Dual citizen withdrawing from RRSP, tax implications

[hajtex]

My husband and I opened RRSPs about 10 yrs ago & haven't done much with them since. They were in labour sponsored funds & have devalued considerably.

We've been here about 7 yrs; he's Canadian & I hold dual. I just sold mutual funds with book value equaling market value (ie, no loss, no gain) & plan to cash out next week. I read about the 25% Canadian withholding & understand I can file w/CRA in 2011 to get a portion of that back, correct?

What I don't understand is what I'll be taxed on - the mkt value now minus book value when I came back to US or mkt value now minus book value as listed on my stmt.

Also, I have just read about the 8891. Is that filed only when you withdraw or contribute? Like I said, ours are down considerably from what we put in. Or do we need to backfile?
Many thanks.

[nelsona]

8891 is required EVERY year since you've been in US, so you need to take care of that before next spring or you could face huge penalties. You need to backfile.

For canada, you will be withheld 25% of the witdrawn amount. You only can get some tax back next spring (by filing a 217 return) if that is 90% or more of your world income for the tax year, so basically, only if you don't work. Remember that it is in US dollars, so even if it has lost in 10 years in CAD, it may have gained in USD.

For US, your basis for taxation is the amount you contributed to the RRSP in USD, in the years you contributed. This is because you are a US citizen. The value when you qarrived in US would be what your spouse would use.