what date to use for VAL on RRSP withdrawals

SergeP · Post by **SergeP** » Wed Jan 11, 2017 4:30 pm

There was a formula provided on this site to calculate a US taxable income on RRS/RIF withdrawals for a USC living in Canada. There is VAL number in that formula which is a total RRSP/RIF value before starting withdrawals.

I moved to Canada from US on May 15 2014. But I started periodical RIF withdrawals only in 2016. Should I use VAL for May 15 2014 or it should be 1 Jan 2016? Thanks.

nelsona · Post by **nelsona** » Wed Jan 11, 2017 5:56 pm

Depends what you are asking:, you need BOTH values to calculate the taxable portion.

the first time you take a withdrawal, the formula is

(1- BOOK/JAN1FMV) * WITHD

BOOK - The book value when you began being taxable in US plus any RRSP contributions which you were not allowed to deduct on 1040. for you either may15 2014 or Jan 1 2014 if you filed a full year 1040 for 2014.
JAN1FMV = FMV on Jan 1 of the year you make the withdrawal 2016
WITHD = gross withdrawal amount.

All in US dollars.

So, say you had a BOOK value of $100K when you moved.
On Jan 1, 2016, your RRIF was worth $125K
You withdrew $10K
Your taxable portion is:
(1 -100/125) * 10 = (1-.8)* 10 = $2,000

Thereafter, you simply reduce the book value by the NON-TAXABLE portion (in this case $8000)
So, for 2017, once you know your FMV on Jan 1 2017, you already know what the taxable amount of any withdrawal is:
(1-92/JAN1FMV)

SergeP · Post by **SergeP** » Thu Jan 12, 2017 12:38 pm

thank you.
Could you explain why either May 15 2014 or Jan 1 2014 is used here?
My understanding is that only actual profit in the RRSP is subjected to U.S. tax when one start making withdrawals. I moved to US in 2003 and returned to Canada in 2014. During this 11 years US taxes on my RRSP were deferred (until I would start withdrawals). It seems logical that I have to use the BOOK value for 2003. And because I am USC it should not be matter where I live, in Canada or US, for tax purposes.
I filed joint 1040 for 2014 and 2015 as required for USC.

nelsona · Post by **nelsona** » Thu Jan 12, 2017 12:46 pm

Well, you were the one that mentioned 2014, and said nothing about 2003 or being a USC!

The equation stays the same:

BOOK - The book value WHEN YOU BECAME TAXABLE in US plus any RRSP contributions which you were not allowed to deduct on 1040.
So, with this new info You have your book value from 2003 and add any RRSP contributions (no growth) you made since then, which I trust you have been keeping track of.

nelsona · Post by **nelsona** » Thu Jan 12, 2017 12:49 pm

You confused me by mentioning a move to Canada. This means nothing for RRSP. It's the date you moved to US that is important.

SergeP · Post by **SergeP** » Thu Jan 12, 2017 4:35 pm

thank you and sorry for this confusion. Digging exact data from 2003 may be hard. At least my all annual RRSP contributions can be found at my CRA account.

nelsona · Post by **nelsona** » Thu Jan 12, 2017 4:52 pm

Unfortunately, now that you live in Canada, the taxable portion for US purposes is relatively meaningless, since it is unlikely thatyou would owe any US tax even if it were 100% taxable in US.