Foreign Tax Credit Form 1116

Al · Post by Al » Thu Mar 06, 2008 10:14 pm

This form is so confusing and from reading questions in your forum, I'm not the only one who's confused. The instructions and publication 514 isn't helping me....I am so "green" with this form. I am American and was married to a Canadian, we lived in Canada and we then moved to the US and the RRSP remained in Canada. When my husband past away, I discovered I was suppose to report that foreign account. I had the Serbinski firm bring me compliant with the IRS....thank goodness. I now have collapsed (withdrawn the funds) and invested here in the US. I understand from the forum that RRSPs are "General category income". I have the following questions:

1) The income on the form has to be reported in US funds. In Part II, I need to convert using the exchange rate that was used when I withdrew. That converted amount into US dollars was taxed at 25%. How do I calculate the carryover for Line 10. How does that work?

2) I receive widow's pension from Canada that I pay US taxes on. Can I use my tax credit for that ? What category does that income fall under and does it qualify ?

3) I read somewhere about how I need to know the book value of the RRSP. Does that mean I don't pay tax on the book value ? Can that be an approximate amount since it's been so long ago ? The account had different GIC amounts invested.

Any help will be appreciated.
Thanks

nelsona · Post by **nelsona** » Fri Mar 07, 2008 6:45 am

You should probably hire serbinski again.

nelsona · Post by **nelsona** » Fri Mar 07, 2008 6:51 am

Since you are american, the book value doesn't matter. It is the contributions only that will be tax-free.

You need to have maintained a record of all contributions you made, plus any ammount that was rolled over to your RRSP from your husband when he died.

The cpa who reviewed your case for serbinski would have been wise to gather this info for you wheh he went over your files.

Al · Post by Al » Fri Mar 07, 2008 9:36 pm

I do not intend to have Serbinski do my return or form 1116. I thought the forum would be helpful to understand how the tax credit carryover is calculated and how it gets carried over from year to year. Can the tax credit be used for the taxes I need to pay for widowed pension income from Canada ?

nelsona · Post by **nelsona** » Sat Mar 08, 2008 8:56 am

I don't work for serbinski. But clearly, since you dealt wit them before. they might be able to unravle the mess you have in your RRSP, like they did before.

Al · Post by Al » Sun Mar 09, 2008 2:43 pm

Serbinski completed the TD F 90-22.1 and 8891 for 2000-2005. I guess you can only go back 5 years. Doing this made me current with the IRS along with a letter explaining I didn't realize I was suppose to report a RRSP foreign held account. I did the forms for 2006 and gave to my accounting service for my tax return. Year 2007 is when I pulled the RRSP out to reinvest in the US since the exchange rate was so low. I contacted the forum so I would be knowledgeable about the foreign tax credit and form 1116 even though an accounting service will be doing my return. I wanted to make sure I had all the information they'd be looking for. I live in Arizona and I would assume tax services are familiar with foreign tax credits since we have alot of retired Canadians living here. I don't seem to have the contributed amounts to the RRSP. It was only in my husband's name and I was the beneficiary....and this goes back to around 30 years ago ! I'm sure the amounts were no more than $3,000 Cdn or $5,000 Cdn but I don't know if the contributions were yearly and for how many years. I know when we moved to the US, about 25 years ago he didn't contribute to his RRSP.