Journalling shares CAN >> US

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Wallace
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Journalling shares CAN >> US

Post by Wallace »

I want to journal shares from my Canadian (taxable) account to the US side.
They state that I have to tell them the book cost in $US.
Do I use the conversion rate for the date(s) I bought the shares or do I use today's conversion rate?
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DavidR
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Re: Journalling shares CAN >> US

Post by DavidR »

Since you are a Canadian resident, your cost base in USD terms is not relevant for Canadian tax purposes, but I suppose the broker wants some figure to show on your statement.
(My broker did not bother to ask, and shows some positions with a nominal value of just $1 as book cost. It makes the 'unrealized gains' look pretty ridiculous...)
If I had to choose, I'd give them the rate from the date of purchase - that way you'll see your 'true' unrealized gain/loss in USD terms.
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Re: Journalling shares CAN >> US

Post by Wallace »

DavidR wrote: 04 Aug 2017 13:53 It makes the 'unrealized gains' look pretty ridiculous...)
The exchange rate when I bought the shares was 1,01222. That's why I was asking.
I should have bought them on the US side then of course. But I just wasn't thinking! :roll:

But don't the banks (it's Royal Direct) use this number to calculate capital gains for the tax slips when you sell? Wouldn't the gain be higher at and exchange rate of 1.01222 rather than 1 25 or whatever it is today?

Exchange rates give me a headache!
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Re: Journalling shares CAN >> US

Post by fireseeker »

You're responsible for the cap gains calculation, not the brokerage.
If you bought the shares with CAD, then that will be the cost base. Simple.
If you eventually sell on the USD side, you will have to calculate the exchange rate then to figure out the cap gain (or loss) in CADs.
IOW, the brokerage request for a USD cost base seems, well, bureaucratic. It's the CAD figure that is meaningful for tax reporting.
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Re: Journalling shares CAN >> US

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fireseeker wrote: 04 Aug 2017 14:36 You're responsible for the cap gains calculation, not the brokerage.
If you bought the shares with CAD, then that will be the cost base. Simple.
If you eventually sell on the USD side, you will have to calculate the exchange rate then to figure out the cap gain (or loss) in CADs.
IOW, the brokerage request for a USD cost base seems, well, bureaucratic. It's the CAD figure that is meaningful for tax reporting.
Notwithstanding the fact the client is ultimately responsible for reporting the correct CAD gain/loss on their tax return, some brokerages (mainly 'full service' as opposed to 'discount') try to provide annual statements of Realized Gains and Losses in CAD terms for investments held on the USD side of an account.
Always best to check the reasonableness of such a report - there are multiple ways for the broker's figures to be wrong. [But I have seen some do it correctly...]

Wallace, a capital gain is of course calculated as Proceeds of Disposition (net of commissions, usually) LESS cost base.
For Canadian tax purposes, your cost base was determined in CAD when you originally bought the shares.
Your Proceeds will be the USD amount received for the sale, converted to CAD using the exchange rate from the sale.
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Re: Journalling shares CAN >> US

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Wallace wrote: 04 Aug 2017 13:33 I want to journal shares from my Canadian (taxable) account to the US side.
They state that I have to tell them the book cost in $US.
Do I use the conversion rate for the date(s) I bought the shares or do I use today's conversion rate?
The conversion rate for the date of acquistion. As DavidR has commented on, it is the wild west out there in terms of what brokerages do. Most of them are dolts in that they do not do it right. It should always be based on date of acquisition but the default is to use the rate in place on the date of journalling. :shock: Yeah, no kidding. Several of us have discussed it and made requests to the brokerages to do it right. Falls on deaf ears mostly.... Shudder to think how many investors blindly use the data shown by their brokerages.
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Re: Journalling shares CAN >> US

Post by IdOp »

If the brokers are reporting a "US$ cost base" to CRA, then ISTM that would be nuts. There is no way the CRA can know how that should be converted back to the required C$ cost base. I hope they are just asking for this in order to fill in a blank slot in their database. As long as you know what you're doing, you could tell them to use anything.

It might be temping to tell them to use the exchange rate at the time the shares will be sold, as that would make calculating the capital gain easier. ;)
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Re: Journalling shares CAN >> US

Post by kcowan »

Has anyone ever been challenged on their cost basis by the CRA when claiming capital gains?
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Re: Journalling shares CAN >> US

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IdOp wrote: 04 Aug 2017 19:02 If the brokers are reporting a "US$ cost base" to CRA, then ISTM that would be nuts. There is no way the CRA can know how that should be converted back to the required C$ cost base. I hope they are just asking for this in order to fill in a blank slot in their database. As long as you know what you're doing, you could tell them to use anything.

It might be temping to tell them to use the exchange rate at the time the shares will be sold, as that would make calculating the capital gain easier. ;)
CRA gets the T5008 data...as you see it also. It is a major flaw in the system.
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Re: Journalling shares CAN >> US

Post by IdOp »

AltaRed wrote: 04 Aug 2017 20:24CRA gets the T5008 data...as you see it also. It is a major flaw in the system.
Yeah. Probably they will know to take it with a large helping of salt for US$ accounts.
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Re: Journalling shares CAN >> US

Post by DavidR »

T5008 forms usually report the proceeds only. IIRC there is a place for indicating the currency if the proceeds aren't CAD.
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Re: Journalling shares CAN >> US

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DavidR wrote: 04 Aug 2017 22:06 T5008 forms usually report the proceeds only. IIRC there is a place for indicating the currency if the proceeds aren't CAD.
My T5008 Annual Trading Summaries (Scotia iTrade and BMO IL) have always included both Buys and Sells and I am pretty sure all that shows up on My Account (but I'd have to verify that).
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Re: Journalling shares CAN >> US

Post by always_learning »

Wallace wrote: 04 Aug 2017 13:33 I want to journal shares from my Canadian (taxable) account to the US side.
They state that I have to tell them the book cost in $US.
Do I use the conversion rate for the date(s) I bought the shares or do I use today's conversion rate?
Good gracious, I'm glad I've never encountered this requirement. As others have said, it would be the conversion rate for the date(s) you bought the shares.

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Re: Journalling shares CAN >> US

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AltaRed wrote: 04 Aug 2017 23:05
DavidR wrote: 04 Aug 2017 22:06 T5008 forms usually report the proceeds only. IIRC there is a place for indicating the currency if the proceeds aren't CAD.
My T5008 Annual Trading Summaries (Scotia iTrade and BMO IL) have always included both Buys and Sells and I am pretty sure all that shows up on My Account (but I'd have to verify that).
I should have said "T5008 data submitted to CRA usually reports proceeds only".
If you check My Account I think you will find that only Proceeds of disposition are reported to CRA by your financial institution. Some FIs add "T5008" to the title of their annual trading summary, but only a subset of the data is actually submitted to CRA.
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Re: Journalling shares CAN >> US

Post by AltaRed »

Thanks... I will check My Account sometime to see. I do agree CRA really knows essentially nothing when it comes to ACB of one's holdings, but they do expect each taxpayer to keep track of and retain the evidence of one's ACB. I've yet to be asked to defend anything I've put on Schedule 3 but it could be only a matter of time.

A few folk in other forums with knowledge of the insde workings of brokerages have been trying to get brokerages to use the right Cost Basis in investor accounts to no avail. I think until IIROC and/or securities regulators demand it, the brokerages won't put in the systems to actually do that. It would mean keeping track of daily forex rates, etc. to manage things like journalling of shares. There is no money in it for them and so some investors will blithely go on with trusting brokerage data.
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Re: Journalling shares CAN >> US

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AltaRed wrote: 05 Aug 2017 12:01A few folk in other forums with knowledge of the insde workings of brokerages have been trying to get brokerages to use the right Cost Basis in investor accounts to no avail. I think until IIROC and/or securities regulators demand it, the brokerages won't put in the systems to actually do that.
I have no knowledge of what is going on behind the scenes, but I hope something like this will never happen. It could lead to massive privacy issues. For example, Broker A says send us all your statements from Brokers B and C to back up your cost base claims. Not to mention the inconvenience, because they'd need to do it every time it might be an issue. If it really became an issue in some case with CRA, I'd be quite willing to prove it to them, but only to them and only when necessary.
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Re: Journalling shares CAN >> US

Post by AltaRed »

I agree, but then we should insist that brokerages do NOT show Cost Basis on client statements or online views. If they can't get it right, don't show it at all.
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Re: Journalling shares CAN >> US

Post by Sensei »

Hello,

A lot of the above is not all that intelligible to me, so I'll ask some specific questions. I have 193 shares of ENB in US dollars in my TD brokerage account. These were my legacy from the acquisition of Spectra. I've been think about moving the shares from the US account to the Canada side, thus consolidating them with my C$ ENB shares.

True or false:

1. Grammatically, I should ask to 'journal my shares from my US account to my Canadian account'
2. There would be no foreign exchange involved. I would receive 193 shares at the same day's value. Ex. June 8. USD Enb = 31.33 Can Enb 40.55
3. There is no charge for doing this.

What else should I know?

All assistance greatly appreciated!
Cheers

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Re: Journalling shares CAN >> US

Post by AltaRed »

There is nothing to calculate. The ENB shares in your USD account are the same as the ones in the CAD account. Same CUSIP number. Nothing different in ACB for you to record in your records. ACB does not change from what you already carry for your total ENB shares.

Your brokerage, on the other hand, will do something really stupid. They will assign a new book value based on the forex rate on the day of journalling!!!!! That is completely wrong. This is an issue that a number of us have taken up with discount brokerages to no avail. Hence why one cannot trust brokerage book values.
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Re: Journalling shares CAN >> US

Post by Sensei »

Thanks. That is what I wanted to be sure about.

Book value, different story, but probably not all that relevant for me.
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Re: Journalling shares CAN >> US

Post by Irwin »

Here's some surprisingly good news.
I recently journaled Franco-Nevada (FNV) shares from USD to CAD at RBC Direct Investing.

A new book value in CAD was assigned using exchange rate on day of purchase.

thumbs up for RBC DI
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Re: Journalling shares CAN >> US

Post by AltaRed »

Well, at least one brokerage now has it right! Good news.
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