canceled), made reference to this. For example, the gain on a transaction made on December 30, 2014 will be reported for tax purposes only in the 2015 taxation year.

In the case of a sale transaction for a security listed on a foreign exchange (such as the New York Stock Exchange), it is also necessary to express the sale price in Canadian dollars. If, for example, in the case of a U.S.-dollar denominated account where the funds remain in U.S. dollars, the question becomes whether to use the exchange rate in effect on the date of the transaction or that in effect on the settlement date. In view of the high volatility of the foreign exchange market, it is not uncommon for a favorable or unfavorable variation of 1 to 3% to occur between the date of the transaction and the settlement date.

On the other hand, from the date of the transaction, the sale price of the shares is fixed definitively, at least in terms of the selling price expressed in foreign currency, on the date of the transaction. In addition, if the taxpayer requests that the proceeds of disposition of the shares be deposited in Canadian dollars on the settlement date, the exchange rate used by the financial institution will generally be the exchange rate on the date of the transaction.

In paragraph 8 of Interpretation Bulletin IT-95R, Foreign Exchange Gains and Losses (Archived), the CRA states the following respecting transactions on income (rather than capital) account: "Transactions on income account are normally recorded in a taxpayer's accounts in the Canadian dollar equivalent determined according to the rate of the exchange prevailing at the time of the transaction." On the other hand, the CRA's position on stock exchange transactions on capital account is not stated.

Questions to the CRA

(a) Should the exchange rate in effect on the transaction date or the settlement date be used in respect of transactions on capital account carried out on a foreign exchange, such as the New York Stock Exchange?

(b) Is the CRA prepared to accept either date to set the exchange rate on the condition that the taxpayer use the same method for all of his or her stock exchange transactions, year after year?

CRA Response to Q5(a)

We are of the view that it is the settlement date of a stock exchange transaction (and not the trade date for the transaction) which is the date of disposition for purposes of calculating the capital gain or loss under subsection 39(1).

Since it is the settlement date of the transaction which gives rise to the proceeds of disposition, the conversion to Canadian dollars of the foreign currency amounts received must be made at the rate quoted by the Bank of Canada for noon on the settlement date for the transaction, by virtue of paragraph 261(2)(b) and the definition of “relevant spot rate” in subsection 261(2).

Thus, in the example of a taxpayer receiving proceeds of disposition of the sale of a security on the New York exchange in an American dollar account, the conversion to Canadian dollars must be made at the noon rate quoted by the Bank of Canada for the settlement date for the transaction.

CRA Response to Q5(b)

The taxpayer must follow the approach described above.

Yves Grondin
2015-058898
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