Pension Plan Transfer to Locked-in RSP

victoriaguy · Post by **victoriaguy** » Wed Apr 15, 2015 1:36 pm

Hi there,

Last year, I elected to transfer my Public Service Pension Plan to a Locked-in RRSP, and part of it was paid out as a cash payment, with tax withheld in Canada. I imagined it would be a simple lump sum tax situation, and the foreign tax credit would take care of it.

Now, as I read about lump sum payments, I see that applies only to "qualified" pension plans, and I'm not sure what that means. At any rate, even when I just put the whole cash distribution in as pension income, the foreign tax credit based on the withheld Cdn tax takes care of that, so I assume that's ok.

I also wonder about the portion that is transferred to the locked-in RSP. Is there a treaty provision that makes that tax exempt?

Thanks for any insights.

nelsona · Post by **nelsona** » Wed Apr 15, 2015 2:24 pm

Yes, only the portion you took out is taxable now. The rest will be taxable when you take it.
The income is general limit income for 1116 purposes.

victoriaguy · Post by **victoriaguy** » Wed Apr 15, 2015 4:33 pm

Oh thank you nelsona. Do I have to report the transfer to the RSP anywhere, or just on my FBAR?

Now I would have thought the cash disbursement was passive income given its a pension, as I've seen the US treats pension income as "unearned". Out of curiosity, what makes it general income?

nelsona · Post by **nelsona** » Wed Apr 15, 2015 7:46 pm

Because it isn't passive.

newballance989 · Post by **newballance989** » Thu Apr 16, 2015 1:05 am

Zhaitan's immortal armies waves from the sea, eager for the damage of the five classes of Tyria: the asura, the violent class of feline warriors, the charr, the norn, the sylvari, towering shape shifters from the cold world, magical investor of great intellect small size, the humans, a arcane young class of visionary plant folk, a resilient one embattled.
___________________________________________________________________________________________________
http://www.rsgoldmall.com/

victoriaguy · Post by **victoriaguy** » Thu Apr 16, 2015 5:26 am

Oops... is pension income always considered "general category"?

I guess I assumed passive meant unearned. Does "passive" category income refer to income from investments subject to the passive investment loss rules?

Thanks for the timely head shake. ;)

nelsona · Post by **nelsona** » Thu Apr 16, 2015 6:52 am

The definitions are available in the 1116 instructions