Deferred USA Inherited Annuity & ACB

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Mswalleye2
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Joined: Fri Oct 12, 2018 2:37 pm

Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

Would I include the total amount of a deferred USA annuity in my calculations for ACB .. or only the distributions received so far?
I have included the total when filing Form T 1135.
Mswalleye2
Posts: 44
Joined: Fri Oct 12, 2018 2:37 pm

Re: Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

Distributions received so far still in USA.
nelsona
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Re: Deferred USA Inherited Annuity & ACB

Post by nelsona »

The annuity manager should be able to tell you the ACB of your annuity.
As for taxation, whatever is taxable in US will be taxable in Canada, should you be residing in Canada at the time of distributions.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Mswalleye2
Posts: 44
Joined: Fri Oct 12, 2018 2:37 pm

Re: Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

Okay .. so I would include the full amount of the death benefit in overall ACB calculation.

I previously contacted CRA and they told me that the inheritance was not taxable in Canada, just the income it generates? So this was wrong?

It was non qualified so taxes due in USA.
nelsona
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Re: Deferred USA Inherited Annuity & ACB

Post by nelsona »

Your annuity ACB will change year-to-year )it may even be listed on your 1099 form.
The inheritance itself is not a taxable event in either US or Canada, however the income is year after year. Just like spouse who inherits an RRSP at death.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Mswalleye2
Posts: 44
Joined: Fri Oct 12, 2018 2:37 pm

Re: Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

Thanks ..

Because we have a couple accounts in USA .. went back years to figure out todays ACB (aggregate of accounts). So.. I don't add the total death benefit amount in 2016 (original access)to my chart .. only the distributions as they are received? Would I use the exchange rate when the distribution is received or exchange rate at time of death?

I understood that the inheritance was not taxable, just the income it generates after he receives it BUT are you saying .. whatever is considered taxable on 1099 in USA would also be taxable in Canada?

If that is the case, I would get an FTC for taxes paid in USA .. otherwise it would be taxable? Why bother reporting it?

I think this is what you mean and I have been scouring the net for a source of info .. I can't find anything.
What would be the best reference for this?
nelsona
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Re: Deferred USA Inherited Annuity & ACB

Post by nelsona »

I'm not sure why you are mixing distributions with ACB. ACB is the VALUE of your annuity, distributions are income FROM your annuity.
It's like a bank account and the interst it pays. Account value is reportable, interest is taxable. The aren't really connected. Distributions will lower the ACB.

As to taxation, yes the distributions are taxable in US and Canada, with credit given in Canada for the tax paid in US. You must report these in bothe countries. Why would you think not?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Mswalleye2
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Joined: Fri Oct 12, 2018 2:37 pm

Re: Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

We have three accounts in the USA .. two banks and the annuity . I went back to 2013, figured out every credit and debit to come up with todays ACB, gains and losses for the years .. didn't know it was reportable.. do now. (But, not according to the lady I talked to the other day from CRA)

So,. there is an aggregate of funds .. I wasn't sure if the annuity was part of that aggregate in 2016 or only when he took out a distribution which was then deposited in one of the bank accounts. The annuity remained in his mothers name so wasn't sure if it was technically his yet?. So if he adds the annuity to the aggregate in 2016, if he takes money out of it and deposits it in one of the banks, ACB would remain the same but if it is reported only when he gets a distribution .. then it would be added to ACB at that time if he leaves the money in the USA. ???

I didn't know how inheritance was to be reported. CRA said the inheritance was not taxable, nothing to report other than the interest it generates going forward. If he moves it to Canada there may be a gain or loss.

In the USA, he has to report more than just the interest it generates from when he got it ... he is taxed on the total amount of interest since his mom started it. Non qualified Annuity.

So, I have been reporting the yearly interest to Canada and on the USA side ... so far the full amount of the distributions have been taxable.
nelsona
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Re: Deferred USA Inherited Annuity & ACB

Post by nelsona »

I think you are misunderstanding. An annuity is not a capital investment, it is like an RRSP. The only income that matters is the amount that is withdrawn from it every year. That is taxable in your case. The annuity itself has a value, which has nothing to with the internal transactions. It is what the annuity is WORTH. As I said, the annuity manager can probably tell you that figure every year. That WORTH goes toward your !1135 foreign statement.

The only income reportable is the amount that comes OUT of the annuity every year. If there is none, then there is no income to report. Taking money out of the Annuity IS a distribution. anything else which occurs under the umbrella of the annuity is meaningless from a tax point of view.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Mswalleye2
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Joined: Fri Oct 12, 2018 2:37 pm

Re: Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

Please bear with me..

So... if i have to calculate foreign currency transactions in and out of bank for capital gains and losses .. I ignore the annuity amount and only use the dollar value of my two bank accounts. When money comes out of the deferred annuity, if placed in the US bank account .. would it then be considered capital dollars and I would then increase my ACB by value of distribution?

I have been reporting the yearly interest as advised ... I just assumed it was like having a third bank account. So you are saying that is wrong.

I noticed if I claim the full distribution on my previous tax return, I will owe another 700 bucks so ... how can they say that an inheritance is not taxable. The FTC is not enough?
nelsona
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Re: Deferred USA Inherited Annuity & ACB

Post by nelsona »

I think I see wher you are going. I was confusing the Cost basis of your annuity, which I assume you need for form T1135, with the cost basis you are using to determine if your US currency, held in banks will incur cap gains when you convert it to something else.

How long have you lived in Canada? Realize that any gains arising before you arrived in Canada don't count. So your USD holdings have cost basis the day you arrived and that is all.

as to taxation of the US income. That is always what happens with US income reported on your Cdn return, The US tax is never enough to cover the Cdn tax, even after the credit.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Mswalleye2
Posts: 44
Joined: Fri Oct 12, 2018 2:37 pm

Re: Deferred USA Inherited Annuity & ACB

Post by Mswalleye2 »

The money in our accounts was not there when husband moved here in 2005. He had an inheritance, his pension money goes in a US account. I am reading about so called sundry dispositions, keeping track of it all to monitor gains/losses due to currency changes. We have moved some larger sums into Canada from house sale / inheritance and I thought I had to keep track of that as well. I was getting so confused about it all.

I did call CRA today and as you stated I am to pay taxes on the annuity, last CRA guy told me no? Asked whether I need to keep track of my expenses out of my USA account for gains or losses, do I have to worry about moving money to canada etc. Two employees told me no. They both stated that any interest income is reportable and and amounts over $10000 is reportable to Canada Border Patrol. If I have investments or property etc yes but not for cash in the bank.

If this is true .. is IT 95R obsolete then? That article referred to sundry dispositions, multiple account credits and debits? Treating a person as a speculator if they have multiple transactions.

I really appreciate the info you have provided, thanks Nelsona
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