I have RRSP comprises of stocks and mutual funds. There is no dividend or interest earned in the account since I came to the US 4 years ago. My questions:
1- Do I have to file form 8891?
2- If I did not make the election on 8819, could I treat my RRSP as a regular investment account, that is upon withdrawal, any gain/loss would be treated as Capital gain/loss? Also, could I still use the tax paid to Canada as a deduction on Schedule A?
Form 8891
Moderator: Mark T Serbinski CA CPA
1. If you do not file 8891, you are stlll required to file 3520 every year or face huge penalties -- even if no income is generated. So, yes, you need to file 8891 retroactively for each year you filed a 1040.
2. Even when filing 8891, you are not obliged to make the election to defer income. You will then simply fill the entire form (including line 10) each year and transfer those numbers to the appropriate form/line on your 1040.
In the year of collapse, since you will have little or no US taxable income to report, you will probably use the Cdn tax as a deduction on Schedule A, but one needs to be wary of getting into an AMT situation, with such a high deduction.
Of course, if you made the election, you could still do the same thing -- and you will not have had to pay any US tax on RRSP income in the previous years.
As to the question of capital losses, it is *possible* that you could claim these year over year as you trigger them, before your final collapse. the proceeds of the collapse however, must be reported as pension income on line 7, gross and taxable. (taxable being ZERO in such cases).
2. Even when filing 8891, you are not obliged to make the election to defer income. You will then simply fill the entire form (including line 10) each year and transfer those numbers to the appropriate form/line on your 1040.
In the year of collapse, since you will have little or no US taxable income to report, you will probably use the Cdn tax as a deduction on Schedule A, but one needs to be wary of getting into an AMT situation, with such a high deduction.
Of course, if you made the election, you could still do the same thing -- and you will not have had to pay any US tax on RRSP income in the previous years.
As to the question of capital losses, it is *possible* that you could claim these year over year as you trigger them, before your final collapse. the proceeds of the collapse however, must be reported as pension income on line 7, gross and taxable. (taxable being ZERO in such cases).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
AMT won't be a problem as I do not have many deductions to trigger that.
So, in my case, it's benificial to still file form 8891 but do NOT elect to defer income so my RRSP can be treated as an investment, and I can make use of any capital loss, and any capital gain would be taxed at the lower rate. Am I correct?
So, in my case, it's benificial to still file form 8891 but do NOT elect to defer income so my RRSP can be treated as an investment, and I can make use of any capital loss, and any capital gain would be taxed at the lower rate. Am I correct?
AMT will only be a problem if you have a large RRSP. If you have a small RRSP and you have little other deductions, then you come up against barely coming up over your standard deduction.
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I am of the opinion, that if you do not make the election, you can indeed report losses. Of course, any gains, dividends, interest you make in years before you collapse the RRSP will be taxable right then, which is not quite as favourable a rate as deferring tax until later.
Just a reminder when calculating gains, make sure that you use the Cdn dollar value when you bought the investments in coming up with your ACB. Given the rise in the CAD over the past years, this may give rise to bigger gains than you expected (and may even wipe out what you thought were losses). This would also apply if you were electing to defer, in coming up with your book value.
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I am of the opinion, that if you do not make the election, you can indeed report losses. Of course, any gains, dividends, interest you make in years before you collapse the RRSP will be taxable right then, which is not quite as favourable a rate as deferring tax until later.
Just a reminder when calculating gains, make sure that you use the Cdn dollar value when you bought the investments in coming up with your ACB. Given the rise in the CAD over the past years, this may give rise to bigger gains than you expected (and may even wipe out what you thought were losses). This would also apply if you were electing to defer, in coming up with your book value.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best