inherit RRIF as a resident alien - how to report payout

RSmithers · Post by **RSmithers** » Sat Feb 08, 2014 7:03 pm

I have been a resident alien of the US for several years.

A Canadian family member passed away 2.5 years ago. I was listed as a co-beneficiary on his RRIF.

The RRIF was just recently paid out, and I received 2 Canadian tax slips - one a NR4 and one a T4RIF. I believe these amounts add up to the increase in dollar value of the RRIF after the annuitant's death.

I believe that the portion of the RRIF in the account before the annuitant's death counts as an inheritance - so no tax liability in the US.

But, how do I report the NR4 and T4RIF? After giving everything to an accountant here they put the amounts on 8891 forms as the distribution, and then claimed them on line 16b of my 1040. Is that correct?

They did not check off the box to defer tax on earnings. I presume this is OK because I didn't receive any of this until it was paid out (ie as a distribution).

Thanks to anyone who can help!

nelsona · Post by **nelsona** » Mon Feb 10, 2014 9:10 am

Sounds fine.

RSmithers · Post by **RSmithers** » Mon Feb 10, 2014 3:41 pm

Thanks so much for the reply! That makes me feel a million times better - I just realized I forgot 8938 for that tax year and I'm guessing they'll be more likely to give me a penalty if I owe tax.

I didn't declare the earnings in the RRIF (for my tax return the year he died or for the one mentioned above). Is this OK? It seems as though the 8891 form is meant for the owners of RRIFs, and I'm in a funny situation.

I've been reading as much as I can about taxation on foreign trusts - is there a reason for me to declare the income on 8891 as opposed to declaring it as dividends, interest and capital gains as seems to be done for other types of trusts? I don't actually have any of that information but I do wonder if I was required to report it. I also wonder if I was supposed to report the inherited part of the RRIF proceeds - the accountants didn't do anything with that despite my protests...

nelsona · Post by **nelsona** » Mon Feb 10, 2014 3:43 pm

I wouldn't worry about this.

nelsona · Post by **nelsona** » Mon Feb 10, 2014 3:45 pm

Technically, the money you recieved was from the estate, not from an RRSP or RRIF.

You do need to file a 3520 becuase your inherited from a foreign person, but that is about it.

RSmithers · Post by **RSmithers** » Mon Feb 10, 2014 4:02 pm

but I received a check directly from the bank? I know the inherited portion was taxed by Canada - but I still feel like i got the money out of a RRIF. And I got the tax slips....

nelsona · Post by **nelsona** » Mon Feb 10, 2014 4:18 pm

You got money, but the rrif was collapsed, no? This is different from inheriting a RRIF, like a surviuving spouse might.

Waht cetegory of income was the NR4.

RSmithers · Post by **RSmithers** » Mon Feb 10, 2014 9:07 pm

So there are actually 2 accounts (just wanted to keep things more simple earlier) and three slips.

For account 1, it's an NR4 slip with income code 27 (RRIF lump sum payment).

For account 2, there are 2 slips: an NR4 with income code 33 (RRSP - deemed receipt upon death), and a T4RIF with income in box 22.

RSmithers · Post by **RSmithers** » Mon Feb 10, 2014 9:36 pm

Yes, the RRIF was collapsed. I believe it was collapsed for the express purpose of giving out the money.

I also wanted to add: I spoke with 2 attorneys who claimed to be international tax specialists today......and they aren't sure of my situation either! They referred to it as unusual and will look into it if I sign on with them.