States that restrict RRSP trading

moneyissues123 · Post by **moneyissues123** » Sun May 29, 2016 3:41 pm

Hi there,

Does anyone know which specific states restrict trading in an RRSP as a non-resident of Canada?

I understand that the IRS has allowed Canadians resident in the USA to trade within their registered plans (I.e. Buy and sell) but that some states place restrictions on it (and thus the Canadian broker won't execute trades based on your us residence).

I read elsewhere online that Virginia, Delaware, Lousiana and Nebraska are examples of those states. Can anyone confirm this and is there source evidence online?

Thanks!

nelsona · Post by **nelsona** » Sun May 29, 2016 7:09 pm

First off, it is not the IRS that ever restricted trading, it was the SEC, and its stste counterparts.

State-by-state in the early 2000's these restrictions were lifted. I ca no longer find the reference to the individual states, but her was the lifting of the SEC ban:

http://www.iiroc.ca/Documents/2000/D038 ... E92_en.pdf

And how work had progressed in 2001:
http://www.iiroc.ca/Documents/2002/182D ... EE0_en.pdf

Since then, most states have fallen into line. You may find more at the IIROC (formerly IDA) sire.

Which ones are left, I do not know, but it is not really that important, since it is the Cdn dealer/broker who has the last say.
You would ALWAYS need to contact your broker to ask them if they trade with residents of all or any of the 50 US states. Most, even given the right to trade, shy away from al US resident clients.

moneyissues123 · Post by **moneyissues123** » Mon May 30, 2016 1:34 pm

Thank you for the reply. When I spoke to my broker this weekend, they said that provided that I give them a signed W-9, they will allow me to maintain my registered accounts (but not my non registered and TFSA accounts). But they never mentioned anything about specific states, so I will follow up with them.

If I were to liquidate my RRSP and have to take the 25% tax hit, would it be possible to apply the tax paid to the CRA as a foreign tax credit on my 1040?

nelsona · Post by **nelsona** » Mon May 30, 2016 3:00 pm

Making sure you do this AFTER leaving Canada, you will not get a full credit on your 1040, since your RRSP will be either tax-free or only a small portion (gain after entry to US) will be taxable. Foreign tax credits only cover the US tax oed on the foreign income.

You could simply take the full amount as a tax deduction on schedule A in the year you collapse.

moneyissues123 · Post by **moneyissues123** » Tue May 31, 2016 10:11 am

Thanks Nelson.

How exactly could I take the 25% tax on an RRSP withdrawal in Canada as a tax deduction on my schedule A? Would I put it under line 8, other taxes?

nelsona · Post by **nelsona** » Tue May 31, 2016 10:53 am

Probably. Your software help or irs.gov can give you the mechanics.

nelsona · Post by **nelsona** » Tue May 31, 2016 10:55 am

your other choice is to start taking it as a [ension, 10% a year at 15% tax in Canada, with some small amount becoming taxable in US every year.

If just moving to US, I would take the 25% tax and be done with it.

moneyissues123 · Post by **moneyissues123** » Tue May 31, 2016 11:47 am

I moved within the last few months, so I might just do that.