Holding company cross-border tax: US assets inside a Canadian corporation

Holding US securities through a corporation sidesteps US estate tax on them

US-listed shares held directly by an individual are US-situs property for US estate tax purposes, regardless of which country the account sits in — a fact that surprises Canadians who assume a Canadian brokerage account keeps them out of the US estate tax system entirely. Shares of a Canadian corporation are not US-situs property, even when that corporation's own balance sheet is full of US stocks. Holding the US portfolio inside a holdco, rather than in your personal name, is a well-established way to keep those specific holdings out of your personal US estate tax exposure — see our note on how US estate tax reaches Canadians holding US stocks for the personal-ownership comparison this is solving for.

This generally works well for a straightforward Canadian-owned holdco. It gets more complicated fast if a shareholder is a US citizen, green card holder, or otherwise a US person — which is exactly the next problem on this page — so we confirm the full ownership picture before relying on the corporate structure as an estate-tax hedge.

T1135 applies to the holdco's foreign holdings, not just your personal ones

A Canadian corporation that holds specified foreign property — a US brokerage account, US-listed securities in a non-registered account, an interest in a US LLC or partnership — files its own T1135 once the cost amount crosses $100,000 CAD at any point in the year, exactly the same threshold that applies to individuals. This is a separate filing from your personal T1135, if you hold any foreign property personally as well, and it is easy to overlook because the trigger sits on the corporate balance sheet rather than in a personal brokerage login. We track the cost base in Canadian dollars through the year specifically to catch the threshold before the filing deadline, not after.

A US LLC or partnership interest can pull FAPI into the holdco's income

If the holdco holds an interest in a US LLC or partnership that CRA treats as a controlled foreign affiliate earning mostly passive or investment-type income, that income can be taxed to the holdco on an accrual basis under the foreign accrual property income (FAPI) rules — whether or not any cash is actually distributed back to Canada. The calculation involves surplus accounts, foreign tax credits, and characterization questions that go well beyond what a standard T2 preparer typically handles; this is a flag to raise before the investment is made, not a line item to discover at filing time. We bring in cross-border specialists for the FAPI computation itself and keep the corporate return coordinated with it.

The trigger is what the entity does, not just its US paperwork. A US LLC that simply holds a portfolio of securities looks very different, for FAPI purposes, from one carrying on an active US operating business, and Canada's characterization of the entity does not always match how the IRS treats it. That mismatch is exactly why a holdco should not acquire a US LLC or partnership interest without a cross-border review first, rather than treating it as a routine investment purchase.

A US-citizen shareholder can turn the holdco into a US reporting problem

If any shareholder of the holdco is a US citizen or green card holder, the corporation can be classified as a controlled foreign corporation (CFC) under US tax law, even though it was incorporated and is managed entirely in Canada. That classification exposes the US-person shareholder to annual GILTI and Subpart F income inclusions on their US return, based on the corporation's passive investment income — a real, recurring compliance and cash-tax issue, not a one-time filing. This is a warning to flag early, not a do-it-yourself calculation: if a US person is or will become a shareholder, that conversation needs to happen before more investment income accumulates inside the corporation, working alongside a US cross-border preparer.

Where this fits with the rest of the group's planning

Cross-border exposure inside a holdco rarely stays isolated from the rest of the structure — it affects purification timing, dividend planning, and how much US-dollar risk the group is comfortable carrying. That broader planning sits on our holdco CFO services page, and the day-to-day investment bookkeeping — cost base in Canadian dollars, T3 and T5 reconciliation — is on our holdco bookkeeping page.

Source: IRS — Some nonresidents with US assets must file estate tax returns.