dividents within RRSP , taxable in California or not?

shsamardar · Post by **shsamardar** » Wed Feb 21, 2007 6:56 pm

Hi

if RRSP account receives dividents/interest and there is no distribution out from RRSP account, is divident taxable in California?

For federal , there is a form we can fill to postpose taxes on RRSPs until distributions. but how about califonia state tax?

Thanks

nelsona · Post by **nelsona** » Wed Feb 21, 2007 10:28 pm

Yes, they are taxable, as are capital gains generated by trades.

shsamardar · Post by **shsamardar** » Thu Feb 22, 2007 1:44 pm

Hi Nelsona

Thank you for your reply.

Is it any specific publications from California Tax board specifying these rules of RRSP involvement?

Thanks
Shahram

nelsona · Post by **nelsona** » Thu Feb 22, 2007 3:53 pm

While I'm loathe to look into state items, I think a search of the california FTB site for RRSP will show it.

Basically, the RRSP account is treated just like any other investment account that you maight haver, interst, dividends, and cap gains are taxable in the year they occur.

shsamardar · Post by **shsamardar** » Sat Feb 24, 2007 10:38 pm

below is the link to california tax board news letter talking about RRSP :

http://www.ftb.ca.gov/professionals/tax ... 3/0506.pdf

In second page, it is saying that RRSP is treated as a saving account. for saving account, we don't have capital gains, all interest are regular income.
Now I am confused that you said treat RRPSs as capital gains and this says treat as saving account. IF My original contributions were $1000 and in 2006 There was $100 dividents paid and it is within RRSP , NO distribution, how do I have to report this $100?

Thanks

The link says:

After reviewing the characteristics of a
RRSP, we have revised our internal
procedures and will now treat a RRSP
like a savings account, not a functional
equivalent of an Individual Retirement
Arrangement. As a result, California
resident taxpayersâ€™ original
contributions, made while a Canadian
resident, are treated as a capital
investment in the RRSP. California
residents are required to include the
earnings from their RRSP in their
California taxable income in the year
earned

Carson · Post by **Carson** » Tue Feb 27, 2007 3:19 pm

CA made a poor choice of words when they used "savings account". What they are saying is (see Nelson's posting) that an RRSP is NOT treated like an IRA, i.e, where only the withdrawals are taxable.

An RRSP is treated like any investment account for CA purposes, i.e. the earnings (interest or dividends) and gains are taxable on an annual basis.

calvin_g · Post by **calvin_g** » Mon Jul 30, 2007 2:19 am

So if I use 8891 to defer my RRSP, then I do NOT need to include the RRSP "internal earnings" on my 1040 but I will need to include the income in my 540 form as investment income. Is that correct?

nelsona · Post by **nelsona** » Mon Jul 30, 2007 5:55 am

Yes. Then when you start withdawing your RRSP, you will report some income on 1040, but generally less on 540 (since you will have 'pre-paid' the tax on this).