U.S. Cost (investment in contract) in a RRSP

[Stuart Macdonnell]

As a U.S. resident filing U.S tax returns, should the calculation of the Cost of a Canadian RRSP/RRIF along with the basis for claiming the annual deduction of the Cost be filed with the IRS in the year that disbursements are first made from the RRSP/RRIF? If so, should this info be filed each subsequent year until the disbursements are finished?

Or is it only necessary to retain that information should the IRS request it?

[JGCA]

You should be disclosing this annually on form 8891 since you are defering the gain until you actually receive funds.

[nelsona]

Stuart, it is one of the strange features of the RRSP filing requirement: Nowhere on 8891 is there provision to indicate what you "basis" is, nor how it changes form year to year (with contributions or withdrawls). This is something you have to track yourself.

In the old REv Proc (85-45), the statement one filed in the first year allowed you to indicate the value on arrival (either Jan 01, or actual date if filing dual-status). It still didn't provide for continuously determining "basis", but since it was free-form, I alwys used to put it on any statements I submitted.

But not since Rev Proc 2002-23.

You not only need it if the IRS aks, you ned it to determine your taxable portion when it comes time to take withdrawals.

[exPenn]

One also needs to know the 'basis' for an RRSP when calculating your net worth on form 8854 after expatriation. If there have been no withdrawals from the RRSP, I am assuming the basis is just the sum of all the annual contributions, (converted to US$ using the proper exchange rate for each year). Is that correct?

[nelsona]

Basis for expatriation is based on the time you expatriate.
Basis for RRSP is (for US citizens) their contributions.

Not quite the same thing. Expatriation basis includes all growth.

[exPenn]

Nelsona: Now I'm confused. If the basis for an RRSP for expatriation purposes includes all growth, then on form 8854, Part V, the value in column b (US adjusted basis) and in column a (FMV) on the date of expatriation would be the same, so there would be zero gain to report in column c. Previous posts on this subject claimed that the amount to list in column b for an RRSP is the sum of contributions (plus commissions, etc.). My wife renounced on Sept. 16. She is not a covered individual, so it really doesn't matter what goes in columns b and c, but I want to do it right.

[nelsona]

I haven't loked too closely to 8854, but has your discussions about RRSP lead you all to conclude that RRSps are not covered by Part V line 7?

If they are covered, then they don't evn go on line 8 at all.

However, assuming you guys have come up with RRSP needing to be reported on line 8, then I guess that cost basis would be contributions. But line 8 is being used to determine net worth, not taxation, so I would think they would want to know book value and FMV.

In geneal cost basis (book value) and FMV are never the same, since even in RRSPs , there are almost always unrealized gains (unless you filipped everything the day you moved/expatriated.

Besides, you may not have always bee na US taxpayer, and thus basis would have little to do with contributions, but rather saome past book value.

Quick example: you contribute $100 to your RRSP, and when the fund you bought reached $200, you swapped it for another one, and now your RRSP is worth $250 the day you expat.

Your contributions (for 8891 purposes) is $100, your book value is $200, and your FMV is $250.

[nelsona]

But if it is fordetermining tax, then, yes, the cost basis you would have used for 8891 purpoes, and the one for 854 would be the same, for a life-long US citizen.

[exPenn]

From previous posts the consensus seems to be that RRSPs should be reported on line 9: "assets held by trusts".

[nelsona]

That is what I would have thought. So it is more anet worth evaluation.

[exPenn]

As I said, my wife is not a covered individual, so I doesn't matter what she puts in columns b and c. However, a lifelong US citizen living in Canada, who files an 8891 every year, is only DEFERRING tax on all the growth within the RRSP, not eliminating it. It would seem to me that a covered individual would have to pay tax on all that growth (not just unrealized gains) as part of their exit tax.

[nelsona]

I'm quite sure that the 8854 threads have determined what goes where for RRSP. This not a thread about 8894, it was about 8891.

Follow the advice on those threads.

[Stuart Macdonnell]

Nelson - is the Cost Basis for a RRSP/RRIF the sum of the contributions and the investment earnings for each of the years up to the date of the US resident's relocation from Canada to the US? (All converted to US$ for each year)

[nelsona]

For someone who was never a US taxpayer, The cost basis for determining future US taxation of an RRSP is the book value on the date one became a US taxpayer, plus any non-deductible contributions made thereafter..

For a US taxpayer, it is the sum of the non-deductible contributions made by the taxpayer.

For RRIFs, there is no cost basis, the RRIF is 100% taxable in US, regardless of when it was formed.

[exPenn]

You mention 'non-deductible' contributions. Under what circumstances would a contribution to a Canadian RRSP be deductible in the US?