Registered Education Savings Plans

[WendyRipley]

Real Income from RESP- Form 3520


Hi,

I am a Canadian citizen with a US GreenCard living with my American husband in Florida. I understand that I need to file Form 3520A to report trust assets and Income. The only thing in the RESP is one mutual fund which doesn't change in book value, but which does change in market value. I am Ok with the balance sheet side of things which I believe requires that the Trust assets be reported in USD at market value.

However on the income side, I am uncertain how to treat "paper" profits & losses from year to year. There is absolutely no trading or income activity and the only changes in the year end asset values to be reported are due to the (1) Canadian market value of the fund and the (2)differences in foreign exchange values at year ends. Are these unrealized gains/losses taxable to me personally, and if not do I still show them on the trust income statement or is there some place on the balance sheet where this goes? The 3520 just refers to capital gains & losses whether they actually took place or not, but I find it difficult to believe that the paper gains/losses are taxable.


Help Please!!!

[nelsona]

The rules of 3520 illustrate why it is very untidy for a US citizen to have an RESP.

Indeed, unrealized gains are to be reported every year, even if only on paper. The goal of 3520 is to have you report and pay tax on the trust as you go, not just when you take out the money.

So, you will have to assume that you buy and sell everything each Dec 31, and pay tax on it. Some years you will have a loss, so will have no tax to pay (and can forego the fake sale).