Using a US Broker to buy ETFs like SPY, IVV, or VOO - does this avoid deemed disposal?

As the title states - if using a US broker (e.g. Tastytrade - formally Tastyworks) to buy US based ETFs, does deemed disposal still apply to me or not? Yes I can buy/sell these via Tastytrade.

Have a decently sized account and have been thinking about putting a portion into some of the SPY related ETFs sometime in the future. I have been avoiding ETFs because of deemed disposal for obvious reasons.

If these are treated more like buying/selling standard shares then great, otherwise I guess I'll just keep avoiding them.

Thanks in advance.

tax_moron said:

if using a US broker (e.g. Tastytrade - formally Tastyworks) to buy US based ETFs, does deemed disposal still apply to me or not

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The tax treatment is determined by the ETF itself.

The broker you use is irrelevant.

You'd have to get out the prospectus of the ETF and examine the legal structure of the fund to determine if offshore fund rules or general tax principles apply.

tax_moron said:

Have a decently sized account

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One planning point to be aware of is that a US-based ETF will be a US situs asset and could be subject to US estate tax.

AAAContributor said:

The tax treatment is determined by the ETF itself.

The broker you use is irrelevant.

You'd have to get out the prospectus of the ETF and examine the legal structure of the fund to determine if offshore fund rules or general tax principles apply.



One planning point to be aware of is that a US-based ETF will be a US situs asset and could be subject to US estate tax.

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Yikes! Well I guess I'll just keep doing my own thing. I would have liked to put X amount in per month/year (set and forget style) for my children's future.

Thanks @AAAContributor! Much appreciated

AAAContributor said:

You'd have to get out the prospectus of the ETF and examine the legal structure of the fund to determine if offshore fund rules or general tax principles apply.

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Just to follow up actually after some reading, taking for example VOO, and the prospectus, as a layman, I don't see anything related to offshore fund rules, and all tax related information is geared towards the American tax system.

In relation to estate tax, it would be the same position I'm currently in as I own shares in US companies, source for below:

The United States imposes its Estate Tax not only on its citizens and residents but also on non-residents that die owning US situs assets. So, what might be taxable? Non-resident aliens (NRAs) are taxed on certain categories of US situs assets. The following is a list of some of the most common types:

• US situs real property (Treasury Reg. 20.2104-1 (a)(2))
• Shares in US corporations (IRC 2106(a)). As an aside, shares in a foreign corporation, even if the corporation has substantial interests and real property in the US are not regarded as a US situs asset.
• Shares in a US registered investment fund (“RIC”) including mutual funds or, mutual funds organized in corporate form if incorporated in the US (to the extent that the mutual fund assets are US situs)
• Tangible personal property such as jewellery, cars, artworks, etc. (Treasury Regulation 20.2104-1 (a)(2))
• Interests in US partnerships, however, there are caveats and analysis may be required.
• Certain trusts owned by the deceased holding US situs assets.
• Bank accounts connected to a US trade or business. However, regular US bank accounts not connected to a US trade or business are not regarded as US situs assets for estate tax purposes.
• Cash in a deposit box located in the US (IRC 2104(c))

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tax_moron said:

Well I guess I'll just keep doing my own thing. I would have liked to put X amount in per month/year (set and forget style) for my children's future.

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It's probably worth noting that the Department of Finance is conducting a review into the taxation of investment products in Ireland and a report is due in a few months.

This may provide some developments in relation to the tax rate, deemed disposal, loss relief treatment, taxation on death etc. which may make EU fund based investment products or insurance-based investment products more competitive from a tax standpoint. Let's wait and see.

tax_moron said:

Just to follow up actually after some reading, taking for example VOO, and the prospectus, as a layman, I don't see anything related to offshore fund rules, and all tax related information is geared towards the American tax system.

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Offshore fund rules are contained in Irish tax legislation. There will be no reference to them in the prospectus of a US-based fund.

The prospectus of the fund would be the starting point for your tax adviser to examine the legal structure of the fund to determine what tax treatment should apply in accordance with Revenue guidance here

AAAContributor said:

It's probably worth noting that the Department of Finance is conducting a review into the taxation of investment products in Ireland and a report is due in a few months.

This may provide some developments in relation to the tax rate, deemed disposal, loss relief treatment, taxation on death etc. which may make EU fund based investment products or insurance-based investment products more competitive from a tax standpoint. Let's wait and see.

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With the way things are currently structured as well as historical changes, I definitely am not looking forward to any future changes. Have nothing but pessimism in that area unfortunately for me.

AAAContributor said:

Offshore fund rules are contained in Irish tax legislation. There will be no reference to them in the prospectus of a US-based fund.

The prospectus of the fund would be the starting point for your tax adviser to examine the legal structure of the fund to determine what tax treatment should apply in accordance with Revenue guidance here

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I see, so it sounds as if the likes of VOO, SPDR etc. would be considered ‘equivalent’ funds. This was something down the line for me but I guess I'll be leaving it for now.... Maybe the DOF's review will open some doors

Thanks again @AAAContributor, great help