Canada

A pension plan registered by the Minister under the Income Tax Act.¹ Both the employer and the members can pay in,² and members can add voluntary contributions on top of what membership requires.³ The plan's assets can be held by a trust or by a pension corporation, and both are exempt from Canadian income tax.⁴

A foreign trust when held in trust; the filing is the same either way.

An RPP held in trust is a trust, because a trustee holds the assets for the members,^5,4 and a foreign one, because it is governed by Canadian law.^6,7 An RPP held by a pension corporation is not a trust. The difference does not change the filing, because Rev. Proc. 2014-55 covers any trust, company, organization, or other arrangement within the treaty's pension article.⁸

The employer-paid part can be a §402(b) employees' trust; the exemption still removes the filing.

The IRS has recognized that a Canadian plan can be a §402(b) employees' trust, with the highly compensated employee rule as the limit.⁹ For the employer-paid part of an RPP held in trust: employer contributions are U.S. income to you when paid, to the extent vested,^10,11 unless the treaty excludes them (see below), and the foreign earned income exclusion cannot cover them;¹² you are not treated as owner of that part;¹³ and once your own voluntary contributions exceed your employer's, you are treated as owner of the part yours fund, if the grantor trust rules are otherwise met. Contributions the plan requires you to make out of your pay are not voluntary, and the IRS has treated contributions like them as the employer's.^14,15 If you are a highly compensated employee and one reason the plan is not exempt is that it fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year instead.¹⁶ None of this changes the filing, because Rev. Proc. 2014-55 removes it.¹⁷

Exempt under Rev. Proc. 2014-55.

Rev. Proc. 2014-55 exempts every beneficiary of a Canadian retirement plan, whether or not they are eligible individuals, from reporting contributions, distributions, and ownership on Form 3520, and relieves the plan's custodian of Form 3520-A.¹⁷ A Canadian retirement plan is any arrangement within Article XVIII(7) of the treaty: resident in Canada, generally exempt from Canadian income tax, and operated exclusively to provide pension or employee benefits.^8,18 An RPP is a pension plan whose trust or pension corporation is exempt from Canadian tax,^1,4 so we read it as within Article XVIII(7); the Form 3520 instructions name RRSPs and RRIFs but not RPPs, and extend the exemption to “any other Canadian retirement plan” within Rev. Proc. 2014-55.¹⁹ Unlike Rev. Proc. 2020-17, this exemption does not depend on having filed U.S. returns. It defines a beneficiary as someone taxed currently on the plan's undistributed income,²⁰ which a member of an employer plan read as a §402(b) trust may not be; such a member files nothing for it anyway: contributions to a §402(b) trust aren't reportable, the member isn't its owner, and payouts reported as compensation stay off Part III.^21,13,22

U.S. tax on the plan's income waits until payout, with nothing to file to claim it.

Article XVIII(7) lets a U.S. citizen or resident elect to defer U.S. tax on income accrued in the plan until it is paid out,¹⁸ and Rev. Proc. 2014-55 treats an eligible individual (one who has filed U.S. returns and not reported the plan's undistributed income) as having made that election, so nothing is filed to claim it.²³ Someone who has reported that income needs the IRS's consent to elect.²⁴ Separately, a U.S. citizen who lives in Canada and works there as an employee can exclude contributions to a qualifying retirement plan, an RPP among them, up to what a U.S. plan would allow,^25,26 but not for pay excluded under the foreign earned income exclusion.²⁷ Two related rules cover other cases: an employee sent from Canada to work in the U.S. for a limited time, and a U.S. resident who commutes to a job in Canada, can each exclude contributions to the Canadian plan, within limits.^28,29 The saving clause does not override these rules.^30,31 Treaty positions that modify the taxation of pensions or employment income are among those for which Form 8833 is waived.³²

Nothing to file on Forms 3520 or 3520-A.

Exempt: no Part I, Part II, Part III, or Form 3520-A.^17,19 No Form 4970: payouts are taxed under §72, subject to the treaty, not under the trust distribution rules.^33,34 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

A deferred profit sharing plan is one an employer pays into out of its profits, to a trustee in trust for its employees;³⁷ only the employer may contribute,³⁸ and the trust pays no Canadian tax.^39,40

A foreign trust: a trustee in Canada holds the employer's contributions for the employees.

A foreign trust: trustees resident in Canada hold the contributions for the employees,^37,41,5 under Canadian law.⁶

Reads as a §402(b) employees' trust; only the employer pays in.

The employer pays in for its employees, so it reads as a §402(b) employees' trust: employer contributions are U.S. income to you when paid, to the extent vested,^10,11 unless the treaty excludes them (see below), and you are not treated as owner of any part, since you cannot contribute.^13,38 None of this changes the filing, because Rev. Proc. 2014-55 removes it.¹⁷

Exempt under Rev. Proc. 2014-55.

Rev. Proc. 2014-55 covers any arrangement within Article XVIII(7): generally exempt from Canadian income tax and operated exclusively to provide pension, retirement, or employee benefits.^8,42 A DPSP's trust is exempt and exists to provide benefits to employees,^40,37 so we read it as within Article XVIII(7), and the Technical Explanation lists DPSPs among Canada's plans that correspond to U.S. pension plans.²⁶ The exemption covers its beneficiaries' Form 3520 and its custodian's Form 3520-A.¹⁷

U.S. tax on the plan's income waits until payout, with nothing to file to claim it.

Article XVIII(7) defers U.S. tax on the plan's income until it is paid out, and Rev. Proc. 2014-55 treats an eligible individual as having made that election, so nothing is filed to claim it.^18,23 A DPSP is a qualifying retirement plan, so a U.S. citizen who lives in Canada and works there as an employee can exclude the employer's contributions for that work, up to what a U.S. plan would allow.^25,26 The saving clause does not override these rules.³¹

Nothing to file on Forms 3520 or 3520-A.

Exempt: no Part I, Part II, Part III, or Form 3520-A.^17,19 No Form 4970: payouts are taxed under §72, subject to the treaty.³³ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

A PRPP is a pension plan run by a licensed administrator, which must administer the plan and its assets as a trustee for the members, with a separate account for each member.^43,44 The administrator sets the contribution rates, and an employer may contribute too;^45,46 a member's contributions are treated like RRSP premiums.⁴⁷ The trust pays no Canadian tax.^48,49 Québec's voluntary retirement savings plans work similarly: members set their contributions, and the employer need not contribute.⁵⁰

A foreign trust: the administrator holds the plan as trustee for the members.

A foreign trust: the administrator holds the plan's assets as trustee for the members,^43,5 under Canadian law.⁶

An employer-paid part can be a §402(b) employees' trust; the exemption still removes the filing.

Where an employer pays in, that part reads as a §402(b) employees' trust,¹⁰ and once your own contributions exceed the employer's, you are treated as owner of the part yours fund, if the grantor trust rules are otherwise met;¹⁴ where only you pay in, §402(b) does not apply.¹⁰ The filing is the same either way, because Rev. Proc. 2014-55 removes it.¹⁷

Exempt under Rev. Proc. 2014-55, on our reading.

A PRPP's trust is exempt from Canadian tax and the plan exists to provide retirement benefits,^48,49 so we read it as within Article XVIII(7) and so within Rev. Proc. 2014-55,^8,42 which exempts its members' Form 3520 and its custodian's Form 3520-A.¹⁷ No IRS guidance names PRPPs.

U.S. tax on the plan's income waits until payout; the contribution exclusion is not settled.

Article XVIII(7) defers U.S. tax on the plan's income until it is paid out.^18,23 Whether a U.S. citizen working in Canada can exclude PRPP contributions under Article XVIII(13) is not settled: PRPPs are not on the list of Canadian qualifying retirement plans, which also takes in substantially similar plans under later legislation, and no IRS guidance says whether a PRPP is one.^26,51

Nothing to file on Forms 3520 or 3520-A.

Exempt: no Part I, Part II, Part III, or Form 3520-A.^17,19 No Form 4970: payouts are taxed under §72, subject to the treaty.³³ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

CPP contributions are paid into the Consolidated Revenue Fund and credited to the Canada Pension Plan Account in the accounts of Canada, and benefits are paid out of it, worked out by formula;^52,53,54 amounts the Account does not need go to the CPP Investment Board to invest.⁵⁵ The QPP is funded by contributions Retraite Québec deposits with the Caisse de dépôt et placement du Québec.⁵⁶ Old Age Security has no contributions: it is paid out of the Consolidated Revenue Fund, based on years of residence.^57,58

Not trusts: contributions go to government accounts, and benefits are set by law.

Not trusts: no trustee holds property for you, and a trust for U.S. purposes needs trustees holding property for the beneficiaries;⁵ contributions go to government accounts and benefits are set by law.^52,57

Does not apply: there is no trust.

§402(b) reaches an employer's contributions to an employees' trust,¹⁰ and these programs have no trust.⁵²

Not needed.

§6048 reaches only foreign trusts.⁵⁹

Taxed only in the U.S., as if it were U.S. Social Security.

Canadian social security paid to a U.S. resident is taxable only in the United States, as though it were U.S. Social Security, and a kind of benefit Canada does not tax its own residents on is exempt from U.S. tax;⁶⁰ the saving clause does not override this.³¹

Nothing on Form 3520 or 3520-A.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts, and these programs are not trusts.^59,61,62 Form 8938 does not count a foreign government's social security.⁶³ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

A registered retirement savings plan (RRSP) is a contract with an annuities provider, an arrangement in trust with a trust company, or a deposit, funded by the individual or their spouse or common-law partner.⁶⁴ A registered retirement income fund (RRIF) is an arrangement under which a carrier pays the annuitant at least a minimum amount each year from property transferred to it.⁶⁵ An employer can also arrange RRSPs for its employees as a group plan.²⁶ A locked-in retirement account (LIRA) or locked-in RRSP is an RRSP, and a life income fund (LIF) a RRIF, that pension law locks in because it holds a pension moved out of a registered pension plan;^66,67,68 the same rules apply to them.

A foreign trust when held in trust; the filing is the same either way.

An RRSP or RRIF held in trust is a foreign trust;^64,5,6 one written as an annuity contract or held as a deposit is not a trust at all. The difference does not change the filing, because the exemption covers every RRSP and RRIF.¹⁹

Generally does not apply.

An RRSP is funded by the individual or their spouse or common-law partner,⁶⁴ and §402(b) reaches only an employer's contributions to an employees' trust,¹⁰ so it generally does not apply. No IRS guidance says how §402(b) treats an employer's contributions to a group RRSP; it does not change the filing.¹⁹

Exempt under Rev. Proc. 2014-55.

Rev. Proc. 2014-55 and the Form 3520 instructions exempt transfers to, ownership of, and distributions from an RRSP or RRIF, for every beneficiary.^17,19

U.S. tax on the plan's income waits until payout, with nothing to file to claim it.

Article XVIII(7) lets you defer U.S. tax on the plan's undistributed income, and Rev. Proc. 2014-55 treats an eligible individual as having made that election, so no form is filed.^18,23 Someone who has reported that income needs the IRS's consent to elect.²⁴ The saving clause does not override Article XVIII(7).³¹ The deferral lasts until a distribution from the plan or a plan substituted for it.⁶⁹ Whether a direct transfer to an FHSA, which is not taxed in Canada,⁷⁰ ends it is not settled. The IRS's earlier procedure carried the deferral over only to another RRSP, RRIF, registered pension plan, or DPSP,⁷¹ and an FHSA is not a plan within Article XVIII(7), so the cautious course treats the transfer as a distribution from the RRSP, taxed under §72.³³ The other reading is that an FHSA, which can itself be moved tax-free to an RRSP,⁷² is a plan substituted for the RRSP, so the deferral continues until money leaves the FHSA. No IRS guidance addresses it. A group RRSP, one that is part of an employer's group arrangement, is a qualifying retirement plan, so a U.S. citizen who lives in Canada and works there as an employee can exclude contributions to it as to an RPP; an individual RRSP is not one.^25,26,73

Nothing to file on Forms 3520 or 3520-A.

Exempt: no Part I, Part II, Part III, or Form 3520-A.^17,19 On our reading that includes your executor's report of your death and a payout to your estate: the revenue procedure names annuitants and beneficiaries, but the IRS describes it as an exception from all section 6048 reporting for the plan, and the instructions' exception names no filer.^74,19 No Form 4970: payouts are taxed under §72, subject to the treaty.³³ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

A TFSA is an arrangement in trust with a trust company, an annuity contract, or a deposit, held by an individual aged 18 or over for their own exclusive benefit.⁷⁵ Only the holder can contribute.⁷⁶ A trust governed by a TFSA is exempt from Canadian income tax to the extent the Act provides.⁷⁷

Not settled when held in trust; our guide treats it as a foreign trust. Otherwise not a trust.

Canadian law sets up a TFSA held in trust as an arrangement in trust with a trust company, and exempts the trust from Canadian tax to the extent the Act provides,^75,77 which reads like a foreign trust.^5,6 Whether it is one for U.S. purposes is not settled, and no IRS guidance addresses TFSAs. Federal law, not Canada's label, decides,⁷⁸ and the closest IRS ruling holds that an arrangement whose title-holder only holds and transfers title at the owner's direction is not a trust,⁷⁹ though not where the title-holder does more than that.⁸⁰ This guide takes the cautious course of treating a TFSA held in trust as a foreign trust. One written as an annuity contract or held as a deposit is not a trust, so §6048 does not reach it. Check the account agreement.

Does not apply.

§402(b) does not apply: only the holder can contribute,⁷⁶ and §402(b) reaches only an employer's contributions to an employees' trust.¹⁰

None.

A TFSA is not a pension plan, so it is outside Article XVIII(7) and Rev. Proc. 2014-55.^18,8 Rev. Proc. 2020-17 covers only retirement trusts and medical, disability, or educational savings trusts,⁸¹ and a TFSA is a general savings account kept for the holder's benefit.⁷⁵ The proposed regulations describe a further category, savings trusts worth $50,000 or less, but the rule that grants the exemption lists only the retirement and medical, disability, or educational categories, so we do not rely on it.⁸²

No deferral.

No treaty provision defers or exempts U.S. tax on TFSA income: Article XVIII(7) covers only plans operated to provide pension or employee benefits.¹⁸

Full reporting for a TFSA held in trust, on the cautious course.

For a TFSA held in trust, on the cautious course: you are treated as its owner, including for contributions made before you became a U.S. person, because it is kept for your exclusive benefit,^83,84,75 so Part II and Form 3520-A are due each year,⁶¹ and payouts go on Part III.⁶² Each contribution you make as a U.S. person is a Part I transfer,⁵⁹ and one made within 5 years before your U.S. residency started is treated as made on your residency starting date and goes on Part I for that year.⁸⁵ Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.⁸⁶ The trustee will not file Form 3520-A for you, so you attach a substitute to your Form 3520.⁸⁷ No Form 4970, because the income is taxed to you each year.⁸⁸ The funds a TFSA or FHSA holds may be subject to the PFIC rules; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

An FHSA is an arrangement in trust with a trust company, an annuity contract, or a deposit, held by a qualifying individual to save for a first home.⁸⁹ Contributions are limited to C$8,000 a year plus carryforward, and C$40,000 for life.⁹⁰ A withdrawal toward a qualifying home is a qualifying withdrawal.⁹¹ A trust governed by an FHSA is exempt from Canadian income tax to the extent the Act provides.⁷⁷

Not settled when held in trust; our guide treats it as a foreign trust. Otherwise not a trust.

An FHSA held in trust is in the same position as a TFSA held in trust:⁸⁹ whether it is a trust for U.S. purposes is not settled,⁷⁹ and this guide takes the cautious course of treating it as a foreign trust.^5,6 One written as an annuity contract or held as a deposit is not a trust.

Does not apply.

§402(b) does not apply: the holder funds it,⁸⁹ and §402(b) reaches only an employer's contributions to an employees' trust.¹⁰

None.

Saving for a home is not one of the purposes Rev. Proc. 2020-17 covers (retirement, or medical, disability, or educational benefits),^81,92 and an FHSA is not a pension plan within Article XVIII(7).¹⁸ As with TFSAs, we do not rely on the proposed regulations' $50,000 savings-trust category.⁸²

No deferral.

No treaty provision defers or exempts U.S. tax on FHSA income.¹⁸

Full reporting for an FHSA held in trust, on the cautious course.

For an FHSA held in trust, on the cautious course, the same as a TFSA held in trust: you are treated as its owner, contributions made before you became a U.S. person included; Part I for each contribution made as a U.S. person or within 5 years before your residency started; Part II and a substitute Form 3520-A each year; and Part III for payouts.^{83,84,59,85,61,62} Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.⁸⁶ No Form 4970, because the income is taxed to you each year.⁸⁸ The funds a TFSA or FHSA holds may be subject to the PFIC rules; this guide does not decide that.

Money moved in directly from an RRSP is not taxed in Canada and uses FHSA room,⁹³ but on the cautious course it is a Part I transfer into the FHSA either way;⁵⁹ whether the RRSP's untaxed income comes with it, still deferred, or is taxed as a distribution on the way out is not settled (see the RRSP block above). A direct transfer from an FHSA to an RRSP or RRIF is not taxed in Canada either;⁷² on the cautious course it is a payout from the FHSA, on Part III, and the RRSP side needs no Part I under Rev. Proc. 2014-55.^62,17 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

An RESP is an arrangement under which a promoter agrees to pay educational assistance payments to a beneficiary, with the property held irrevocably by a trust.^94,95 The subscriber pays in, up to C$50,000 per beneficiary for life,⁹⁶ and government grants under the Canada Education Savings Act can be added.⁹⁵ The plan can refund the subscriber's contributions, and income paid out to a subscriber rather than for education (an accumulated income payment) carries an extra 20% tax (12% in Quebec).^95,97 A trust governed by an RESP is exempt from Canadian income tax to the extent the Act provides.⁷⁷

A foreign trust.

A trust holds the plan's property, under Canadian law.^95,5,6

Does not apply.

§402(b) does not apply: the subscriber, not an employer, funds the plan, and §402(b) reaches only an employer's contributions to an employees' trust.^94,10

Rev. Proc. 2020-17 may cover it; one condition is unsettled.

Rev. Proc. 2020-17 §5.04 covers savings trusts for educational benefits,⁹² and an RESP with five or fewer beneficiaries meets three of its four conditions on the face of Canadian law. It is tax-favored: the trust is exempt and the government adds grants.^77,98 Its trustee must file information returns with the Minister.⁹⁹ Contributions are capped at C$50,000 per beneficiary, about US$36,523 at the Treasury rate for December 31, 2025, under the US$200,000 lifetime limit;^96,100,101 a family plan's cap is per beneficiary, so one for six or more can pass it. The open question is the fourth: earnings paid out for anything but education carry the extra tax, but the subscriber's own contributions can be refunded at any time without one.^97,95,102 No IRS guidance addresses RESPs. The exemption also needs you to be an eligible individual.¹⁰³ The proposed regulations have the same four conditions for a savings trust, with the $10,000 and $200,000 limits raised for inflation since 2020,^104,105,106 so the same question stays open under them.

No deferral.

No treaty provision defers or exempts U.S. tax on RESP income: Article XVIII(7) covers only plans operated to provide pension or employee benefits.¹⁸

Nothing to file if you rely on the exemption; otherwise Parts I to III can apply.

If you rely on the exemption: none of Forms 3520 or 3520-A.⁹² On our reading the exemption also spares the executor the report of a U.S. owner's death, if the owner was an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^107,108 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁰⁹ If not: a U.S. subscriber's contributions are Part I transfers, and the subscriber is treated as owner of the part they fund for any year the plan has a U.S. beneficiary,^59,84 and likely in any year, since the subscriber's contributions can be refunded and the plan's income paid to the subscriber;^95,83 the cautious course treats you as owner either way. So Part II and Form 3520-A are due each year;⁶¹ a U.S. beneficiary who receives a payment, or a U.S. subscriber who receives a refund or an income payment, files Part III.⁶² Part I also applies on the death of a subscriber who is a U.S. citizen or resident, if any part of the plan is then treated as owned by them or is in their gross estate: the executor reports it, whether or not the executor is a U.S. person.⁸⁶ No Form 4970 on the part you own, because its income is taxed to you each year.⁸⁸ The government grants come from neither you nor the beneficiary, and whose they are is not settled: they are repayable to the government if not used for education, which points to their not being part of what you own,⁹⁵ and a grant paid out to a U.S. beneficiary may then be an accumulation distribution on Form 4970.¹¹⁰ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

An RDSP saves for a person with a disability. Its property is held by a plan trust; contributions are capped at C$200,000 for the beneficiary over all their RDSPs; only a holder, or someone with a holder's written consent, can contribute; and the plan can pay out only disability assistance payments, transfers to another RDSP, and repayments of government grants and bonds.¹¹¹ A trust governed by an RDSP is exempt from Canadian income tax to the extent the Act provides.⁷⁷

A foreign trust.

A plan trust holds the property, under Canadian law.^111,5,6

Does not apply.

§402(b) does not apply: the plan is funded by its holders and government programs, not an employer, and §402(b) reaches only an employer's contributions to an employees' trust.^111,10

Rev. Proc. 2020-17 may cover it; two conditions are unconfirmed.

Rev. Proc. 2020-17 §5.04 covers savings trusts for disability benefits,⁹² and an RDSP meets most of its conditions on the face of Canadian law. It is tax-favored: the trust is exempt and the government adds grants and bonds.^77,98 Contributions are capped at C$200,000, about US$146,092 at the Treasury rate for December 31, 2025, under the US$200,000 lifetime limit,^111,100,101 but the Act does not count government grants and bonds as contributions;¹¹² if Rev. Proc. 2020-17 counts them, a plan that receives the most it can may pass US$200,000. We have not confirmed this condition. Payments are limited to disability assistance payments.^111,102 Nor have we confirmed the condition that information about the plan is reported to the tax authorities: the Act requires the issuer to notify the Minister responsible for the program when a plan is set up, not the tax authority,^113,114 and issuers report to the tax authority only the taxable part of payments from the plan, on T4A slips, in years with payments.¹¹⁵ No IRS guidance addresses RDSPs. The exemption also needs you to be an eligible individual.¹⁰³ The proposed regulations have the same conditions for a savings trust, but raise the $200,000 limit for inflation since 2020,^104,105,106 which leaves more room for grants and bonds; the reporting condition is just as open under them.

No deferral.

No treaty provision defers or exempts U.S. tax on RDSP income: Article XVIII(7) covers only plans operated to provide pension or employee benefits.¹⁸

Nothing to file if you rely on the exemption; otherwise Parts I to III can apply.

If you rely on the exemption: none of Forms 3520 or 3520-A.⁹² On our reading the exemption also spares the executor the report of a U.S. owner's death, if the owner was an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^107,108 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁰⁹ If not: a U.S. person who contributes files Part I and is treated as owner of the part they fund for any year the plan has a U.S. beneficiary,^59,84 so Part II and Form 3520-A are due each year;⁶¹ a U.S. beneficiary who receives a payment files Part III.⁶² Part I also applies on the death of a contributor who is a U.S. citizen or resident, if any part of the plan is then treated as owned by them or is in their gross estate: the executor reports it, whether or not the executor is a U.S. person.⁸⁶ No Form 4970 on the part you own, because its income is taxed to you each year.⁸⁸ The government grants and bonds come from neither you nor the beneficiary, and whose they are is not settled: the plan can pay them back under the Canada Disability Savings Act, which points to their not being part of what you own,¹¹¹ and a payment from them to a U.S. beneficiary may then be an accumulation distribution on Form 4970.¹¹⁰ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^35,36

A trust set up under Canadian law, during someone's life or by their will, in which a trustee holds investments or a business for family members.⁵ If the trustee mainly runs a business for profit rather than holding property for the family, U.S. law may classify the arrangement as a business entity rather than a trust.¹¹⁶

A foreign trust, unless a U.S. court supervises it and U.S. persons control its substantial decisions.

An ordinary trust where the trustee holds property for the beneficiaries,⁵ and a foreign trust where a trustee in Canada administers it under Canadian law, since it then fails the court test, which alone makes it foreign, even where the trustee is a U.S. citizen.^6,7 A trust is domestic only on a day a U.S. court can supervise its administration and U.S. persons control all of its substantial decisions, counting everyone who can make one, not only the trustees.¹¹⁷ Powers a settlor keeps, or a protector's consent rights, do not on our reading stop it being a trust; they go to who is owner, below, and where a foreign person holds one that is a substantial decision, such as a power to revoke the trust or to replace the trustee, it also keeps the trust foreign, even with a U.S. trustee.^118,119 A bare trust whose trustee only holds title for an adult entitled to the property may not be a trust for U.S. purposes,⁷⁹ but that ruling is narrow,⁸⁰ so whether a bare trust is one is not settled, and the cautious course reports it as a trust. A bank or trust company that holds your own investments only to act on your instructions is not that kind of bare trust; it is an account, not a trust.⁷⁹

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.⁸⁴ Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.⁸⁵ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone or with the consent of a related or subordinate party subservient to them, or if only they or their spouse can receive distributions during their life.¹²⁰ Otherwise, unless another grantor trust rule makes a U.S. person owner,⁸³ no one is owner, and the trust is taxed as a separate, non-grantor trust.¹²¹

A trust has a U.S. beneficiary for the transferor rule if anyone has discretion to pay or benefit any person, unless its terms identify the class who may benefit and none of them is a U.S. person that year,¹²² even if nothing is paid to a U.S. person that year;¹²³ a power to amend the trust to benefit a U.S. person counts, and so does a letter of wishes or other understanding that points to benefiting one, even one that says it is only a suggestion.¹²⁴ Where a U.S. person funds the trust, the IRS may treat it as having a U.S. beneficiary unless that person shows it has none.¹²⁵ A beneficiary who first became a U.S. person more than 5 years after the transfer is not counted,¹²⁶ and a transferor whose trust gains a U.S. beneficiary is taxed that year on the income the trust kept for that part to the end of the year before, as an accumulation distribution with the interest charge.^127,128 A settlor who is not a U.S. person keeps the revocable-trust exception for a year only if they can take the property back alone, or with the consent of a related or subordinate party subservient to them, for at least 183 days of it; a power that needs anyone else's consent, such as an independent trustee's or protector's, does not count.^129,130 Once the exception fails for a year it is lost for good.¹³¹ Separately, a portion already treated as owned under §676, or under §677 other than its life insurance rule, on September 19, 1995 keeps that owner for the property it held that day, for as long as it stays so treated.¹³² A U.S. settlor of a trust with no U.S. beneficiary can still be owner under another rule, for example by keeping a power to take the property back,¹³³ and a U.S. beneficiary who alone can take the property is owner of it.^134,120

When a settlor who was not a U.S. person dies, the revocable-trust and spouse-only exceptions end for that settlor's portion, because the person left with the power, even a surviving spouse, is not its grantor;¹³⁵ a U.S. person who alone can take the property, or a U.S. person who funded the trust, can still be owner, and otherwise the portion is taxed as a non-grantor trust.^134,84,121 When a portion stops being owned by a U.S. person, the owner is treated, for the gain rule, as transferring it to a foreign trust that day.¹³⁶ At death the gain is excused only if the trust's basis in the property is then reset to its value at death under section 1014(a), as where the owner could still revoke the trust;¹³⁷ otherwise the owner is treated as transferring it immediately before death and recognizes the gain.¹³⁸

No relief.

The saving clause lets the United States tax its citizens and residents as if there were no treaty, apart from listed provisions,^30,31 none of which concerns foreign trust reporting.

Part I for whoever funds it, Part II and Form 3520-A for an owner, Part III for whoever receives a distribution.

A U.S. person who transfers property to the trust files Part I for that year.⁵⁹ A transfer to a foreign trust is treated as a sale, and you recognize any gain on what you transfer;¹³⁹ a transfer is not, to the extent anyone is treated as owning the part it funds.¹⁴⁰ Part I also applies on the death of a U.S. citizen or resident who was treated as owner of any part of the trust, or whose gross estate includes part of it, and to property that passes to the trust by reason of a U.S. person's death; the executor reports it, whether or not the executor is a U.S. person.⁸⁶ The gain rule does not apply to property that passes to the trust by reason of a U.S. person's death, if its basis in that property is set under section 1014(a).¹³⁷ A U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year.^61,87 A U.S. beneficiary who receives a distribution files Part III for that year.⁶² A distribution from a non-grantor trust that carries out income the trust kept in earlier years is an accumulation distribution, taxed with an interest charge on Form 4970.¹¹⁰ Form 4970 can also apply to a transferor taxed when the trust gains a U.S. beneficiary, as the owner step says.¹²⁸ Rev. Proc. 2020-17 does not apply: it covers only retirement trusts and medical, disability, or educational savings trusts.⁸¹

A distribution is any gratuitous transfer from the trust, whether or not it is a grantor trust and whether or not you are named as a beneficiary, including a credit card bill it pays or guarantees and a check written on its account.¹⁴¹ On the proposed rules, a payment from a company the trust owns to a U.S. person who is a grantor, owner or beneficiary of the trust, or related to one, is treated as a distribution from the trust, unless that person shows it is properly attributable to their own interest in the company.^142,106 A loan of cash or marketable securities, or use of trust property, to you or a related U.S. person goes on Part III whether or not it is taxable;¹⁴³ it is treated as a distribution for income tax, except a loan made on a qualified obligation (a written loan in U.S. dollars, for 5 years or less, at an interest rate tied to the federal rate, for which you extend the IRS's time to assess and that you report each year) or use you pay the fair market value for within a reasonable time,^{144,145,146,147} and where a U.S. person funded the trust, the loan instead makes it a grantor trust, and it still goes on Part III.¹⁴⁸

If you are the U.S. owner of the part that pays you, you complete only lines 24 and 27, and the rest of this paragraph does not apply to you.¹⁴⁹ Otherwise, with a complete Foreign Grantor Trust Beneficiary Statement you treat a payment as coming from the owner, so a gift from the owner is not your income;¹⁵⁰ without one, the default method applies even to a distribution from a grantor trust.¹⁵¹ From a non-grantor trust you may use the actual method if you have a Foreign Nongrantor Trust Beneficiary Statement,¹⁵² and without one the default method applies: the part of this year's distributions above 1.25 times the average of the three years before is an accumulation distribution, taxed on Form 4970 with an interest charge figured on Form 3520's Schedule C, and the rest is ordinary income,^153,110,154 and once you use the default method you must keep using it in later years, except that in the year the trust ends you may use the actual method if you have the statement.¹⁵⁵ In the trust's first year as a foreign trust, you stop Part III once you have entered how many years it has been foreign, so no accumulation distribution is figured that year.¹⁵⁶ The statute treats the whole distribution as an accumulation distribution where adequate records are not given;¹⁵⁷ the default method is the IRS's relief from that, open if you can give the trust's distributions for the three years before,¹⁵⁸ and where there were none, it too makes the whole distribution an accumulation distribution.¹⁵³ A foreign trust's distributable net income, the income its distributions carry out, includes its capital gains,¹⁵⁹ and the exception for income kept before a beneficiary was born or turned 21 does not apply to it.¹⁶⁰ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.¹⁶¹

A Canadian mutual fund or ETF can be a mutual fund trust: a unit trust resident in Canada, in which each investor's interest is described by units, that meet prescribed conditions, including at least 150 unitholders.^162,163,164 Funds held inside an RRSP, TFSA, or other registered plan are covered by that plan's block.

Not a trust where its manager can vary its investments; then a foreign corporation if all investors have limited liability.

Not a trust for U.S. purposes where its manager can vary its investments: an investment trust with that power is not classified as a trust,¹⁶⁵ and as a foreign entity it is treated as a corporation if all its investors have limited liability, unless it elects otherwise.¹⁶⁶ A fund that cannot change its investments may be a trust; check its declaration of trust.

No owner: the grantor trust rules do not reach a corporation.

The grantor trust rules apply to trusts, so no one is treated as owner of a fund treated as a corporation; its investors hold shares in a foreign corporation.¹⁶⁶ The PFIC rules may apply to them; this site does not determine PFIC status.

No effect.

No treaty provision changes how the fund is classified or reported.³⁰

No Form 3520 or 3520-A for a fund treated as a corporation.

For a fund treated as a corporation: no Part I, Part II, Part III, or Form 3520-A, and no Form 4970, because Forms 3520 and 3520-A report foreign trusts.^59,61,62 A fund that is a trust is reported under the trust rules above.¹⁶⁵ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.¹⁶¹