Converting a LIRA to an RRSP - Owners now U.S. Residents

[ahays]

An account owner had an employer pension plan when she worked in Canada. When she left Canada, the employer placed the pension into a LIRA. The account owner then transferred 100% of the LIRA to an RRSP because she became a resident of the United States. The account has been an RRSPs for about 15 years. Does the fact that the RRSP originally started as a LIRA change any of the taxation rules in either Canada or the United States? By taxation rules I'm referring to the 25% rate for an RRSP and the gain over cost basis formula for the United States. Also, does the fact that the RRSP originally was a LIRA prevent the account owner from converting the RRSP to an RRIF? As always, thank you very much for your help.

[nelsona]

Because it was a LIRA, it is 100% taxable in US (you cannot use the book value when entering US as a cost basis).

Since it is an RRSP, it can be converted to a RRIF at any time, and then qualify for periodic withdrawals at 15% Cdn tax rate.

[nelsona]

If she has combined her personal RRSP with the one from the LIRA. still only the book value on arrival in US of the personal portion would be tax-free in US.

[ahays]

Thank you for your reply.
Just to confirm the details. The LIRA was combined with the RRSP. The combined RRSP account can be converted to an RRIF. Also, the book value of the RRSP as of the arrival date is excluded from US income tax. Please let me know if I misunderstood anything.

[nelsona]

Correct. Withdrawals should be considered blended withdrawals, prorating the non-taxable portion with the taxable, slowly reducing the non-taxable portion.