Guidance on Form 8938 with respoect to RRSPs

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Filo
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Post by Filo »

K104XYZ --

Thank you for your clarification. I didn't read your original remarks (and 8938 VI) carefully. What you're saying is perfectly clear.

On the Schedule B issue, I will try sending a question to the IRS's Email Tax Law Assistance just to see what they have to say.

Thank you very much for taking the time to respond in such detail.
Filo
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Post by Filo »

nelsona --

"In fact until 2014, [RRSPs] were indeed a foreign trust requiring 3520 treatment." But I haven't seen remarks on this forum indicating that any significant number of people with RRSPs were submitting 3520s. The IRS appears to be inconsistent with its treatment of requirements. Which at least leaves open the possibility of similar inconsistency with respect to YES/NO in Sch B Line 8.

However, if I do decide to mark Sch B Line 8 = YES, shouldn't I cover myself by making an attachment to Sch B to the effect that the only foreign trust I own is an RRIF?
nelsona
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Post by nelsona »

That was because 8891 supplanted 3520, and the new rev proc eliminating 8891 also eliminated need for 3520.
But all of us back in 2003 filed 3520 for RRSP.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
Filo
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Post by Filo »

nelsona --

I know there was a year when people were supposed to file a 3520 for an RRSP; I gather from what you said that it was 2003.

But for 1989 to 2002 I sent in only a table satisfying the dictates of Rev Proc 89-45, with no 3520. (I also did that for 2003 and got no flak from the IRS, but I realize that proves nothing.)

Before 1989, my then accountant (a CA) said that I did not have to file any information concerning my RRSP.

I think there was some year that a US court decision proclaimed that RRSPs were a "trust" (oddly), but I don't know when that was.

At this point, it is fortunate that Rev Proc 2014-55 appears to forgive a lot of mistakes people made in the past (including my own).
Filo
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Post by Filo »

I know this is anticlimactic, but I submitted the same query to the IRS that K104XYZ did, with the following result.

I contacted the IRS's Electronic Tax Law Assistance Service, asking them if I could check "NO" on Schedule B line 8, given the fact that I do own an RRIF but I do not own any other foreign trusts. The following paragraph is their response:

"The (1040) Schedule B is using Part III to gather information and to remind taxpayers about filing additional tax forms if required to do so. In your case, you would not need to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, based on Rev. Proc. 2014-55 and are therefore not required to file Form 3520 for this reason. As a result you may answer Line 8 as a 'no'. However, please make sure that you report the amount distributed on Line 16-Pensions and Annuities of Form 1040, U.S. Individual Income Tax Return."

I am not trying to argue with anyone as regards what the right thing to do is; but I thought that some people might nevertheless be interested in a recent response from the IRS about this question.
K104XYZ
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Post by K104XYZ »

Hi Filo … the terminology that the IRS used in their response to you, namely to say that Part III of Schedule B is “to gather information and to ‘remind’ taxpayers about filing additional tax forms if required to do soâ€￾, is interesting – also, that they said that you ‘may’ answer Line 8 as “NOâ€￾ for your RRIF.

I have looked in the Internal Revenue Manual a few times, Part 3 “Submission Processingâ€￾, to see what it might say about Line 8 Schedule B. The manual is extremely detailed and prescriptive about what IRS processing staff is expecting to see on every line of every form, and what kinds of tax filer submissions represent errors, and so on, and it certainly mentions the Line 7 items of Schedule B, but it doesn’t say anything about Line 8 at all, from what I have been able to ascertain. One could, perhaps, wonder about the importance of Line 8 – it is literally just a ‘reminder’ question?

In any event, I do know that the IRS has never questioned my “NOâ€￾ responses on Line 8, over 10 years in which I filed Forms 8891 previously. I presume that they never questioned your “NOâ€￾ responses on Line 8 over “several decadesâ€￾, either. I also have never read anything to suggest that the “YESâ€￾ responses that are presumably provided by most other people have ever resulted in any questions or requests for forms, either. I would speculate, from that, that a tax filer’s notation on Line 8 Schedule B might not necessarily result in any rigorous IRS cross-checking to see if the notation there matches the filing, or lack of filing, of other forms.

So I guess that you would be fine with a “NOâ€￾ on Line 8 Schedule B for your RRIF, if that’s what you prefer (you mentioned in a previous post that you would prefer to keep doing that) – you certainly now, personally, have the answer from the IRS ETLA to allow you to do that – so no problem.

I would also guess that no one would have any issues if they say, or continue to say, “YESâ€￾ on Line 8 for any foreign trust, even if it’s only an RRSP or an RRIF, since “YESâ€￾ would be a literally correct answer, and I would understand that almost everyone else has been doing that successfully for a long time with no questions asked – and even if a question was asked, there would be an easy logical answer – so no problem.
Filo
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Post by Filo »

To K104XYZ --

"...prefer to keep doing that": that's the point, I would rather keep doing what I've been doing, rather than change and thus tacitly imply that I've been doing it wrong. And since I now have that response from the IRS email tax help service, I feel reasonably secure in continuing to check "NO" to Sch B Line 8, even though I understand the objections of others who feel that that question should be answered literally.

If I had been checking "YES" all these years, then I would likewise feel more comfortable in continuing to check "YES". I just don't want to rock the boat if I don't have to.

You have my admiration for taking the time to navigate the (online) Internal Revenue Manual. What a quagmire that thing is. Apparently there is no search facility. I tried various subsections of Part 3 but never succeeded in finding a discussion of the lines of Sch B. I don't need to see that, of course, since your remarks on it are clear, but it is rather a put-off to see how hard it is to find things in that manual (particularly in contrast to the effective search mechanism provided for this Serbinsky forum).

Thank you once again for a detailed response.
hacanuck
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Post by hacanuck »

I used Section V to report RRSP. Do I need to file an amendment to get it corrected?
nirvana_1959
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Re: Guidance on Form 8938 with respoect to RRSPs

Post by nirvana_1959 »

Reviving an old thread...

If you're holding a self-directed RRSP account with a brokerage firm then, IMO, it should be reported in Section V. Section VI is for other financial instruments (physical share certificates, financial contracts, etc.). Comment/feedback ?
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