Section 217 & RPP Withdrawal

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Jojo
Posts: 12
Joined: Wed May 29, 2019 11:20 am

Section 217 & RPP Withdrawal

Post by Jojo »

Scenario: Dual citizen couple, US residents, became USC after move to US.
Spouse A has an RRSP worth $50k. Increase in value since became a US resident = $20k.
Spouse B has an RPP worth $30k, and no income.

Looking to collapse both with lump sum withdrawals, and pay a minimum of tax.

If Spouse A withdraws their RRSP that generates an excess of US foreign tax credits because the CDN 25% NR withholding exceeds the US tax due on the $20k taxable in US.

If Spouse B elects Section 217 to reduce net Canadian tax on their RPP withdrawal, can they offset the US tax on said withdrawal with Spouse A's unused FTC's?
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Section 217 & RPP Withdrawal

Post by nelsona »

Yes, couples can combine the foreign tax paid in one year. Remember that the RPP is 100% taxable in US.

I presume spouse B has no other world income?

You could also wait and do this in separate years, since foreign tax credits can be carried forward, in case this extra %50K in one year would raise your US tax bracket.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Jojo
Posts: 12
Joined: Wed May 29, 2019 11:20 am

Re: Section 217 & RPP Withdrawal

Post by Jojo »

Spouse B has a small amount of US investment income (mixed CG and interest), total $1-2k.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Section 217 & RPP Withdrawal

Post by nelsona »

So that should result in *some* reduction in the RPP withdrawal. You could also spread the withdrawal over two years if the Pension fund allows it.
In other wirds, there is no advantage to doing this all in one year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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