HBP and affect on form 8891

[olsoncanadian]

Here is my situation and questions.

At the begining of 2011 I had three RRSP Accounts, all of which have been reported using the Form 8891 in previouse years. Durring 2011 I rolled all the funds into one of these three accounts. Then using those funds I participated in the canadian first time home buyers plan (HBP). The account was around $25,000 at this time, I withdrew about $20,000 to participate in the HBP leaving a balance of around $5,000 in the account. After this the remaining $5,000 was then transfered into a new RRSP account.

On the form 8891 for 2011 do I still have to report the 3, no longer active accounts or do I report them but have the year end balance as zero.

Also how do I treat the HBP amount, do I put $20,000 into 7a then enter zero into 7b.

Technicly the HBP is a liability against me to the RRSP account that remains.

Any input or examples of the forms 8891 would be hugly appreciated.

Thank you,

[nelsona]

Phew.
I asume you have been deferring income
These are the 8891's you must have:
You need one for each of the original three you had, all of which will indicate zero balance at end of year.
You will also need 1 for the new one (#4) you now have with year end balnace $5000

The first 2 dead accounts will showe no transactions, jus ta note at the top saying that each was rolled into account #3.

The remaining account (#4) wil simply have the year-end balance.
The 3rd one is tricky. You will indicate $20K withdrawal, but while the withdrawl is tax-free, any previously deferred income becomes reportable because of the HBP: it IS a diestribution from the RRSP.

So for 7(b) you need to determine what your contriburions were to RRSPs in the past (the ones you made), and then report all growth up to the time of your HBP.

HBP really complicates life for a USC. The good news is that re-zeros yourtaxable portion of your RRSP for IRS purposes,

[olsoncanadian]

Phew is right, could they make something that should be fairly straight forward any more complicated then the process a US citizen has to go through when they live and work in Canada.

Just so I am clear, is it the "growth" in the RRSP plan from the time of contribution that is the "taxible" piece? for example, if the growth on the account besides contributions was zero, would the tax liability then be zero?

[nelsona]

To be precise it is the INCOME that has been deferred upto and including the gaind trigggered by the sale for HBP purposes that should be reported.

IE, over the years you contibuted $10K, the funds generated $1K of income (distributions that would have been taxable but for the fact that it was an RRSP, or other triggered gains), but is still worth $10K.

From a techinical point of view, you should report the $1K of deferred income. But I have no problem if you decide none of the income is taxable. But I would then expect you to always continue to use this method for determining your US taxablity on any future withdrawals.