Taxable income calculation after RRSP withdrawal

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padma_rakshi
Posts: 3
Joined: Fri Jun 12, 2020 2:54 pm

Taxable income calculation after RRSP withdrawal

Post by padma_rakshi » Fri Jun 12, 2020 3:36 pm

Sorry, I have made an attempt to browse through your pages to get answers for my questions but i was not successful.

Date of Departure to US: 08/20/2008

Amount from two pension accounts have been transferred from OMERS to ING DIRECT in RRSP Savings account on 04/13/2010; one account is locked in and other one is unlocked. I was unsuccessful in getting actual amount on 08/20/2008 even after contacting both OMERS as well as ING Direct(Tangerine)

1. C$16639 and C$ 3013 Exchange rate on 04/13/2010 was 1.003 hence total amount in USD$ is 19593

Distribution of these amounts in full happened during tax year 2019. i.e., C$18663 and C$3377. 25% has been deducted from these amounts. Annual Exchange rate for 2019 was 1.327. Hence, total amount distributed in US$ is 16609

Now, taxable amount is 16609-19593=(2984) loss

Could you please help me by answering below questions:

1. Could you please let me know whether taxable amount calculation shown above is correct or not?

2. pension 4c is US$16609, 4d which is taxable amount, Do you think I should use (2984) or 'zero' in 4d?

3. If your answer to above question #2 is zero then do you think i can use loss incurred in schedule D so that i can carry forward for future use?

4. In my situation, standard deduction is appropriate one. Here, do you think i should file Form 1116 even though FTC is zero. May be i can carry forward taxes paid in Canada for future years to use if an opportunity exists? Please let me know.

Regards,
Padma

nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Taxable income calculation after RRSP withdrawal

Post by nelsona » Fri Jun 12, 2020 4:21 pm

Any PENSIONS you transferred to an RRSP (locked-in or not) are considered 100% taxable in US upon withdrawal.
If they were not pensions, you can declare the value that you had upon arrival in US as non-taxable. You could also, once the account was collapse, declare a "terminal loss", based on the value when you arrived vs. the total distribution, which would be claimed as an itemized deduction. That doesn't seem to apply here. These are, as you say, pensions, not personal RRSP accounts.

So, you must declare the entire gross amount as taxable, with no terminal loss available.

This may change your FTC issues.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

padma_rakshi
Posts: 3
Joined: Fri Jun 12, 2020 2:54 pm

Re: Taxable income calculation after RRSP withdrawal

Post by padma_rakshi » Mon Jun 15, 2020 12:20 pm

Thanks for your reply. I appreciate it.

Sorry, let me give clear information about my account transfer which happened during 2010 from OMERS to ING Direct.

With OMERS, name of account was Registered pension plan(RPP). These RPP accounts has been transferred to RSP savings accounts with ING Dirtect back in 2010 using form T2151. Total money from these RSP savings accounts has been withdrawn in 2019. My question here is, could you please confirm back again that 100% money withdrawn from these accounts are taxable in US? If yes, could please explain why? Any reference to publication would be great.

Sorry, i am not able to understand why these money have to be 100% taxable in US since money was contributed to RPP while i was resident of CANADA.

Thanks,
Padma

nelsona
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Re: Taxable income calculation after RRSP withdrawal

Post by nelsona » Mon Jun 15, 2020 2:37 pm

IRS Code 72(w) or I believe. It is pension money, contributions for which you did not have to pay tax on in canada or US, thus by IRS rules, it is fully taxable in US.
It is NOT the sane as RRSPs for which you have some contributions.

The fact that these were morphed into other accounts that "look" like RRSPs does not matter.

You should have checked here before collapsing, as you would have been advised to take the monay as periodic pension, only having to pay 15% CRA tax, instead of the 25% you paid, which would have fit nicely in your US tax bracket.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Taxable income calculation after RRSP withdrawal

Post by nelsona » Mon Jun 15, 2020 2:40 pm

Btw, your US pensions will be treated the same way if you move to canada: 100% taxable in US and Canada.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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