Filling out 1040 Shedule B Part III Foreign Income

[oaktree]

We are Canadians, permanent residents in the US with RRSPs. With respect to 1040 Schedule B, Part III Foreign Accounts and Trusts, questions 7, 7a and 8, we understand that the answer to Question 7 is YES, Question 7B is CANADA, but are unsure about the answer to Question 8.

For question 8, because the RRSP is considered a foreign trust, there are some Canadian tax advisors with expertise in cross-border taxation who are advising to answer YES to this question. We are inclined to answer NO.

We are not sure what the correct answer should be for question 8. There are three separate issues in the question. Did we receive a distribution from a foreign trust? No. Were we the grantor of a foreign trust? No. Were we a transferor to a foreign trust? No.

We are the owners of the foreign trusts,i.e, RRSPs. If we are the owners, can we also be grantors or the transferors? Why then would some Canadian tax advisors be advising to answer YES to this question? We would understand the YES answer if our accounts were already converted to RRIFs from RRSPs and this would make the proceeds distributions, but otherwise it doesn’t make sense.

Thanks for this very helpful Forum.
Oaktree

[nelsona]

The answer is YES of course, and you must file 8891 to cover the trust.

The debate over whether RRSP need 3520 is over years ago, and the answer is yes. That is why form 8891 was developed, to substitute for 3520 (and, separately, to make election to defer taxation). You are the grantor

[oaktree]

Thanks for your quick reply.
Fortunately, we have been filing 8891 and TDF 90-22.1 as required.

If someone has made a mistake on 1040 Schedule B how does one repair this with the IRS and how far back does one have to go?

Thanks.
Oaktree

[nelsona]

6 years of 8891's. Forgetting to tick schedule B means nothing if you've submitted the 8891's. That more than compensates.