It is time to start taking money out for son going to university in Canada. Since I have several children, I planning to divide the capital and earnings over time and children.
I am planning to have the plan make a $1000 Educational Assistant Payment. This is taxable according to the Withdrawal Form. Since payed to my son, he will need to do a Canadian return with this on it. Correct? This year he was in Canada only to go to school Sept to Dec.
Also needs to go on his US return. He is also a US resident "Green card holder" Correct or is this a gift and not taxable on US return?
I am also planning another $1000 withdrawal but this will be a Post Secondary Education Capital Withdrawal. This will not need to go on son's Canadain return. Correct? And does not need to go onto his US return?
I will do my US tax return as usual (including deferral of recognition of income on RESP as on Notice 2003-75 Beneficiaries Making the Election to Defer U.S. Income Taxation on Income of an RRSP or RRIF) Therefore no effect on <font color="red">my</font id="red"> US return due to this activity in my RESP?
In future but not this year, he may be working in Canada on some work terms (his university program is a CO-OP program). Will that affect future withdrawals?
Nick (Canadian in US)
RESP Registered Education Saving Plan Withdrawal
Moderator: Mark T Serbinski CA CPA
<b>Your RESP is NOT eligible for any deferral in US </b> (who told you this?!). An RESP is not an RRSP or a RRIF.
You should be reporting the income that it generates every year to IRS, regardless of whether you take money out or not. This is a known issue.
That said, any withdrawal you make is a non-event to IRS (other than a cap gains trigger) since you wouldn't have deferred anything.
The money you give to your son is just that -- a gift -- and you are allowed to give $11,000 to him every year withhout consequence.
As to the taxability of it in Canada, i'll leave that to others, but it is pretty straightforwardly explained on any RESP site.
<i>nelsona non grata</i>
You should be reporting the income that it generates every year to IRS, regardless of whether you take money out or not. This is a known issue.
That said, any withdrawal you make is a non-event to IRS (other than a cap gains trigger) since you wouldn't have deferred anything.
The money you give to your son is just that -- a gift -- and you are allowed to give $11,000 to him every year withhout consequence.
As to the taxability of it in Canada, i'll leave that to others, but it is pretty straightforwardly explained on any RESP site.
<i>nelsona non grata</i>
About the EAP withdrawal, note that a "normal" EAP is taken partly from earnings and partly from CESG money, according to the proportions of each in the plan. However, in order to get CESG money out of the plan, the student has to be a resident of Canada at the time of the payment. (This is very clear on Canadian gov't web pages. Just google for RESP and EAP. I used to quote URLs but they keep changing due to seemingly endless government reorganization).
<p>Nick mentions that his son is a US resident "green card holder" and spent only the fall university term in Canada. If the son is maintaining US residency, can he simultaneously be a Canadian "resident" for EAP purposes? I don't know the answer to this question but it seems like something Nick would want to check out.
<p>Nick mentions that his son is a US resident "green card holder" and spent only the fall university term in Canada. If the son is maintaining US residency, can he simultaneously be a Canadian "resident" for EAP purposes? I don't know the answer to this question but it seems like something Nick would want to check out.
It would be easy for the lad to establish cdn residency for this purpose. Getting a Driver's license would suffice.
There is no downside for him becoming a Cdn resident (and also filing as a US resident) since his income is unlikely to be taxable, what with all the student deductions available to him.
<i>nelsona non grata</i>
There is no downside for him becoming a Cdn resident (and also filing as a US resident) since his income is unlikely to be taxable, what with all the student deductions available to him.
<i>nelsona non grata</i>
IT-221 has indeed drastically changed, in 2002, especially the notion of 'deemed non-resident', an animal that was created by CRA in 1997 to 'force' fat-cats into non-residency to trigger their deemed dispo.
The result, after the economic turn-down in 2000, was that deemed dispos dried up, and now becoming a 'deemed non-resident' (whereby you essentially report world income and the deduct at line 256 ALL income from your new country) is very simple and well-defined. One even gets to pay NR tax just like a true NR.
Nowadays, I wouldn't do a single thing when leaving Canada that wasn't convenient, not even selling my house or giving back my cards, so long as I (a) maintained at least as many ties in foreign country and (b) went to a treaty country.
Deemed non-resident is a great status.
<i>nelsona non grata</i>
The result, after the economic turn-down in 2000, was that deemed dispos dried up, and now becoming a 'deemed non-resident' (whereby you essentially report world income and the deduct at line 256 ALL income from your new country) is very simple and well-defined. One even gets to pay NR tax just like a true NR.
Nowadays, I wouldn't do a single thing when leaving Canada that wasn't convenient, not even selling my house or giving back my cards, so long as I (a) maintained at least as many ties in foreign country and (b) went to a treaty country.
Deemed non-resident is a great status.
<i>nelsona non grata</i>