Pension Gains Question

Ingtar17 · Post by **Ingtar17** » Mon Oct 06, 2008 1:26 pm

Hello.
From reading many posts, I believe the following is true. Please confirm or correct me. (Much appreciated)

1) You need to keep track of what your gains consist of in an RRSP (dividends, interest, cap gains, etc.) because when you finally make withdrawls, you need to know how to report it.

2) You do not need to keep track of what your gains consist of in a Canadian Pension (dividents, interest, etc.) because it is reported as 'pension income'.

Am I correct?

Thanks a bunch,

Geoff

P.S. Great forum by the way

nelsona · Post by **nelsona** » Mon Oct 06, 2008 2:03 pm

1. If you use the election to defer taxation of RRSP, then you really don't need to track the individual types of income, since, in the end you will be taxed on the GROWTH regardless of type of income. Your important nuimber is (for non-US citizens) the book value the day you became US tax resident or, for US citizens, like you, the contributions you made. If you were NOT electing to defer then you would need to track each individually, since you would be reporting these on your 1040 on the proper lines each year.

2. Pension income is reported as pension income (so is RRSP income btw, if one elects to defer as above). What you need to track is the CONTRIBUTIONS that YOU make that were not deductible on your US returns. These will eventually come oput tax-free.

joeinusa · Post by **joeinusa** » Fri Nov 06, 2009 10:14 pm

Nelson you said:
" is (for non-US citizens) the book value the day you became US tax resident or, for US citizens, like you, the contributions you made. "

If you made the RRSP contributions, then moved to US and became a citizen, is it book value or the total of the contributions?

If the RRSP book is significantly more than the contributions, this might be a reason not to become a citizen.

nelsona · Post by **nelsona** » Sat Nov 07, 2009 9:15 am

It is book value. My reference to US citizens is when the contributions are made, not when you moved to US. The reason for that is that US citizens, have always been taxable on the earnings in there RRSP even when in canada, while non-citizens like you were not. Getting citizenship laer makes no difference in this. Your pre-arrival earnings are not taxable.

This applies to self-funded RRSPs.

joeinusa · Post by **joeinusa** » Sat Nov 07, 2009 2:03 pm

I am fairly sure that you that you are telling me: If I become a US citizen then (1) my book value on leaving Canada continues to not be taxable in US and (2) my earnings are tax deferred until withdrawn if I use the 8891 form each year.

To take this a little further not that it applies to me but just curious.

If additional contributions were made to the same RRSP after becoming a US citizen but also after going back to live and work in Canada for a few years, it would be wise to put those in a different RRSP as earnings on those contributions would be taxable in US?
If you did use the same RRSP (maybe to lower transactional costs), you would have to use some type of proportional basis of the earnings for the year? You would also adjust book value by the amount of the contribution and earnings declared on US return and adjust the 8891 appropriately each year?

And if you had not become a US citizen, you would have avoided the earnings being taxable or would you? A green card holder needs to do US tax returns for 10 years after returning to Canada and on that return the earnings are taxable?

joeinusa · Post by **joeinusa** » Sat Nov 07, 2009 2:10 pm

Yes I understand this is just for self-funded RRSP as a pension converted to RRSP could be tax deferred using 8891 but would in the end be fully taxable.