Jessica (38) and Mark (39) live in Vancouver, BC with their young daughter. Jessica works remotely for a U.S.-based tech company, paid in USD. Mark is VP Finance at a Canadian manufacturing firm in BC, earning a high salary with stock options and bonuses.

With a growing portfolio of investments, cross-border income, and an Arizona vacation property, they face challenges managing tax compliance, accounting treatment, and wealth planning under Canadian tax law and IFRS accounting standards.

Financial Overview

Key Cross-Border Tax & Accounting Challenges

Cross-border taxation:

Jessica is a Canadian resident for tax purposes but earns a U.S. salary and receives RSUs from her American employer. She must report all worldwide income on her Canadian T1 return. The challenge is optimizing foreign tax credits to avoid double taxation on her U.S. salary and RSU income, considering timing differences between U.S. vesting and Canadian recognition, and navigating potential currency fluctuations impacting taxable amounts.

T1135 Foreign Property Reporting:

Jessica is required to file the T1135 form annually to disclose her foreign property holdings, including the U.S. brokerage account, Roth IRA, and their vacation rental property in Arizona. The family must ensure proper valuation and documentation of these assets to comply with CRA rules, and understand the accounting implications for disclosure in their Canadian financial statements, especially concerning foreign exchange gains/losses and investment income.

Rental Income Accounting for Arizona Property:

The couple’s seasonal rental property in Arizona produces rental income and incurs various expenses such as property management fees, maintenance, and mortgage interest. Under Canadian GAAP (IFRS or ASPE), they must accurately report this income and allocate expenses. Decisions about depreciation (Capital Cost Allowance) are complex given differences in U.S. and Canadian tax treatments, and the family needs to understand how to differentiate repairs versus capital improvements for tax and accounting purposes.

Retirement Planning with Cross-Border Accounts:

Jessica holds U.S.-based retirement accounts, including a Roth IRA and 401(k). Integrating these with Canadian retirement savings vehicles such as RRSPs and TFSAs requires careful planning to optimize tax deferral benefits, avoid unintended tax liabilities, and coordinate withdrawals. The family must also consider implications on contribution room, reporting requirements, and potential tax consequences upon repatriation or withdrawal.