Canadian H1B holder sells her RRSPs while living in

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MessageAndrew brings forward an important note onthe claiming of internal capital losses within your RRSP as referred to in last night's CEN-TAPEDE
Thanks Andrew
david
It is important to note that, once Any Rev. Proc (Either 89-45 or 2002-23) is used to defer RRSP income in ANY year, the ability to treat these RRSP account as "ordinary" investment account for IRS purposes disappears.
Once invoked, the Rev. Proc (and 2002-23 states this specifically) treats any distribution as annuity/pension income, which doesn't allow for claiming losses (merely gross and net taxable on line 16 -- which cannot be negative).
But, for 1st or 2nd year US residents who have either neglected or chosen not to use the Rev. Proc, this capture of losses does exist.
AGN
  -----Original Message-----
  From: [email protected] [mailto:[email protected]] 
  Sent: Tuesday, October 07, 2003 21:32
  To: CENTAPEDE
  Subject:  Canadian H1B holder sells her RRSPs while living in theUS - The good news is!
  Hi David,
  One more quickie question on that matter--I gather that as a non-resident of Canada, I have to pay 25% tax in Canada on the gross sale of the RRSP's.  
  Do I get to deduct anything for the losses sustained on these investments?
  Cxxxxxxxxxxxxxx
  P.S. No bonds, no securities--really pathetic!
  I'm 55, in debt for school and no retirement funds--I guess I'll be working till I drop!
  -------------------------------------------------
  david ingram replies
  CXXXXXXXX, it isn't that bad, you will come out with a newly minted PhD, more experience and hopefully US citizenship.
  In addition, you will qualify for full US social security medicare when you retire and a Social Security pension AND will be able to collect Canada Pension Plan and some OAS as well.
  It is NOT that bad. 
  However, back to your RRSP question.  You got the deduction on your Canadian Tax Return when you put the money into the plan.  
  Let's assume you put in $20,000 and received a $8,000 tax refund.  Now you are cashing in the $4,000 left and are only paying tax of $1,000.00 tax.  You have already had the beneift of the loss.  On the other hand, the US does not look at it that way.  
  We will be able to deduct the capital loss on your US return because they do not have a deemed disposal or acquisition on these funds when you crosed the border.  The US does not recognize it as a registered deductibel plan either. 
  Therefore, next year we will create the loss when you file your return.  Good news all around.
  Just remember, Be aLERT - the world needs more lerts
  david
  (now to try and figure out how to make this a broadcast.  Felt good writing it.)
  -  
  David Ingram of the CEN-TA REALTY  Group
  US / Canada / Mexico tax and working Visa Specialists
  US / Canada Real Estate Specialists
  108-100 Park Royal South
  West Vancouver, BC, CANADA, V7T 1A2
  (604) 980-0321 - Fax 913-9123 [email protected]
  www.centa.com www.david-ingram.com
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