Classification of RESP income on Form 1040

ustaxpayer · Post by **ustaxpayer** » Wed Mar 12, 2014 10:52 pm

I've searched high and low for an answer on this. Apologies if I've missed the answer elsewhere in this forum. If someone would be so kind as to point me in the right direction, I'd be most appreciative.

I'm a US resident who recently opened an RESP account for my Canadian niece without being aware of the tax and reporting burdens. My bad. Later this year, I'll transfer the account to her parents and be done with it.

I've filed the 3520-A and will file the 3520 prior to April 15th. The paperwork is well in hand.

My question relates to how to properly categorize the various components of RESP income for the purposes of 1040 reporting.

- Interest -- I'll treat as interest
- Grant (CESG) -- How should this be treated? Interest? Dividend? Other?
- FX gain / loss -- Th account is denominated in CAD so each year there's an appreciation or loss due to currency fluctuations. How should these be categorized?

I'm hoping there's a best practice or consensus view on how to do this. Thank you in advance for any advice you can offer.

nelsona · Post by **nelsona** » Thu Mar 13, 2014 12:13 am

It is govt payment.

nelsona · Post by **nelsona** » Thu Mar 13, 2014 12:15 am

Cap gains are calculated only when you sell something. If you hold cash, it is not depreciated I=until it is "sold' for another investment. FX losses must be greater/less than than $200 per transaction to be reportable.

ustaxpayer · Post by **ustaxpayer** » Thu Mar 13, 2014 9:04 am

@nelsona

Appreciate your note re: FX gain/loss. I may look for a way to work it into income because omitting it at this stage may raise questions.

"Government Payment"... that makes sense. And do you agree this should be captured under "Other Income" (i.e. Line 21) on form 1040?