Confidential — For specialist use

Tax Compliance
Questionnaire

Prepared by S.J. Rubin for review by a cross-border tax specialist. Please complete all sections relevant to your area of expertise. All answers will be used to configure the compliance architecture of an automated trading system.

About the trading system

An automated algorithmic trading bot executing trades via Interactive Brokers Canada based on geopolitical signals. The operator intends to operate as an investor (capital gains treatment).

Fully automated — no discretionary decisions
Average hold time: 14 minutes to several hours
Instruments: US-listed equities, ETFs, options
Frequency: 0–10 trades/day depending on signals
Dual citizen: Canadian resident + US citizen
Owns multiple Canadian corporations
Currently paper trading — live within 90 days
Intends to commercialize if strategy proves out
1
Canadian tax (CRA)
Q1 Given the trading profile described above, will CRA likely classify this activity as investor (capital gains) or trader (business income)? Critical
Q2 What documentation should the operator maintain to support investor (capital gains) classification with CRA? CRA
Q3 Does Canada's superficial loss rule apply to automated algorithmic trading? Critical
  • If the bot sells a security at a loss and the same security appears in the signal queue within 30 days, does re-buying trigger the superficial loss rule?
  • Should the bot automatically block repurchase of recently sold losers for 30 days?
  • Does the rule apply to options on the same underlying?
  • Is the window 30 days after the sale, or 30 days before AND after?
Window:
Q4 How should CAD/USD currency gains and losses be tracked and reported? The bot trades in USD but the operator files in CAD. CRA
Q5 What is the correct CRA form / schedule for reporting algorithmic trading gains? CRA
2
US tax (IRS)
Q6 As a US citizen resident in Canada, does the wash sale rule (IRC §1091) apply to trades executed via a Canadian brokerage account (IBKR Canada)? Critical
Q7 Does the wash sale rule apply across accounts and instrument types? IRS
  • Personal account + corporate account trading the same securities?
  • Options and the underlying equity simultaneously?
  • Short positions?
Q8 What is the correct US form for reporting these trades? IRS
Q9 Does Mark-to-Market (IRC §475(f)) election make sense for this trading profile? What are the tradeoffs? IRS
Q10 Does the Foreign Tax Credit (Form 1116) fully offset Canadian tax paid, or will there be residual US tax owing? IRS
3
FBAR & FATCA
Q11 Does the IBKR Canada trading account trigger FBAR (FinCEN 114) reporting requirements? At what threshold? Critical
Threshold basis:
Q12 Does FATCA Form 8938 apply? What are the correct filing thresholds for a Canadian resident US citizen? Both
Q13 Should the bot monitor account balance and alert when approaching FBAR/FATCA thresholds? Is $10,000 USD the correct FBAR threshold? Both
4
Corporate trading
Q14 Is it advantageous to trade through a Canadian corporation given this profile? Which structure is most appropriate? Critical
Q15 As a US citizen, does trading through a Canadian corporation trigger PFIC (Passive Foreign Investment Company) rules under the IRS? Critical
  • Does it matter which securities are held (equities vs options vs ETFs)?
  • Does the corporation type matter (CCPC vs non-CCPC)?
  • Is there a safe harbor or exemption available?
Q16 Do CFC (Controlled Foreign Corporation) rules apply to a Canadian corporation owned by a US citizen? IRS
Q17 If trading through a corporation, how does profit extraction work most efficiently? Can corporate trading losses offset other corporate income? CRA
5
Bot compliance architecture
Q18 The bot blocks repurchase of any security sold at a loss within 30 days (superficial loss). Is 30 days the correct window? Does it apply both before AND after the sale? CRA
Q19 The bot adds disallowed wash sale losses to the cost basis of the replacement security rather than blocking the trade. Is this the correct IRS implementation? IRS
Q20 The bot generates annual tax reports in CSV format with: trade date, symbol, proceeds (USD + CAD equivalent at Bank of Canada daily rate), cost basis, gain/loss, hold time, and any wash sale / superficial loss adjustments. Is this sufficient for both CRA and IRS reporting? What's missing? Both
Q21 What additional data should the bot log on every trade to strengthen the investor (vs trader) classification position with CRA? CRA
6
Recommended actions
Q22 What should the operator do in the next 30 days before going live with real capital? Critical
Q23 Are there any tax elections available that should be made before the first live trade? Both
Q24 At what point does the activity definitively become a business for tax purposes? How should the commercialization transition be structured? Both
Q25 Anything else the operator should know that isn't covered above? Both
Answers saved. Thank you for completing this questionnaire. Your responses will be used to configure the compliance architecture of the trading system.
© S.J. Rubin
Geopolitical Trading Bot — Tax Compliance Questionnaire
Confidential · For specialist use only