US tax issues from transfer of RRSP on marriage breakdown?

[Carson]

Here's a unusual one:

US tax resident/Canadian citizen finally settles with ex-wife still living in Canada for his spousal support obligations by transferring $175,000 of his RRSP to her RRSP (tax-free for both ex spouses under Canadian rules). What are the US tax implications to him?

The RRSP fair market value when he entered the US was $300,000; the FMV is $450,000 at the date of transfer with no contributions or withdrawals since he entered the US. Is the increase in value of the portion withdrawn taxable to him in the US?

I believe that for US purposes the transfer is treated as a withdrawal from his RRSP, but per Treaty Art XVIII(1), it should be tax-free because it is tax-free in Canada.

Or is the transfer tax-free in the U.S. because it is considered a property settlement under Sec 1041?

Opinions?

[Greg]

I believe that for US purposes the transfer is treated as a withdrawal from his RRSP, but per Treaty Art XVIII(1), it should be tax-free because it is tax-free in Canada.
Opinions?

My situation is different then yours but I believe it may fall into the same category under the treaty.

I withdrew a large amount under the HBP in Canada in 2004 and filed form 8833 stating that the amount was not taxable because of treaty XVIII Pensions and Annuities.

Nothing was said by the IRS and a received my refund within 6 weeks.

[Carson]

My situation is different then yours but I believe it may fall into the same category under the treaty.

I withdrew a large amount under the HBP in Canada in 2004 and filed form 8833 stating that the amount was not taxable because of treaty XVIII Pensions and Annuities.

Nothing was said by the IRS and a received my refund within 6 weeks.

Yup, I would agree with your position. Thanks.

[nelsona]

Greg is exactly correct.

Any RRSP ammount not included in income in Canada is not included in income in US, by treaty.