RPP, 8891, US tax

[RPPquestion]

Hi, I have lived in the US since 2003 but I do have old RPP account administered by my former employer (a University in BC) that I paid no attention to for years. I have been considering liquidating it and in the process learned about various reporting requirements etc. After reading about it for a few hours I'm utterly confused... I'll try to ask clear questions though:

1. For RRSP, one would file back 8891s and TDF 90.22.1 to come into compliance. However, it's been mentioned in this forum that the same does not apply to RPPs and that they don't have to be reported. Is this correct?

2. If I decide to liquidate it now, how do I report income in the US?

3. How is that income taxable? There are multiple funds that one can invest in the plan, well-defined cost basis (past contributions) and, hence, earnings. Do I just report earnings and have them taxed as capital gains? Or as ordinary income?

4. (A bonus question...) I'm an AMT taxpayer, unfortunately that means no foreign tax credit - can I report earnings net of foreign tax instead?

Thank you, a wealth of information in this forum!!!

[nelsona]

1. RPP's are not covered by 8891. In my opinion, these do not need any special reporting while being adminned by the employer. You do need to include its value in determining whether you need to file/report on IRS Form 8938.

2. The total income is reported on both CRA and IRS returns as pension income, 100% taxable.

3. See 2. This is pension income, plain and simple.

4. No, the gross amount is taxable. Why do you say AMT prevents you from using 1116? There may be a treaty provision to allow Cdn tax as ftc.

[RPPquestion]

Thank you for your response. I may be confused about AMT and FTC, I'll read more on it.

About the distribution being treated as pension income: what confused me about it is that

(1) the account includes my own individual (not just employer's, though it has those too) contributions that at the time counted against the RRSP limit
and
(2) taking it as cash is not my only option. I can convert it to RRSP or RRIF, or I can request an "RRIF-type payment".

In particular, if I converted it to RRSP (hypothetically - not sure if I can set up a new RRSP as a non-resident, but let's say), I'd assume it would no longer be considered pension income for the US tax purposes when I cash it out. Correct? What would the base then be?

Thank you very much!

[nelsona]

It doesn't matter. IRS regulations clearly state that foreign pension income from employer-sponsored funds are fully taxable, since neither your nor your employers contributions were subject to US taxation. Section 72(w), and the treaty offers no relief from this.

It doesn't matter if they are converted to a RRSP (or RRIF depending on your age and the rules of the pension plan), IRS considers that you have no "investment basis" in the plan, unlike self-funded RRSPs.

Comapny Pensions always count against RRSP limit. So?

[MikeRitchie]

I just started an employer-sponsered DB RPP (with optional employee contributions).

Nelsona, your response seems to imply that my contributions to a RPP would reduce my income for US tax purposes. Is that correct? Would I just reduce my Line 7 income by that amount?

[nelsona]

Your RPP contributions would be excluded from line 7, correct.