401K used to live in Texas - now Toronto want to put

Dear Mr. Ingram,
 
I hope you are well.
 
My husband and I had a phone consultation with you in January while still in Texas (we are in Toronto, Ontario now).  We needed some advice on XXXXXX's 401 K.  We wanted to know what the consequences of cashing the 401 K were and if it was possible to transfer the 401K to an RRSP.
 
We did cash the 401K but cancelled the transaction; therefore money is still in the USA.  I am still trying to find a way to transfer it to an RRSP, which brings me to my questions.  When a 401K is cashed, how is it reported on the 1040?  I am asking because Fidelity, at our request, did not withhold any tax when we cashed the 401K in January.  Is there a way to show on the US income tax form 1040 that this money was transferred to an RRSP in Canada?  On your site it says that Canada allows 401K to be transferred into an RRSP but the institutions will not allow it, does the IRS allow it?  If the IRS allows it maybe we can buy pass the institution?  
 
I may be chasing windmills but there must be a way to get that money to Canada without paying the taxes and penalties.
 
Thank you for your time.
 
Regards,
XXXXXXXXXX XXXXX
=====================================
david ingram replies:
It depends upon what Fidelity puts on the 1099R slip they issue.  Any Canadian Institution will accept the money as a deposit.  It is the US institution which will not usually  allow it to be rolled over into a Canadian RRSP.
You can:
1.     pay the tax in the US
2.    report the money again on your Canadian tax return and pay the tax again.
3.    Make a deposit to your Canadian RRSP of the amount you withdrew and getthe RRSP rollover deuction under section 60.
Not a direct transfer but it will work.
in th alternative and this depends upon what the Fidelity slip says.  You could jut claim it as a rollover and avoid the US 10% penalty.  
Whatever you do, you should make your Canadian RRSP contribution before Dec 3s1st to make it have the characteristics of a rollover.  If you leave it until after Dec 31st, it will not look like a rollover.
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