another question on moving rrsps

nelsona · Post by **nelsona** » Thu Mar 17, 2016 3:42 pm

UK: since they don't recognize the RRSP, they will want cap gains paid when you sell an item inyour RRSP. if you bought it 10 years ago at $10 and now its worth $50, they will want their $40 in gains. if you swap before moving to UK, you don't risk UK taxing your pre-UK gains, since there will be none.

US doesn't matter, since you are looking at undeducted contributions, so gains and book value, etc don't matter.

eortlund · Post by **eortlund** » Thu Mar 17, 2016 3:46 pm

Got it! Will switching the funds before we leave and noting the value of each one be sufficient?

The UK has a capital gains exemption that I believe will be 11000 pounds for us so I wonder if we really will need to pay them anything.

Thanks so much nelsona! Dealing with 3 countries is making my head spin and without this board, I would have been so much further behind in thinking through everything.

eortlund · Post by **eortlund** » Fri Mar 18, 2016 10:53 am

I asked the bank about stepping up the cost basis. They said switching funds would not accomplish this, I would need to actually sell and pay tax on everything first? So she said that couldn't be done with an rrsp. ?

nelsona · Post by **nelsona** » Fri Mar 18, 2016 5:33 pm

The bank does not know the rules of US or UK tax system!

Obviously this will change the basis. Ignore their advice.

eortlund · Post by **eortlund** » Fri Mar 18, 2016 6:01 pm

OK, so when the funds are changed over and we become non-resident, I need to look at the amounts in each fund, keep a record of it, and that crystallizes the gains? Is that it?

nelsona · Post by **nelsona** » Sat Mar 19, 2016 12:16 pm

Whne you switch the funds, the will have a purchase price, that will be your cost basis for determining future cap gains in UK. Just like you would for any other non-sheltered investment in any country. And taxed diveidends that you will report in UK, will increase the cost basis of your investments over time, until you acyually sell/swap them.

This is basic cap gains determination stuff.

eortlund · Post by **eortlund** » Sat Mar 19, 2016 12:38 pm

Thanks.

It has been kind of bugging me that this process is going to take 15 years. If the UK will give each of us an exemption for capital gains of 11000 pounds per year, wouldn't that cover tax due there on a total collapse of RRSPs equalling 80k CD? I suppose if they tax it like income, at 20%. I should be sure.

Then Canada would tax it at 25%, I could regain some from section 217, and the US would not want much. But then what to do with the money, can only put so much in Roths per year and we wont own a house.

We are early 40s, which path would you recommend?

nelsona · Post by **nelsona** » Sat Mar 19, 2016 1:29 pm

The problem is that the Cdn tax cannot be used against the UK tax.

217 only works if you have little or no other income, and takes time too. If you have little or no other income, then why worry about UK tax at all, and just take all the funds

Your RRSP is a pension, to be taken slowly. Otherwise just take it all the " day after" you leave, at 25% Cdn and no other tax.

Then invest you money in UK and pay tax on the gains you make there. Doesn't seem to make much difference.

eortlund · Post by **eortlund** » Sat Mar 19, 2016 7:34 pm

I guess I was wondering if we would have to pay much to the UK if they only tax gains since becoming resident. But perhaps they would tax the whole thing. The link I posted is in the HMRC archives so i'm not sure if anything has changed. Perhaps it is better to take smaller RRIF payments and then if the UK does something weird tax-wise, it is only $8000 or less not 80k all at once.

I probably won't be working, husband is a professor so not high income.

nelsona · Post by **nelsona** » Sat Mar 19, 2016 8:54 pm

Either way, it is the Cdn tax that you have control over, so should do what ever you need to to keep the tax at zero.
btw, for 217 spouse's income doesn't count.

eortlund · Post by **eortlund** » Sat Mar 19, 2016 11:28 pm

Thanks for helping me think this through. Hard to turn down the 0% withdrawal rate which is certain for RRIFs for UK residents,, when the other factors are hard to predict.

eortlund · Post by **eortlund** » Mon Mar 21, 2016 12:43 am

If we keep the same funds, but convert the RRSP to a RRIF, is that sufficient for crystallizing the gains? Or is it important to actually change funds?

nelsona · Post by **nelsona** » Mon Mar 21, 2016 8:19 am

You need to change funds. It has to be recognizable (in UK terms) sale and purchase.

eortlund · Post by **eortlund** » Mon Mar 21, 2016 10:20 am

OK thanks, we will be sure to do that

eortlund · Post by **eortlund** » Wed Mar 30, 2016 5:25 pm

Another question: does it matter if we are still in Canada or non-resident when we convert the RRSPs to RRIFs, or does it only matter that we are non-resident when we take our first withdrawal?