US 401(K) to Canadian RRSP = Can it be rolled over?

This is a multi-part message in MIME format.
---------------------- multipart/alternative attachment
Answers to this and other similar  questions can be obtained free on Air every Sunday morning.
Starting this Sunday at 9AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet at
www.600AM.com 
================================================================================
Mr. Ingram, I hope you can help me. 
I have lived in the U.S. (currently New York city) since 1984(I am 50 years
old) and now have an US and Canadian passport. However, I am planning on
moving back to Canada sometime in the next 1 or 2 years. My current plan is
to retire in Canada. I have purchased a condo in Toronto. 
I have a non-resident bank account with the HSBC in Toronto. I have
appoximately $800,000can in GICs (3% return) with them. I was told this is
the only investment instrument they could offer without jepordizing my
non-resident status.
I read your answer to the question on rolling a 401K to an RRSP and you
appeared to indicate that this is possible with out incurring taxes
immediately in either the United States or Canada.
I currently have appoximately $650,000US in a 401K plan (I can roll it into
an IRA if I choose to). I know I can just leave the money in the United
States and face the consequence of paying tax when I withdraw it several
years down the road. However, I don't feel comfortable with the exchange
rate exposure. 
Initially my plan was to find a Canadian fund sold in the USA that was
eligible for IRA contributions believing that I was achieving the same goal
of removing the exhange rate exposure. The best I could find was Fidelity's
Canadian fund and the people I talked to at Fidelity couldn't seem to grasp
exactly what I was talking about. Would you have any comments about this
stategy?  
In a perfect world....I would want to roll the money into an IRA transfer it
to Canada and invest it in a Canadian balanced mutual fund as an RRSP
without incurring any taxes in either country until withdrawal several years
down the road.
Another questin I have pertains to timing and the tax consequences.........I
also have what we referred to as an excess 401k plan....this is a
non-qualified deferred compensation fund. There is about $710,000US in it. I
have control of the date of distribution..... for example I can request that
the amount be paid in full on any date in 2004, 2005, 2006 etc. and I would
receive a W2 in the year it occurs and be subject to normal U.S. taxes. This
money is an asset of the company and is exposed to bankruptcy so I would not
want to leave it much past 2006. It is my believe if I return to Canada
after 185 days in any given year I am not exposed to Canadian taxes on
worldwide income.....Do you have any comments on this.
I certainly am willing to pay a reasonable fee for your proffesional advice
if you know I can save paying some taxes.
Thank you in advance...... 
BXXXXXXXXXXX
====================================================================================
david Ingram replies:
You should likely buy an hour of my time which would cost you $350.00 by phone.
For Free!  If the condo is empty, it means that you have a residence in Canada ready and waiting for you to move into it.  In this case, Canada and the United States would decide where you do live.  I am enclosing Article IV of the US / Canada Income Tax Convention (Treaty) which deals with this situation.
 You can find much more by going to www.centa.com and finding the a lot more than the  US/Canada Taxation section on the right hand side in the second box down.
ARTICLE IV - US / CANADA INCOME TAX CONVENTION 
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows: 
(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests); 
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode; 
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national; 
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 
Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. Notwithstanding the preceding sentence, a company that was created in a Contracting State, that is a resident of both Contracting States and that is continued at any time in the other Contracting state in accordance with the corporate law in that other Contracting State shall be deemed while it is so continued, to be a resident of that other State. 
You can see that the countries themselves have set it up so that they will get tax. It is up to you to arrange your affairs to pay the least tax possible. 
Both Canada and the U.S. will tax you on any money you earn within the country. The BIG question is: 
WHEN ARE THEY GOING TO TAX YOU ON THE REST OF YOUR WORLD INCOME? 
Canada taxes on RESIDENCY, not citizenship. Basically, if you have been in Canada for more than 183 days (counting the hours - one hour is only one hour, not one day as in the States), you are taxable on your world income, no matter where it is located and under whose name you have your assets stashed away. That is why Howard Hughes left Canada when he did back in the 70's. If he had stayed in Canada (even as a visitor) two more days, he would have been taxable on his world wide holdings. 
================================================================
Back to Today's answer.
In your case, if the Toronto condo is empty and you use it occasionally,  Canada would try and call you a factual resident but because you are living in and working in the US, they would deduct any US income received on line 256 of your Canadian Return. You would still only pay tax to Canada on Canadian income which would be the tax on the interest.
If you wish to have a Canadian Securities Account, I can refer you to Shaun Rickerby in Vancouver who is licenced to handle any kind of security you might wish to buy as a US resident. Your Bank's advice about the GIC has no basis in law in my opinion.
If the Condo was rented, you do not fall into Article IV's clutches (no home available in Canada) but you do have to file a Canadian Income tax return under Section 216 (4) to report the rental income and should have filed an NR6 as well to appoint a Canadian agent.
 
With reference to rolling over the 401(K) to an IRA to an RRSP, there is no doubt that Canada will allow a rollover from an IRA to an RRSP.
However, the US institutions will not recognize the rollover and want to withhold tax.  I have only been successful twice in ten years and do not even bother any more.  In other words, I have given up getting anyone to make the rollover although yours is certainly enough to make the time worthwhile if there was a real good reason for doing it.
I recognize your exchange rate problems and I, for one, believe that the Canadian dollar will be stronger again but I think it will also dip again.  In general, over the last thirty years, you have been better having your money in US dollars.
However, many, if not most Canadian Financial Advisors lament the fact that Canada limits foreign holding in an RRSP to 30% of the invested amount. You have 100% in a perfectly legal US account in one of the strongest if not the strongest economies in the world.
I personally see no reason for you to bother with the rollover. The only one who would likely want you to do it is a Canadian institution or advisor who will pick up commissions and management fees if you move the money to his or her account.  Not that they are not entitled to earn a living (I started off with a quote) but Most money I see moved around did not need to be moved (in my opinion).
Your deferred 401(K) income should not be taxed in Canada.  The only case that comes to mind quickly is also from my old book:
But June, 1989 was a good month for Henry Hewitt. He had been a non-resident living in Libya for four years and received some back pay after returning to Canada. DNR tried to tax him on the money but Judge Mogan of the Tax Court came to the rescue. He ruled that although Canadians were usually taxable on money when received, that assumed that the money itself was taxable in Canada, which was not true in this case. 
Hope this helps.  
Sometimes one needs to BUTTON up the details.
David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 
[email protected]
www.centa.com www.david-ingram.com
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
This from ask an income tax immigration planning and bankruptcy expert consultant guru or preparer  from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate gambling refunds for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa,  Thailand, Indonesia, Egypt, Antarctica,  Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
income tax wizard wizzard guru advisor advisors experts  specialist specialists  consultants taxmen   taxman tax woman planner planning preparer of Alaska,  Alabama,  Arkansas,  Arizona, 
 California,  Colorado, Connecticut,  
Delaware, District of Columbia,  Florida, 
Garland, Georgia,  Hawaii,  Idaho,  Illinois,
  Indiana,  Iowa,  Kansas,  Kentucky, 
 Louisiana,  Maine,  Maryland,  
Massachusetts, Michigan, Minnesota,  
Mississippi,  Missouri,  Montana,  Nebraska,  
Nevada, New Hampshire,  New Jersey, 
New Mexico,New York, North Carolina,  
North Dakota,  Ohio,  Oklahoma,  Oregon. 
Paris,  Rome, Sydney, Australia Hilton
Pennsylvania,  Rhode Island,  Rockwall, 
South Carolina, South Dakota, Tennessee,  
Texas,  Utah, Vermont,  Virginia, 
West Virginia, Wisconsin, Wyoming, 
British Columbia, Alberta, Saskatchewan, 
Manitoba, Ontario, Quebec City, 
New Brunswick, Prince Edward Island, 
Nova Scotia, Newfoundland, Yukon and 
Northwest and Nunavit Territories,  
Mount Vernon, Eumenclaw, Coos Bay 
and Dallas Houston Rockwall Garland 
Texas  Taxman and Tax Guru  and wizzard 
wizard - Your name has been added to our email list because of an enquiry we have received,  we may not answer your question but 
another similar question will be as we lump them.
You may find more answers at www.centa.com
If the number of messages is too many for you or the US / Canada Taxation and Immigration information is not of interest, simply  reply with a remove request.
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
---------------------- multipart/alternative attachment
An HTML attachment was scrubbed...
URL: http://www.centa.com/CEN-TAPEDE/centapede/attachments/c6196039/attachment.htm
---------------------- multipart/alternative attachment--

Trackback

Trackback URL for this entry: http://www.centa.com/trackback.php/UsCaWeekofMon20040202000749.html

No trackback comments for this entry.

0 comments