RRSP, RRIF annuities and other Canadian accounts for US resident - Dan Walkow, Seabank - Darrell Thomspson Blackmont -- Shaun Ri

I can't believe everyone of the hundreds of thousands of Canadians who retire in the sunny US go through all this.  And that all the local brokers and financial advisors are so clueless. 

My ex employer and the Canadian expatriates working there still think I'm creating.a tempest in a teacup, and that an RRSP is treated like a 401K by the IRS.  They all deserve what they get at this point.

Is what I told my Canadian broker in the email below correct?

This is really a nightmare. I have six RRSP GIC accounts in Canada, they total about $550,000 Canadian. My first priority is to have an income stream from them by January 2008, my secondary priority is to have an inheritance from them to leave my two daughters who both live in NYC. I need about 5% payout to maintain my standard of living. I will take care of my American wife after I go to the big motorcycle ride in the sky from my US pensions and US investments.

I have no idea what to do with these RRSP's. Everybody I speak to is either clueless, or has something to sell and thus a hidden agenda. I 'm scared to put them in mutuals in an RRIF because I can't manage that from here, and I think annuities are a ripoff.

I know that if I deregister them and bring them down here over a period of say 5 years I can still keep my federal tax below 15% so the bite will still fall within the foreign tax credit applicable to what Canada witholds. And then if I have them in mutuals in the USA, whatever I leave to my kids will be tax free, the US government forgives capital gains on a mutual fund left as an inheritance, and I will fall well below the $2000,000 exemption on estate tax. Unless the democrats change the laws and screw it all up.

I believe there is some special deal that one can deregister all their RRSP's when leaving Canada at a lower tax rate; a one shot deal. I left in 1991 on a temporary visa, without the intention of staying in the USA permanently. My employer later petitioned for a permanent visa, and I eventually became a US citizen. But because this developed slowly, I never filed a "leaving Canada tax return". I didn't have anything to declare anyway. I did file tax returns for 1991 in both Canada and the US, both Federals, state, and provincial, I guess that qualifies as a leaving Canada return". Does this lower deregistration rate apply 17 years later, and anyway, will the IRS consider it all income in one year?

Right now I'm thinking of just rolling it all into RRIF's and taking whatever interest payout a GIC in an RRIF will provide, and declaring the disbursements as ordinary income on my US taxes.

Do you have any advice on which is the best course through this minefield?


Letter to Canadian Broker
To: Sent: Monday, February 05, 2007 4:47 PM
Subject: Re: U S TAX


If we had some bread we could have a bread and cheese sandwich if we had some cheese.

You have been doing your home work. However the forms you sent were used for a few years, but have been out of date since 2003. They were superseded for the tax year 2004 and on by form #8891. I attach a copy. Please note the IRS term "beneficiary" means someone who would be obligated to pay tax on the income if he did not declare for an exemption on #8891. "Beneficiary" does NOT mean one is already taking disbursements, it just mean one is entitled to them one day. Exactly like a beneficiary in an insurance policy, one is a beneficiary even if one has not yet become entitled to a payout. In short; if one owns an RRSP or an RRIF, one is a "beneficiary".

It doesn't matter whether it is in an RRSP or an RRIF, all gains on any RRSP ot RRIF account, ever since the moment I became a US resident in 1991, are taxable the minute I deregister the account. If I do this I have to go back and figure for all the years, and declare the income on the basis of:
- Interest
- Capital gain
- Dividends paid
That's why I like GIC's; it would be impossible to backtrack mutual funds. I still would have to pay capital gains tax on my GIC's, the value the accounts have increased since 1991 due to exchange rate is a capital gain in the USA because I report in US dollars.

The amount that I had in the plans before I moved to the States is not taxable even though it is in pre-tax Canadian dollars: only the gain since moving to the United States is taxable in the United Sates.

This is not the end of it. The US federal Government (the IRS) allows one to defer taxation by filing form #8891. Almost all states go along with this filing of form #8891, and therefore allow deferment of the state tax as well. EXCEPT CALIFORNIA. Anyone living in California who owns a Canadian RRSP or an RRIF has to calculate the the internal income and declare it on his California State taxes and pay the tax every year. If he doesn't he is commiting a crime.

Now if I just take quarterly income from the RRSP or RRIF, whether in the form of an annuity or a regular disbursement, then I could declare all that disbursement as income in the USA and pay tax on it all every year, and defer taxation on the balance left in the accounts. See form #8891. I have not yet found out how to take disbursements and do this so I do not pay US tax on the amounts I had in the account when I came to the USA. This may all be academic, because my tax rate in the USA will be about 15% federaL, and 6% State, so the tax rate is lower than in Canada. However Canada will withhold something like 15% or 20% or 25% (I'm not sure, please tell me) and the US will give me a tax credit up to what I would have paid in the USA on this income. So if Canada withholds 20%, there is no point in my turning the world upside down to show that I do not need to pay that much in the US, I might as well declare it all here and take the tax credit which will still be under the amount Canada has already withheld.

This is a nightmare.

from Canadian Broker to US client

----- Original Message -----
From: xxxxxxxxxxx  
To:   xxxxxxxxxxxxxxxxxxxxxx
Sent: Monday, February 05, 2007 3:24 PM
Subject: U S TAX

david ingram replies;
You are not the only person frustrated by the system but there are a couple of solutions that I know of.
And make s real note to yourself that from 2000 to 2005, you likely did 3 or 4 times better by leaving them in Canada.  Just think of the flat market in US securities and the high market for Candian securities for those five years and then add in a 35% positive exchange rate for Canada to US and thank youir lucky stars that you did not move them in the summer of 2000 or 2001.  Remember, that for that period, most Canadian Financial advisors were telling theuir Canadian Client to get foreign content and putting them into US Dollar accounts and US securities.
There are two people I know of who are specializing in your situation.  They are:
Dan Walkow of Seabank Securities who is running a seminar on this topic at 7 PM in San Diego today (see www.seabankcapital.com) and one in Casa Grande Arizona on Feb 12,.  Therefore, today, he is not available at his office in Surrey, BC but I am sure that they would take a message or put you through to him.

How to Contact Us

Seabank Capital Management Inc. 

Suite 301 - 1959 152nd Street

White Rock, British Columbia, CANADA V4A 9E3

 Toll-Free 1-866-541-9952 (United States & Canada)

Telephone: 604-541-9952                                                      

Fax: 604-542-5642                    

General inquires: [email protected]

Dan Walkow, Managing Director: [email protected] 

AJ Sull, Portfolio Manager: [email protected]                                                                

Paul Bains, Associate Portfolio Manager: [email protected]                                      

Johanna Van Poele, Manager of Business Development: [email protected] Anthony Darcovich, Executive Assistant: [email protected]

Johann Van Poele is with him in the USA at the moment but she likes old North American iron and if you sent her pictures of your cars, I know you would get supberb service.

SeaBank is a boutique operation that can look after any Canadian or American Investor no matter what they own or where it is located or where they are located if it is a security.  They do not deal with Real Estate.  You can see more at their website at www.seabankcapital.com.  The nice part is that everyone involved is involved int he US Canada Cross Border operations.


The second and closer to you is Darrell Thompson of Blackmont Securities in Toronto. Blackmont is the old Yorkton Securities and I can still remember the Yorkton Director telling me that he had spent some $5,000,000 getting his firm registered to be able to look after your kind of business.  Unfortunately, very few of the brokers participated in the cross-border business. 

Darrell Thompson is one that did and you can get hold of him in Toronto at 866 775-7704 - If that number does not work in your area, try (416) 874-8007


I had great hopes for TD Waterhouse.  TD Waterhouse started down that lane and even had a dozen of their brokers like Shaun Rickerby (another lover of old cars) who were getting going and then TD stopped the process.  And, if you were living in any other country but the US, I would recommend Shaun as well.(604) 482-5188 because he understands the non-resident rules, etc.

Both Dan and Darrell CAN deal with any movement in your RRSP or RRIF.  You are not limited to GICs because of the cross border rules because these two brokers have made it a point to be registered in the US States and Canadian Provinces that they need to be registered in to deal with you.

However, if I were you, I would leave the money in Canada and withdraw from a good securities (maybe a mutual fund) account in a systematic withdrawal as a RRIF.  The Canadian withholding tax will be 15% and you will not need to file a Canadian return.

You will have to calculate the earnings portion of this blended payment to report as taxable income on your US return and you get to claim the 15% tax paid to Canda as a foreign tax credit on US form 1116.

And, If you move to Texas or Washington or Nevada or Florida or Alaska, you can avoid a state tax return.

If you were totally frustrated, you could just withdraw the whole shebang and pay Canada 25% of the gross as tax f a one time payment to Canada.  You would then add all the increase in value since you moved to the US to your US return and claim a pro-rata amount of the 25% tax. 

Hope this helps - now I have to figure out how to make it into a mass mailing.

There is another group in Calgary that I could rcommend if you do not want to manage the account.  Guardian will manage a US residents account but - officially - they decide what goes into the mix.


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 10 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 [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 and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consuDavid Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Saudi Arabia to Mexico to China or Chile - Cross border, dual citizen - out of country investments are all handled with competence & authority.

David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Saudi Arabia to Mexico to China or Chile - Cross border, dual citizen - out of country investments are all handled with competence & authority.


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