Taxes on RRSP Donations at Death

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Tocargo
Posts: 4
Joined: Sun Sep 04, 2016 8:47 pm

Taxes on RRSP Donations at Death

Post by Tocargo »

Hi,
I am investigating how a RRSP would be taxed if all of it was given to a public charity at death.

Assuming this would be for a Canadian citizen permanent resident in the US. My current understanding is that 100% of the amount donated would result in an automatic 25% tax withholding in Canada, which can be regained by filing a Canadian tax return within 6 months if the charity was a public Canadian charity.

If the beneficiary is a Canadian charity is not registered as a public charity in the US, would this mean that the RRSP is taxable in the US?

On the other hand, if the donation is made to a US charity, would it be taxable in Canada and would it be 100% tax deducible in the US?

Thanks
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

This a complicated question for 2 reasons:

First, at death, US imposes ESTATE taxes on your holdings, not income taxes. So the entire RRSP would be subject to estate tax, and subject to the limits for non-residents.

Second, there is no mechanism for a non-resident to recover the 25% tax, other than a section 217 return, which has strict requirements as to eligibility, and requires reporting world income. Whether or not the charitable donation would wipe out the 25% depends on many other factors.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Tocargo
Posts: 4
Joined: Sun Sep 04, 2016 8:47 pm

Post by Tocargo »

Thanks Nelson. This helps a lot. I haven't found much info on the topic of cross border charitable donations.
Tocargo
Posts: 4
Joined: Sun Sep 04, 2016 8:47 pm

Post by Tocargo »

Digging into this a bit more and assuming that this is for a green card holder living in the US at death, that the person is not married.
I found that it would be possible to claim a tax credit for a charitable donation to an IRAs and 401K (by naming the charity as a beneficiary). Is it fair to assume that the same would be true for an RRSP because of the tax treaty?
Tocargo
Posts: 4
Joined: Sun Sep 04, 2016 8:47 pm

Post by Tocargo »

Correction: The credit would be for the US Estate Tax since there would not be income tax in a situation where the charity is named a beneficiary of the account.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

That is what I said, no? That would only address the US tax.

AS I said, any Cdn credit against Cdn tax arising from the collapse of your RSSP is not so straightforward.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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