Serbinski Accounting Firms

Sorry, I also wanted to say that while my son will report the RESP distribution on 3520, he will not include any of the distribution (including the grant) in his taxable income. My rationale here is that, in absence of the tax deferral that the Canadian Tax code permits for RESPs, the liability to p...

I am following up on advice from another thread – from nelsona and others on RESPs and US taxes and Form 3520. Here I would like to describe exactly how I will fill out forms 3520 and 3520 A in relation to an RESP where the subscriber/grantor is a non-US person and the beneficiary is a US person.

I will appreciate any comments.

My son (US/Canadian citizen) is filing a US tax return for the first time. It is a year in which there is a distribution to him from the RESP established by me, a non-US person/a Canadian. The distribution is only of the EAP (RESP earnings and grants). His plan is to file a 3520 (Part III Q 24,27 and 29 only besides page 1) and attach a “Foreign Grantor Trust Beneficiary Statementâ€￾ as provided by me (page 4 only from 3520-A).

Form 3520 – filled by my son
He will fill in page 1 as follows:
1. My son’s info

2a – Name of Foreign Trust: TD RESP by “my nameâ€￾, Grantor
2c-f – Address of Foreign Trust: the TD branch address that appears on the RESP statement
2b(1) - Employer ID #: None
2b(2) – Reference ID #: TD Plan # and Account #

3. Foreign trust Agent appointed: No
3a-g Blank
4 a-f Blank

Part I – Blank
Part II – Blank

Part III
24(a) – Dates of distributions
24(b) Cash
24 (c) $XXX (cash amount of distribution to my son)
24(d) None
24(e) None
24(f) and 27 $XXX (cash amount of distribution to my son)
25,26,28 – Blank
29- Tick “Yesâ€￾ to indicate that a “Foreign Grantor Trust Beneficiary Statementâ€￾ was received
My son will sign the form and mail it to Ogden

Page 4 of 3520-A filled by me, the grantor, as follows (I will provide this page with attachments to my son for him to attach to his 3520):

1a – Name of Foreign Trust: TD RESP by “my nameâ€￾, Grantor
1c-f – Address of Foreign Trust: the TD branch address that appears on the RESP statement
1b(1) - Employer ID #: None
1b(2) – Reference ID #: TD Plan # and Account #

2. Foreign trust Agent appointed: No
Permission to IRS or the US Beneficiary to inspect and copy records: Yes

3 – Blank

4 – Name of Trustee: Change the title to “ Name of Trustee/Account Holder/Grantor “ and provide my name and address. ID # - leave blank

5 – Dates to which the form applies: Jan 1 to Dec 31 2015
6 - Name/address of US Beneficiary – Provide my son’s info
7(a) Description of Trust Property Distributed: Cash 7(b) $ amount of distribution (only EAP was distributed to my son)

8- Attach an explanation of facts and law that establishes that the foreign trust is treated for US tax purposes as owned by another person. (I think this means that I have to prove that the RESP property – corpus- is not owned by the ‘trust’ but by a person other than the trust i.e. me, the ‘grantor’ ). I will attach a statement that reads: “The Canadian Registered Education Savings Plan, "RESP", is owned by the grantor as according to the documents that established the RESP, the grantor may withdraw the corpus at any time and revoke the arrangement. According to the documents, the grantor has the authority to appoint a different beneficiary at any time or transfer any investment income, within certain limits, to the grantor’s personal or spousal retirement savings plan or withdraw the income in the form of cash subject to Canadian taxes and certain restrictions. Contributions to the plan, the corpus, can be withdrawn at any time with no Canadian tax consequences.â€￾ And attach the appropriate RESP documents from TD, the promoter.

9 – Owner of foreign trust: Individual

I will sign and put my title as Account Holder/Grantor

I will appreciate any comments.

Nelsona, I am confused about RESP with an NRA grantor and a US beneficiary (my situation). It seems most experts regard RESP as a Foreign Grantor Trust. In this case the filing/reporting requirements are that the trustee (i.e. the parent) has to sign and provide a Foreign Grantor Trust Beneficiary Statement (found in IRS Form 3520-A) to the US beneficiary. The US beneficiary has to file Form 3520 (Part III Q 24,27 and 29 only besides page 1) for each year there is a distribution and attach the Beneficiary Statement. The “distributions to a U.S. beneficiary will be treated ... as non-taxable giftsâ€￾ (according to Deloitte and the following lawyer and several others). The distribution does become taxable to the US beneficiary if the Beneficiary Statement is missing.
http://www.americanbar.org/content/dam/ ... eckdam.pdf
http://www2.deloitte.com/content/dam/De ... 021315.pdf
I am still struggling with how to help my son report RESP distribution.

Nelsona - Thanks. Your interpretation is based on treating the RESP as a Trust . According to the following, the RESP may not be a trust for US Tax purposes: a) it is called an "arrangement" in the Income Tax Act that created it, b) courts in Canada have ruled that an RESP is not a trust c...

Thanks Nelsona. Sorry, I should have been clearer. The 'bad idea' was waiting till the end to withdraw from RESP until the last year of my US son's university education meant he received all EAP in a single year pushing him into a higher tax bracket in Canada. Of course RESP with a non-US parent was...

Thanks Nelsona and CdnAmerican. I should have done some research about the RESP and the TFSA we set up for our son. While we funded our son's TFSA (for his wedding expenses), he was the legal owner of the account at Canadian Shareowner and it was not organised as a trust. Our son closed the TFSA thi...

I, a Canadian (NRA) am filing US taxes for my "Accidental American" son via the "Streamlined Foreign Offshoreâ€￾ program (2013, 2014 and 2015). I was planning on reporting my son's TFSA like a brokerage account and include all the income (dividends and capital gain) in the tax return. This legal analysis suggests that TFSA is not a "Foreign Trust" for US Tax purposes even if it is structured as a "Trust" in Canada:
http://wolterskluwertaxcentre.intellico ... -purposes/

I am also planning on reporting all dividends as "Qualified Dividends"

My son closed his TFSA this year - 2016.

For the RESP, the same expert above suggests RESP is also not a "Foreign Trust" in a separate piece. I wound up the RESP in 2015 and distributed the EAP (dividends, cap gain and grants) to my son and took back the corpus I had contributed. My son lived in Canada throughout 2015 and was going to university. My son did not have any control of the RESP account, he was just a beneficiary and will file form 3520 (and not form 3520A).

In 3520, my son will report the distribution in Part III, line 24 and tick line 29 "Yes". He will not fill Part III's schedule A or B. He will not report the distribution as income on his US Tax return. It seems that I, owner of the RESP account, have to give my son a "Foreign Grantor Trust Beneficiary Statement" for him to include with his 3520 (although I am non-US)?

What I am proposing to do is radically different from what has been suggested in this thread and the RESP Withdrawal thread by nelson, MGeorge, CdnAmerican, DrJFM and others. I am making big leaps of faith here and I am no expert. Is this appropriate? Can anyone correct me? Thanks.