Tax question for fund transfering between RRSP plan for

newbie12345 · Post by **newbie12345** » Wed Jul 25, 2012 1:38 pm

Hi Nelsona and others,

Since the purchasing of canadian money market RRSP mutual fund is not quite right transaction, I am thinking about to to re-deem it and transfer the money from my RRSP mutual fund account to my old RRSP saving account and purchase a RRPS GIC.

There will be still one canadian mutual fund left in the RRSP mutual fund account.
(This mutual fund is purchase while I am living in canada. It never generates any distribution)

If I do this, do I need to file anything to CRA?

Do I need to file any to IRS for:
1. 8891 for RRSP mutual account (let's say RRSP account #1),
do I need to report any distrubtion from the account or just append a note explain money is transfer to RRSP account #2 ?

2. 8891 for RRSP saving plan (let's say RRSP account #2)
Do I need to report any contribution or just append a note explain money is transferred in from RRSP account #1?

3. Do I need to file any income for this transfer?

4. If I do this transfering and I withdraw all the RRSPs later (for example, 5 years later, with 25% withholding rate from canada), would the tax I pay to IRS be different than not do this transferring transaction (assume the income generated from the redeeming money market fund same as the income generated from RRSP GIC)

Thanks in advance for any information!

nelsona · Post by **nelsona** » Wed Jul 25, 2012 2:05 pm

Why don't you just open a proper RRSP with TD waterhouse. What you've done in the past doesn't matter anymore. You need to get into abn RRSP that will allow you full trading. Don't bother with GICs or savings account.

Your old RRSP savings account is not allowed to accept any new money, even from a transfer, because it is not a legimate self-directed account with a broker licensed for your state. These should ahve been closed when you moved away.

When you do set up the transfer, in that year you will have an 8891 for the old account with zero balnace, and one for the new account, with new year-end balance.

All this has no impact on your IRS taxation when you withdraw. Your cost basis was set on the day you arrived in US and all these transfers would have no impact on that.

newbie12345 · Post by **newbie12345** » Wed Jul 25, 2012 5:28 pm

Hi nelsona,

Thanks a lot for the information. Redeem the mutual fund and transfer the money into RRSP savings plan to buy GIC (canadian's CD) is what suggested by the RRSP mutual fund specialist. They might not tell me the truth!

I am wondering about the cost basis for the RRSP.

For the year I moved, I report my whole year income to IRS since me and my husband jointly file the return and he lives in U.S. For the whole year.

Should the cost basis set as the Jan 1st of the year or the day I physically moved across the boarder?

Is the cost basis
1. my total RRSP contribution?
2. total number of the book value of the mutual fund showing on the RRSP account statement at the set date? ( It might not be the same as contribution if you switched funds in previous years. If it is lost, then book value is less than contribution. If it is gain, book value is greater than contribution)?
3. Total fair market value of the mutual fund at the set date?

Thanks!

nelsona · Post by **nelsona** » Tue Jul 31, 2012 8:58 am

The cost basis will be the book value of your RRSP on Jan 1st of the year you started reporting on 1040, since you filed full year, plus any contribution you make thereafter.

From your other posts, your Dpsp has no effect on your cost basis, so you will pay US tax on all of it in future.