Form 8938 versus FBAR threshold checker
Test your foreign assets against both US reporting thresholds at once.
Open itA non-United States fund held by a US person is usually a passive foreign investment company, and the default regime spreads the gain back over every year you held it, taxes the earlier slices at the top rate and adds interest. This shows what that costs.
The holding
A sale spreads the whole gain. A distribution spreads only the part treated as excess.
US$
Used when you are modelling a sale.
US$
What you paid, adjusted for anything already included in income.
US$
Used when you are modelling a distribution. The excess is worked out from your own distribution history.
years
Whole years the holding has been in place. The spread is over this number.
%
The slice allocated to the current year goes into ordinary income at your own rate.
%
Slices allocated to earlier years are taxed at the highest rate in force for those years, not at your rate. Enter the figure for your years.
%
Interest runs on the tax attributed to each earlier year. Enter the underpayment rate for the period.
US$
What you would have included each year had a qualifying election been in place from the start.
%
The rate that would have applied to the annual inclusion.
Total tax and interest
—
Effective rate on the amount spread —
An election from the start would have cost less —
Amount spread over the holding period—
Years in the spread—
Allocated to each year—
Current-year slice—
Tax on it at your rate—
Earlier-year slices—
Tax on them at the top rate—
Interest on the deferred tax—
Interest as a share of the total—
Tax under an election from the start, for comparison—
Difference—
Why a foreign mutual fund is treated so harshly
A pooled investment vehicle outside the United States is almost always a passive foreign investment company, because its income is passive and its assets are financial. That includes ordinary retail funds, exchange-traded funds and unit trusts held perfectly innocently through a bank in Toronto, Mumbai or Dubai. There is no de minimis for the substantive tax, and the default regime is punitive by design.
Under that default, a gain on sale or an excess distribution is allocated rateably across the days of the holding period. The slice landing in the current year goes into ordinary income at your rate. Every earlier slice is taxed at the highest ordinary rate in force for that year — not your rate — and carries an interest charge running from that year to now. Long holding periods are what make the numbers large: the interest layer grows with the square of the years, not in a straight line.
The elections, and why they have to be early
Two elections avoid the default. A qualifying election taxes you each year on your share of the fund's income as it arises, and a mark-to-market election taxes the annual change in value. Either is far cheaper than the default over a long holding, which is what the comparison line in the readout shows.
Both have to be made for the first year the holding is a passive foreign investment company in your hands. Made late, the earlier years stay in the default regime and a purging election is needed to get out of it. And a qualifying election needs an annual information statement from the fund, which most non-United States retail funds simply do not produce — so the practical answer is often to hold United States-domiciled funds instead.
Worked example
A US citizen living in Canada bought a Canadian equity fund for 100,000 dollars eight years ago and sells it for 180,000.
- The 80,000 gain is spread over eight years — 10,000 to each.
- The current-year 10,000 goes into ordinary income at her own rate. The other 70,000 is taxed at the top ordinary rate for those years.
- Interest runs on each earlier year’s tax from that year to now, and on an eight-year holding it is a substantial share of the total bill.
Shorten the holding period to two years and the interest layer nearly disappears. Nothing else changed — the cost of this regime is mostly the cost of time.
What this calculator assumes
- The allocation is rateable over whole years, which is the mechanism. The statute allocates over days, so a part-year holding will differ slightly.
- No rate is asserted. The current-year rate, the top rate for the earlier years and the interest rate are all yours to enter, from the tables for the years involved.
- The excess distribution figure is yours to work out from your own distribution history. This tool spreads it; it does not compute it.
- Interest is computed as simple interest per year of deferral. The real charge compounds, so treat this as a floor rather than a ceiling.
An estimate, not advice. This is an estimate built from what you typed, not advice on your file. Nothing here reads your documents, checks your treaty article or looks at the year you are actually in. Where the number matters, we agree a fixed fee in writing before any work starts.
Where these figures come from
- current instructions Form 8621 and PFIC reporting — IRS
- current instructions Instructions for Form 8621 — IRS
- current rates Interest rates on underpayments — IRS
Any figure prefilled in the panel above is stated with the year it belongs to and can be changed. Rates and thresholds move; a calculator that asks you for the current one stays right, and one that hides a guess does not.
What these engagements turn on
Case study 1
An Assignment Priced Without Counting the Days
Nearly every relief in a mobility file — treaty exemption, residence, social security — is decided by a day count that has to be evidenced. The engagement puts the tracking in place at the start, because it cannot be reconstructed at the end.
Read how this one runs
Case study 2
Whether Documentation Was Required At All
The obligation turns on the transactions that actually happened rather than on the size of the group, and the penalty for contemporaneous documentation is charged by reference to the adjustment. The review establishes which side of the line the company sits.
Read how this one runs
Case study 3
A Home Kept in Canada After the Move Abroad
A dwelling left available is the tie the CRA weighs most heavily, and its treatment differs depending on whether it is rented at arm's length. The file settles the residence position first and the rental reporting second.
Read how this one runs
Case study 4
A Distribution From a Trust Set Up Abroad
A distribution can be capital in the trust's country and income here, and the reporting attaches to the beneficiary rather than the trustee. The work is characterising the payment before it is received where possible.
Read how this one runs
Case study 5
One Employee Working From Another Country
A single remote employee can create payroll registration, withholding and social security obligations in their country, and sometimes a corporate presence too. The review sets out each obligation and the order they have to be registered in.
Read how this one runs
Case study 6
Paying a Dividend Up to a Foreign Parent
The withholding rate depends on the treaty, on the size of the holding, and on whether the parent is the beneficial owner rather than a conduit. Establishing all three before the payment is what secures the lower rate at source.
Read how this one runs
Case study 7
Coming Back to Canada After Years Abroad
Returning restarts Canadian residence and re-values what you own on the day you arrive. Foreign pensions, employer plans and accounts opened abroad each land differently, and the reporting thresholds are tested against the whole portfolio rather than each account.
Read how this one runs
Case study 8
Leaving Canada — the Bill You Get for Assets You Still Own
Emigrating triggers a deemed disposition of most holdings, which produces tax on gains never realised in cash. The file values the property, identifies what is excluded, and looks at whether security can be posted rather than the tax paid outright.
Read how this one runsAll case studies — every published engagement in one place.
Core International & Cross-Border Tax Services
International Tax Planning & Advisory
Strategy and compliance for income, assets and families spread across borders.
One coordinating team: filings on every side of the border are sequenced so treaty relief and foreign tax credits are claimed once — and in the right country.
U.S. & Cross-Border Tax Returns
Dual filers: U.S. citizens in Canada and Canadians with U.S. income run two parallel systems — we prepare both, in the right order, every year.
Expat & Emigration Tax
The move year is its own project: the elections and valuations filed that year decide the next decade of both countries’ returns.
Non-Resident Canadian Tax
Default withholding is 25% of gross: elective returns routinely turn over-withheld rent and pensions into refunds.
Transfer Pricing & BEPS
Documentation prepared with the return is the cheapest insurance in international tax; reconstructing it during an audit is the most expensive.
Tax Treaties & Withholding
Relief is only as good as the paperwork claiming it — we build treaty positions that survive review on both sides.
Cross-Border Estates & Trusts
Wills drafted for one country routinely misfire in the other — deemed disposition here, estate tax there, credits in between.
Global Investments & Reporting
Information returns carry the sharpest penalties — $25 a day whether or not any tax is owing. We keep them clean and on time.
Cross-Border Corporate Tax
Expansion raises the same four questions every time — entity, PE, repatriation, payroll. We answer them before the tax authorities do.
India Tax for NRIs & Returning Residents
The deduction is taken on the sale price, not the gain — which is why an NRI property sale strands cash unless the certificate is applied for before closing.
Canadian Tax with a Foreign Element
Residency is decided on facts, not on a form — and the year you arrive or leave is the one where the largest amounts turn on the smallest details.
UAE Tax for Expats & Their Home Country
A zero-tax country is only half the answer — the question that decides the bill is whether the country you came from still treats you as resident.
Industries & Client Types We Serve Worldwide
Global E-commerce & Marketplaces
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Importers, Exporters & Manufacturers
Athletes, Artists & Entertainers
Remote Workers & Digital Nomads
Investment Funds & Holding Companies
Global E-commerce & Marketplaces
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- Inventory nexus & PE analysis
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Technology & SaaS
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- IP structuring with real substance
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- U.S. expansion: entity & PE setup
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Professional Services Firms
- Reg 105 / 102 waivers
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Cross-Border Real Estate
- Section 216 rental returns
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Importers, Exporters & Manufacturers
- Transfer pricing documentation (s.247)
- Customs value vs transfer price
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- Country-by-country reporting
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Athletes, Artists & Entertainers
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Remote Workers & Digital Nomads
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Investment Funds & Holding Companies
Holding structures live or die on treaty access, beneficial ownership and substance — the MLI's principal-purpose test now sits over every arrangement.
A holding structure is only as good as its reporting. Foreign affiliates, accrued passive income and distributions each carry their own return, and the penalties on those attach to the form rather than to any tax being owed — so a structure that saves tax can still cost money if the information returns are late.
- Treaty access & PPT reviews
- FAPI & surplus computations
- Withholding-efficient routing
- Governance & substance
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