US Citizens Residing in Canada
American citizens are generally aware that the US tax laws requires that they file tax returns in the US even when they reside abroad. As a result, some pitfalls should be avoided when tax planning for Canadian residents who are also US citizens.
As such, although it is common for Canadian residents to hold investments through holding corporations, this strategy is generally ineffective for those who are also US citizens. The latter corporations would likely fall under the passive foreign income company ( PFIC ) rules. The passive income earned through the corporation would likely immediately give rise to a US tax burden.