US Citizen in Canada - Rolling defined pension to RRSP

bigrandy · Post by **bigrandy** » Sat Apr 07, 2012 2:21 pm

I am a US Citizen who has lived in Canada my entire life. So far my US tax filings have been quite straight forward. This year 3 items came up which I have not had to deal with in the past.

The first is that I left my employer I directly rolled 300k from my defined municipal pension into my RRSP. Are there any reporting issues here for my US return? (I am 45 yo if it matters)

The second is that I took 100k as a lump-sum that was not eligible to be rolled over. I paid 35k in Cdn tax on this on my return. Do I just report the 100k on 16a and 16b and claim an FTC on the from 1116 as "general" income.

The third is that I received an 80k stock option benefit on a T4. In Canada I am allowed a 50% deduction from my income. Is the full 80k reportable as income in the US?

With the above 80K my income is now $240k after the 2555 reduction. I am getting dinged with $1100 in AMT. Does this make sense? The AMT form is very confusing to me.

Thanks in advance for any answers.

nelsona · Post by **nelsona** » Sat Apr 07, 2012 3:23 pm

1. Just remember that the $300K is NOT included in the cost of the investment for determining the taxation of RRSP when you draw upon them later.

2. Yes.

3 and 4 I'll leave you to hire someone.

Filo · Post by **Filo** » Sat Apr 07, 2012 11:47 pm

@nelsona as regards your point 1:

In a buyout, I received a $30K lump sum that I was free to take as cash or to have (legally) deposited into my RRSP. That $30K did not in any way reduce my pension nor come out of my pension. That $30K was mine; shouldn't it count as part of my cost of investment?

nelsona · Post by **nelsona** » Mon Apr 09, 2012 9:59 am

Not the same issue.

This is sevverance pay. Did you report it on both your Cdn and US returns? If not, then it can't be considered cost of investment.

Filo · Post by **Filo** » Mon Apr 09, 2012 6:13 pm

Thank you!

Yes, severance pay. And I reported it as income on all my returns, Canadian, Quebec, and US.

nelsona · Post by **nelsona** » Mon Apr 09, 2012 9:17 pm

Then, since it was not deductible on your US return, it becomes cost. You did report it on your US return, and not as earned income (since it is not earned income)?

nelsona · Post by **nelsona** » Mon Apr 09, 2012 9:19 pm

Putting it in RRSP, since it was not deductible in US was probably not best idea, since you got little tax deduction, and will pay full tax in canada when you take it out. Not the windfall you would expect.

Jospher · Post by **Jospher** » Tue Apr 10, 2012 3:36 am

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Filo · Post by **Filo** » Tue Apr 10, 2012 10:29 pm

It was entered as Other Income, because that's what made the most sense to my accountant. And that's despite the fact that the IRS international-tax advisor in Puerto Rico told him (by phone) to put it in with excludable earned income. Getting "information" from the IRS is perilous.

Incidentally, is there any simple way provided to report the spam inserted by Jospher? He's put up more than a dozen of these. (I'm *not* complaining about how this forum is administered; I think it works extremely well. I just wondered if there was a spam alert mechanism available to ordinary users.)