RRSP disbursements - Big Picture

[Trekrider2001]

I have been living in the US since 1997, been a resident, filed US taxes since I've been here. In 2012 I closed out my RRSP. I had an accountant do my taxes in the early years, but he really did not understand cross border RRSP's. I been doing my own with Turbo tax for the past 5 or so years. So this 8891 reporting was not really done until the past few years. 1997 the RRSP was worth about $100K. Market and bad investments, the thing was closed at $33400 this year. The Canadians held 25%. TurboTax seems to add the whole distribution to my income without letting me enter the 25% withholding. I can "force it" but what is the big picture here? I thought the distribution was added to my income and I take the 25% withholding as a tax credit which means I need to "force" Turbo Tax to do this. After reading posts on this page, it seems that I might be able to claim a loss between the time I came to the US and now, but that does not seem to make sense.

[JGCA]

If when you entered the US the FMW was $ 100K and now you closed it and received $33K then you have no income to report to the US if you were deferring by way of 8891 and prior letters by electing. Canada will always tax the RRSP since you got a deduction for it the 25% tax you paid to Canada can not be claimed in the US because the US does not include it in income and you can not claim a loss either.

[Trekrider2001]

Thanks! So the big picture is... (Distribution amount) - (FMV@ time on entry to US) = reported income (if positive). What happens on the tax? The distribution amount gets nailed with 25% by Canada. How does that get claimed against the reported income in the US? A tax credit? ie, if the FMV was $100 and ten years later the plan was closed out and it rose to $200, then Canada would tax it at $50. Adding the disbtribution ($200) to US income and then taxes at say even a low 16 % ads another $32 in tax for a total tax paid of $82 or 41%. There has to be a way to get a credit for the tax paid in Canada? (ie my wife still has an RRSP and we need some tax planning)

[nelsona]

You can cliam the Cdn tax you paid as a dedustion. on scheduel A.

You can ALSO cliam the loss of schedule A, if you have closed all your RRSPs. Its a tterminal loss on sheltered investement.

The fact that that you had no positive income is not important, except taht mecahically you cannot use a tax credit.

The problem is that this will put you in AMT world.

[Trekrider2001]

Now I'm confused. JGCA suggests that I cannot deduct either the withholding nor claim the loss. Nelsons suggest that I can claim the loss. My RRSP has a loss and we closed it in 2012. My wife's is still open and doing well. Are you suggesting that when I close her account I can combine the two gains and loses and pay on the net?

[nelsona]

This applies to YOUR RRSP holdings. Once you have none left, you can write off the loss. Your wife will be able to write off a loss (if there is one) when she closes her RRSPs.

You can ALWAYS thake the 25% tax as a credit or deduction.
the loss deduction is limited by your AGI, since it is a miscellaneouls loss. The NR tax is foreign tax.

You would need to be careful of AMT.

[Trekrider2001]

Thanks... now to figure out how to get all this into TurboTax... :cry: ... as to the AMT, yep, that hits ... but if I run TurboTax willout mentioning the RRSP, I get the AMT also, so it looks like I'm getting caught in that "middle income" AMT trap.

[nelsona]

If AMT is getting you, then I would simply use the RRSP tax as a credit, by fillingan 116. You won't get any this year, but you can carry this forward 10 years. Who knows if you go work abroad for a couple of weeks, you can use it then. No pint adding to your deductions if you are in AMT.

You can only use the loss this year.