HBP IRS Provisions

Kolaivo · Post by **Kolaivo** » Sun Oct 26, 2008 2:50 pm

I am submitting a 8833 form for HBP withdrawl, quoting ArticleXVIII(1). I'm not sure what to put where they're asking me to list the Internal Revenue Code provision(s) overruled or modified by the treaty-based return position.

Do I need to put something here?

Thanks.

nelsona · Post by **nelsona** » Sun Oct 26, 2008 8:04 pm

The Atrticle is sufficient.

Remember that although your HBP is not taxable in US (since it is not in Canada) the withdrawal DOES trigger the requirement to begin paying US tax on any RRSP internal income that you previously elected to defer.

Kolaivo · Post by **Kolaivo** » Mon Oct 27, 2008 8:18 am

I'm in the unique situation that the HBP emptied out the account. So on one hand the entire withdrawl is tax free as per the treaty, but on the other hand, I need to pay tax on the gain???

I DO have another HBP withdrawl in another account with a larger negative gain, so maybe I can combine the gain and loss to come up with a loss?

nelsona · Post by **nelsona** » Mon Oct 27, 2008 8:22 am

The HBP has subjected up ALL your RRSP accounts to IRS tax on any past accruals.

You cannot reduce your taxable portion to below zero (unless and until ALL your RRSP accounts have beebn collapsed).

If you have sheltered any interest income in the past, then it should be reported as now taxable, regardless of how your accounts have performed.

Kolaivo · Post by **Kolaivo** » Mon Oct 27, 2008 7:20 pm

Thanks.

What about the HBP year? Does the interest from that year need to be taxed that year, or can I defer it?

nelsona · Post by **nelsona** » Mon Oct 27, 2008 8:13 pm

It should be included.

it is not bad to do this, as it increases your non-taxable amount when you do withdraw,