Form 8891 question - as beneficiary elected deferral

[resourcemom2]

Thanks for a great tax blog!! I have a couple of questions,

Q1) Can you confirm for 2013 tax year if I have no withdrawals from my RRSP I just report the year end value (converted to US$) on line 8 -- I check Beneficiary, 6a/YES, 6b/enter 2011. That's what I've been doing so far.

Q2) If you withdraw money from an RRSP do you become Annuitant, or do you check off annuitant only if you have a RRIF?

Q3) Curious what to do if in future I do a partial withdrawl - do I:
check Beneficiary, 6a/yes 6b/2011
7a/enter withdrawn amount
7b/enter taxable amount
8/enter year end FMV .

So report withdrawal yet still continue to report value for election.
(I guess for partial withdrawal I would prorate my Book Value to calculate the taxable amount of the withdrawal)


Q4) I had an RPP that was transfered to a LIRA - Book Value based on when it became taxable to me in US - so the Dec 31 FMV the year of the transfer is my LIRA Book Value??? (I keep my LIRA separate from my RRSP)


Q5) Also any beneficiaries need to file for 8891, so for my RRSP I also filed a form 8891 for my husband (since he is the beneficiary of my RRSP upon my death) so the income has been deferred for him should I pass away & vice versa.


I live in US (now dual US/Cdn citizen), have Canadian RRSPs & am compliant with forms FBAR/8938 & 8891
**note - I filed rev proc 89-45 till 2010........in 2011 filed 8891 checked 6a/NO,, & checked 6c election,, & 8/entered year end FMV converted to US$
-- I did this to get compliant with correct election under XVIII(7) since I was filing under old XVIX(5) **


thanks

[nelsona]

1. Correct
2. You NEVER choose annuitant. Period. You are always the beneficiary.

3. Correct
4. No. LIRAs are FULLY taxable in US, so there is no non-taxable portion. when you withdraw funds, the gross and net are the same.

5. No. he would report only if he inherits your RRSP and is a US taxpayer at that time.

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[resourcemom2]

Thanks for your reply. Great info, but to clariy from my earlier question, not sure what you mean by LIRAs are fully taxable? Isn't there a book value like with an RRSP?? from my question 4) is book value of my LIRA a) b) or c) below?

(a) FMV at time of transfer from RPP to LIRA in 2011 (since that's when it became taxable, since was a non taxable Cdn RPP before then, and RPPs are non taxable in US)
(b) my actual contributions & employer match amounts into the RPP from years 1988-1995
(c) the FMV the year I became US taxpayer in 1995 (but did not need to report RPP then)

I would interpret a) since IRS docs state that book value of RRSP/LIRSs is the FMV when the funds became taxable in the US. ***So for my LIRA book value would seem to me to be when RPP was transferred to LIRA & became taxable in US.


**** 5) Hmmm so if I filed 8891 on my RRSP for my spouse do I just stop doing it (since not necessary). OR is it something I need to correct & how would I do that.

thanks again

[nelsona]

LIRA's are by definition, company pension that was rolled over to the employee with special restrictions. Since pension money is always fully taxable, and the contributions both you and your employer made were not taxable in canada, so is a LIRA. RPPS are indeed fully taxable in US when you withdraw them. This is by Section 72(w) of the IRC.

That is differnt from RRSP, which had (at least in the past) some contributions which were taxable in US (or would have been had the employee been a US citizen or residnt). And Various rev procs have ALWAYS treated RRSPs as having contributions that would eventuyally come out tax-free. RPP (and thus LIRAs) have not.

You cannot lump RRSPs and LIRAs, since they did not come from the same source.

By the way, casn you point to this IRS doc that says LIRAs have a non-tatxable basis? I can for RRSPs.

[resourcemom2]

I will have to look to find where I thought I saw IRS wording on LIRA having a non-taxable basis. Likely you are correct and I'm not, but if I find anything I'll post it.

[resourcemom2]

Back to my initial question (5) which was... Also any beneficiaries need to file for 8891, so for my RRSP I also filed a form 8891 for my husband (since he is the beneficiary of my RRSP upon my death) so the income has been deferred for him should I pass away & vice versa.

Got your response no need to do that till one spouse passes away then other would file 8891

???? I actually did file 8891 for spouse last year, so do I just stop filing 8891 for spouse since not necessary **OR** is it something I need to correct & how would I do that (? 1040x and note to delete 8891 for spouse?)

[nelsona]

There is no point "deleting" the erroneous 8891.

[resourcemom2]

Thanks, will just leave erroneous 8891.