RSP/LIF/RIF Cost Basis from Employer Contributions

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Cadman
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RSP/LIF/RIF Cost Basis from Employer Contributions

Post by Cadman » Tue Mar 24, 2009 9:14 am

I am a Canadian citizen, retired, with permanent residence (green card) in the US. While living in Canada (BC), both my employer and I made contributions to a company pension plan. When I returned to the US in 2001, the pension plan was rolled over into a locked-in RRSP. In 2008 the RRSP was converted to a LIF, then unlocked and converted to a RIF in 2009. My 8891's are in order.

In figuring my cost basis (book value) as of my departure date from Canada, should the employer contributions be excluded from my cost, and are my contributions eligible to be included?

Thanks,

nelsona
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Post by nelsona » Tue Mar 24, 2009 9:22 am

Only YOUR contributions are cost basis. Not your employer contibution, noit any growth.

Book value is not the guideline for US citizens and GC holders in determining their 'investment' in the RRRSp. Only your contributions are.
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rgiustini
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Post by rgiustini » Wed Mar 25, 2009 11:30 am

Hi NelsonA,

Ouch! Did I read your response correctly? That only MY contributions to an RRSP/LIRA while residing in Canada are excluded from US taxes on withdrawal? So if I had a locked-in RRSP (LIRA) when I left Canada, my employer's contributions to that plan are not basis cost?

Does this mean that, to compute the cost basis, I have to determine each of my contributions, when it was made (to convert to US funds), the earnings on those contributions (before leaving Canada) and that is my cost basis?

I have been working on the assuption that the book value of the plan when I left Canada (including my employer's contribution and its earnings) was my basis.

Which is it?

Thank you in advance for your reply.

nelsona
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Post by nelsona » Wed Mar 25, 2009 11:46 am

You stated you were a US GC holder. US GC holders are always taxable on their RRSP.

Former Cdn residents, who were never taxable on ther RRSP until they became US residents, aren't laible for income that arose before becoming taxable in US, thus there right to use book value on arrival as their 'investment'.

There's the difference.

You rcan determine the contributions on a yearly basis, and do the conversion on a basket rate for that year.

All US GC holders and US citizens living in Canada must do this with their RRSPs.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Post by nelsona » Wed Mar 25, 2009 11:48 am

rgiustini,

Note that my answer was in response to Cadman's question. cadman stated he is a GC holder.

IF you are not, and you are simply moving to the US at some point, then you aren't a GC holder and aren't yet subject to IRS. When y ou are, then the tax clock statrts ticking.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

rgiustini
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Post by rgiustini » Wed Mar 25, 2009 12:28 pm

Hi NelsonA,

I apologize for barging in on CadMan's thread and causing confusion.

I am now a US citizen. If I can paraphrase your response, my US-tax exempt basis on moving from Canada to US includes employer contributions and crystallized earnings. After moving to US, any Canadian employer contributions to my LIRA are US taxable on withdrawal?

Thank you for your patience.

Cadman
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Post by Cadman » Wed Mar 25, 2009 12:29 pm

Hi nelsona,

After reading these additional posts, I have another question.

I've been a GC holder since 1988 and have 2 separate RRSP's that I'm computing cost basis. Both RRSP's had employer contributions. I had one RRSP when I left Canada for the first time and became a GC holder in 1988. The second RRSP was established when I moved back to Canada in 1998 and worked for 3 years, returning to the US in 2001.

From a cost basis standpoint are these 2 RRSP's treated differently?

Thanks.

nelsona
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Post by nelsona » Wed Mar 25, 2009 1:22 pm

Cadman,

Your tax-free investement in the RRSP held before becoming taxable in US is based on (a) the book value when you first became taxable, plus any non-deductible contributions made since then.

Your second RRSP, funded entirely while you were taxable in US: your tax-free investment is strictly your non-deductible contributions.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Post by nelsona » Wed Mar 25, 2009 1:24 pm

rgiustini,

Your RRSP was funded before becoming taxable in US, thus book value on arrival in US is your tax-free portion.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Cadman
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Post by Cadman » Wed Mar 25, 2009 1:37 pm

nelsona,

Sorry, but I'm not very good with the terminology. In this context could you explain "book value" and "non-deductible contributions".

Thanks again.

nelsona
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Post by nelsona » Wed Mar 25, 2009 2:04 pm

Book value is the cost basis of your investments.

For the purposes of RRSP discussion, non-deductible contributions are (a) any that were to any RRSP made by the taxpayer before 2009, and (b) any contributions made by the taxpayer to PERSONAL (non-employer sponsored) RRSPs from 2009 onwards.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Cadman
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Post by Cadman » Wed Mar 25, 2009 2:23 pm

Book value on my RRSP before becoming taxable in the US would include my contributions plus my employers contributions plus interest as of the date I became taxable... correct?

nelsona
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Post by nelsona » Wed Mar 25, 2009 2:28 pm

There is no distinction as to what funded the RRSP when you become a US tax resident. Its ONE RRSP with one book value (which, btw, is NOT the market value on that date, its the cost basis on that date -- difference can be big).
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Cadman
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Post by Cadman » Wed Mar 25, 2009 2:37 pm

Then, in my layman terms, does that mean that the interest earned is NOT included in this cost basis?

nelsona
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Post by nelsona » Wed Mar 25, 2009 2:48 pm

Yes it is.

Are you familiar with how cost basis is determined?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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