I just contacted IRS and an accountant and they are both telling me that there is no such thing as a "cost basis" for RRSPs.
I became a US resident on Jan. 4 2011 and collapsed my RRSP on Jan. 10 2011.
IRS wants me to report all of the income generated within the RRSP since it was first created (back in 2004) even though I was not a US resident at the time. Is that right?
I could not find any information on IRS Web Site regarding "cost basis" on the day one becomes a US resident.
I need to file form 8891 and I want to make sure I do it correctly. This is my first time filing in the US.
Can someone help me by providing me "official" information that I can use when filing form 8891.
Thank you in advance for your help.
Collapsing RRSP after becoming a us resident and form 8891
Moderator: Mark T Serbinski CA CPA
Ignore what you heard form IRS telephlunkies. They don't know the most basis.
And your local CPA knows nothing about this issue.
You cost basis is the BOOK value when you arrived. Period.
The "offical" information is in Section 72 of the tax code, and the specific wording is in an old Rev Proc 89-45, which although the reporting process has been replaced by Form 8891, the method of determining cost is the same:
http://www.garygauvin.com/WebDocs/IRS/RevProc89-45.pdf
Look for "investment in the contract".
And your local CPA knows nothing about this issue.
You cost basis is the BOOK value when you arrived. Period.
The "offical" information is in Section 72 of the tax code, and the specific wording is in an old Rev Proc 89-45, which although the reporting process has been replaced by Form 8891, the method of determining cost is the same:
http://www.garygauvin.com/WebDocs/IRS/RevProc89-45.pdf
Look for "investment in the contract".
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Hi,
Thank you so much for the information. I'm having a hard time understanding the concept. My Canadian financial institution sent me a statement indicating how much my RRSP was worth on the day I moved to United States. Is that considered the book value?
Six days after my arrival, I collapsed my RRSP. CRA sent me a T4RSP statement a couple of weeks ago. The value indicated on the T4RSP is less that the one indicated on the financial institution's statement on the day I became a US resident (let's say $10000 vs $10200).
So, what should I write on lines 7a & 7b?
Also, should I make the election on line 6c?
This account was closed 6 days after I became a resident.
Thank you.
[quote="nelsona"]Ignore what you heard form IRS telephlunkies. They don't know the most basis.
And your local CPA knows nothing about this issue.
You cost basis is the BOOK value when you arrived. Period.
The "offical" information is in Section 72 of the tax code, and the specific wording is in an old Rev Proc 89-45, which although the reporting process has been replaced by Form 8891, the method of determining cost is the same:
http://www.garygauvin.com/WebDocs/IRS/RevProc89-45.pdf
Look for "investment in the contract".[/quote]
Thank you so much for the information. I'm having a hard time understanding the concept. My Canadian financial institution sent me a statement indicating how much my RRSP was worth on the day I moved to United States. Is that considered the book value?
Six days after my arrival, I collapsed my RRSP. CRA sent me a T4RSP statement a couple of weeks ago. The value indicated on the T4RSP is less that the one indicated on the financial institution's statement on the day I became a US resident (let's say $10000 vs $10200).
So, what should I write on lines 7a & 7b?
Also, should I make the election on line 6c?
This account was closed 6 days after I became a resident.
Thank you.
[quote="nelsona"]Ignore what you heard form IRS telephlunkies. They don't know the most basis.
And your local CPA knows nothing about this issue.
You cost basis is the BOOK value when you arrived. Period.
The "offical" information is in Section 72 of the tax code, and the specific wording is in an old Rev Proc 89-45, which although the reporting process has been replaced by Form 8891, the method of determining cost is the same:
http://www.garygauvin.com/WebDocs/IRS/RevProc89-45.pdf
Look for "investment in the contract".[/quote]
The value of teh RRSP on the day you came to the US is the cost basis converted to US $ on that day. You said you subsequently cashed in the plan this is why you received the T4RSP slip from CRA this was the amount you received afterwards so it will not be the same since it was a few days later. This too is to be converted into US$ at that date and compared to the value on date of arrival the difference is taxable if any. BTW it may not be taxable in the US but it is in Canada and a witholding tax should have been applied by the brokers for CRA since you are a non resident now CRA wants its tax on the RRSP the entire amount.
JG
Thank you for your reply. Yes, like I said I technically lost $200 if we compare the value on the date of arrival and the value on the date of withdrawal. That's why I do not know what to write on lines 7a & 7b. And yes, CRA took 30% on it even though it should have been 25% because I was not a resident of Canada at the time of the withdrawal.
[quote="JGCA"]The value of teh RRSP on the day you came to the US is the cost basis converted to US $ on that day. You said you subsequently cashed in the plan this is why you received the T4RSP slip from CRA this was the amount you received afterwards so it will not be the same since it was a few days later. This too is to be converted into US$ at that date and compared to the value on date of arrival the difference is taxable if any. BTW it may not be taxable in the US but it is in Canada and a witholding tax should have been applied by the brokers for CRA since you are a non resident now CRA wants its tax on the RRSP the entire amount.[/quote]
[quote="JGCA"]The value of teh RRSP on the day you came to the US is the cost basis converted to US $ on that day. You said you subsequently cashed in the plan this is why you received the T4RSP slip from CRA this was the amount you received afterwards so it will not be the same since it was a few days later. This too is to be converted into US$ at that date and compared to the value on date of arrival the difference is taxable if any. BTW it may not be taxable in the US but it is in Canada and a witholding tax should have been applied by the brokers for CRA since you are a non resident now CRA wants its tax on the RRSP the entire amount.[/quote]
Lines 7a & b - form 8891
Could someone answer my previous questions about lines 7a & b (form 8891) as well as line 6c? I really need some help. I must say that I feel overwhelmed...
Thanks.
[quote="Confused"]Hi,
Thank you so much for the information. I'm having a hard time understanding the concept. My Canadian financial institution sent me a statement indicating how much my RRSP was worth on the day I moved to United States. Is that considered the book value?
Six days after my arrival, I collapsed my RRSP. CRA sent me a T4RSP statement a couple of weeks ago. The value indicated on the T4RSP is less that the one indicated on the financial institution's statement on the day I became a US resident (let's say $10000 vs $10200).
So, what should I write on lines 7a & 7b?
Also, should I make the election on line 6c?
This account was closed 6 days after I became a resident.
Thank you.
[quote="nelsona"]Ignore what you heard form IRS telephlunkies. They don't know the most basis.
And your local CPA knows nothing about this issue.
You cost basis is the BOOK value when you arrived. Period.
The "offical" information is in Section 72 of the tax code, and the specific wording is in an old Rev Proc 89-45, which although the reporting process has been replaced by Form 8891, the method of determining cost is the same:
http://www.garygauvin.com/WebDocs/IRS/RevProc89-45.pdf
Look for "investment in the contract".[/quote][/quote][b][/b]
Thanks.
[quote="Confused"]Hi,
Thank you so much for the information. I'm having a hard time understanding the concept. My Canadian financial institution sent me a statement indicating how much my RRSP was worth on the day I moved to United States. Is that considered the book value?
Six days after my arrival, I collapsed my RRSP. CRA sent me a T4RSP statement a couple of weeks ago. The value indicated on the T4RSP is less that the one indicated on the financial institution's statement on the day I became a US resident (let's say $10000 vs $10200).
So, what should I write on lines 7a & 7b?
Also, should I make the election on line 6c?
This account was closed 6 days after I became a resident.
Thank you.
[quote="nelsona"]Ignore what you heard form IRS telephlunkies. They don't know the most basis.
And your local CPA knows nothing about this issue.
You cost basis is the BOOK value when you arrived. Period.
The "offical" information is in Section 72 of the tax code, and the specific wording is in an old Rev Proc 89-45, which although the reporting process has been replaced by Form 8891, the method of determining cost is the same:
http://www.garygauvin.com/WebDocs/IRS/RevProc89-45.pdf
Look for "investment in the contract".[/quote][/quote][b][/b]
7a is the total dist you received from RRSP collapse
7b is the taxable amount ( diff between value on day of entry ACB and the amount dist to you value reported from CRA slip)
6c is to make the election to not be taxed until you collapse the plan you can check this off it has no effect since you cashed in.
7b is the taxable amount ( diff between value on day of entry ACB and the amount dist to you value reported from CRA slip)
6c is to make the election to not be taxed until you collapse the plan you can check this off it has no effect since you cashed in.
JG