RRSP Distribution Form 8891

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safflenow
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Joined: Tue Apr 13, 2010 11:24 am

RRSP Distribution Form 8891

Post by safflenow »

Sorry to trouble but just wanted to confirm the following: I am a Cdn citizen/US resident who elected to defer RRSP. In 2009, I made a partial RRSP $7000 withdrawal and am currently filing form 8891.

On form 8891 section 7a I placed the entire 7000 amount and this figure should also be on 16a on my 1040. 7b is the tricky part as this forum can attest: Dec 06 (first US filing) book value was $45k USD. Dec 09 market value (USD) was $44k (before 7k withdrawal).

Does this mean the taxable portion is zero due to capital loss? In addition, can I claim foreign tax credit on 1116 for the 25% withheld by Canada despite the capital loss?

Any guidance would be appreciated.
nelsona
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Post by nelsona »

From what you state there is no taxable portion to your withdrawal. However, since that means the 25% tax can only be used as a deduction on schedule A, since you have no Cdn income to write off against.

If you had some distributions in the past 3 years, you could include these as teh taxable part and get something for your 25% as a credit, and save the rest for future years.

I trust your method of calcualting arrival book value is accurate: cost basis (not market value) of all your RRSP at the time you became taxable in US.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
safflenow
Posts: 2
Joined: Tue Apr 13, 2010 11:24 am

Post by safflenow »

Sadly, I believe this book value is correct as I mistakenly transferred funds between RRSP accounts (funds were converted to money market funds) and had the rest indexed to the market at its peak.

Thank you kindly for your prompt response. This forum has been an invaluable resource.
nelsona
Posts: 18684
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Why "sadly"? The higher your book value upon arrival, the better it is for US tax in the long run.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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