Calculation of Capital Gains & Irrevocable Election on 8

[blitzloper]

Hello,

A beginner's question on RRSPs and form 8891. I have US and Cdn citizenship and I'm resident in Canada.

I've been filing an 8891 and a TD F 90-22.1 every year, as required, for my foreign accounts. I have not made an election onder Art XVIII(&) to defer taxes on my RRSP.

In deciding when to make this election, I wondered about how capital gains tax would be calculated -- is it a 'deemed disposition' approach in the year I make the election, or is the entire gain realized folded into the election? Here' an example to illustrate:

In 2008 I purchase 100 shares of ABC for $1 each ($100 total) in my RRSP. I file an 8891, but don't make an election to defer taxes.

In 2009, these shares are woth $2 each ($200) but no capital gain has been realized yet, as I haven't sold the shares. No dividend or distribution is made by the shares. I file an 8891, but don't make an election to defer taxes.

In 2010, the shares are still worth $2 each ($200). I make an election on my RRSP to defer taxes.

In 2011, I sell the shares at $3 each ($300). Do I defer the capital gains on the entire $2 gain, or just the $1 gain since electing to defer?


Thanks!

[blitzloper]

No ideas?