My_question_is: Applicable to both US and Canada Subject: HB(Home Buyers Plan) Expert: taxman at centa.com Date: Wednesday January 10, 2007 Time: 02:35 PM -0500 QUESTION: Hi David I was hoping you could share your knowledge of the following. Background: I live in Canada; work in the US (Permanent Resident Commuter). Took out 12,000cdn from RRSP in 2004 under home buyers plan. Filed tax forms with the IRS 1040, 8891, and 8833 to exempt the 12,000cdn form taxes. My first installment payment is due under the Home Buyers plan for tax year 2006. If I elect to add the 1/15 (800.00cdn) to my Canadian tax return as income instead of contributing back into my RSP would this 800.00cdn amount be taxable on my 1040?. Thanks ------------------------------------------------------------ david ingram replies: Not specifically. However, any increase in value of the plan between Dec 31st 2005 and Dec 31 2006 "is" taxable on Schedule B of your US return unless you fill in US form 8891. The penalty for not reporting the RRSP to the US IRS on form 8891 and the Department of the Treasury on form TDF 90-22.1 is up to $500,000 plus five years in jail plus 35% of the amount in the RRSP Plus 5% per year for every year you fail to report it. See here for the TDF 90-22.1 Read the fine print at the bottom of form TD F 90-22.1 http://www.irs.gov/pub/irs-fill/f9022-1.pdf Since part of the $800 DOES represent withdrawn money, some or all will be taxable and can NOT be exempted on form 8891 because you have now officially withdrawn the money. Remember, for US purposes, it is the interest portion that is taxable, NOT the principal. However, if the earnings were more than $800, you would be reporting the total, say $1,100 and exempting the excess over $800 on form 8891 and claiming a foreign tax credit on the US return for the tax paid to Canada on the $800.00. -------------------------------------- Hope this helps -------------------- David Ingram's US / Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists My Home office is at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. 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