RRSP cost basis for US taxation -


I have a RRSP to which both my late husband (Canadian) and I (American) contributed while living in Canada.  He died in 1995 and I inherited his RRSP. I moved back to
the USA in 1996. I withdrew about 30% ($200,000) of the RRSP in 2007.  My accountant initially thought the cost basis in the RRSP would be the amount of our
 contributions to the plan, but now she says that she can only include my contributions, and not my husband's (since I filed US tax returns during those years, but my Canadian
 husband did not).  Is this correct, or are there legitimate alternative ways to calculate cost basis?  I also had thought that perhaps a "step up" in cost basis for my husband's
 RRSP as of the date of his death might be possible, since he was not a US citizen and therefore his RRSP would not have been subject to US tax if I had not inherited it.  This
 is an important issue for me as there is still a significant amount of money in the RRSP and I am considering withdrawals, but need to know how it will be taxed first.

Thanks! If you can be of help to me I would surely appreciate it.
david ingram replies:

I am amazed.  In the 45 years that I have been in this business, this is the first time, this situation has come up and I  have likely been involved in several hundred deaths in several situations similar to yours.

Only including your contributions makes no sense to me whatsoever.   If a  form 8891 had been  properly completed completed each year  (It did not exist until 4 years ago), both his contributions AND yours would have been included.  If you had followed the rules in REV-PROC 89-45, both contributions would have been included. 

Unless your accountant has a specific ruling or court case to the contrary, I believe that both contributions should be included when calculating the cost base. 

This question was originally rejected by the system but i happened to look at it while watching Larry King's coverage of Alaska Governor's Sarah Palin's being added to the McCain ticket.

There was no onus on your husband to report the payments to a spousal RRSP.  The account was yours once he made the contribution and since he was giving you less than $100,000 per year, there was NO REASON FOR YOU TO FILL IN FORM 3520 on an annual basis.

The net effect of the spousal RRSP was that he gave you $2,000, 5,000 or some other figure which was deposited to your account each year and would have shown up as a deposit "IF" form 8891 had existed at the time.

In my opinion, all deposits made add to the adjusted cost base for US tax purposes.  However, I could be wrong and am answering this at 1:45 AM from memory without looking anything up. To make up for that, I am sending this out to the list of about 13,000 people.  Maybe, perhaps, someone else will have a different opinion because of their own experience or education. 
Now, as i said that,  you received this because i was up dealing with a private email from the former head of a Canadian political party.  This is what i was writing about the picking of Sarah Palin as the V-P candidate.

This is the essence of the exchange between us with a couple of spelling errors corrected and the names of some individuals left out.

Why Obama did not pick Hilary is beyond me.  However, it is also possible that he did and she said "no" right at the start.
If and when he loses, she has it (the democratic nomination) next time for sure and could then be president four years earlier than being vice-president for eight years.
Besides, being Hilary and the Senator from New York is likely better than being vice-president to Obama.  Few Vice-presidents have any real position out there,  Mostly, it is a ceremonial position 'until'.
Sarah Palin is a friend of my old friends, XXXX and XXXXXX XXXX in Wasila, where she was the mayor.
They were active in the oil drilling movement on opposite sides but still friends.
She and her husband are also friends with XXXXX and XXX XXXXXXX, who I visited with in 2000.
Sarah's husband's being the Alaska Snow mobile racing champion AND a union member is another big plus for the election.  They Palins are more 'common folk' than the democratic ticket.  Democrats with a right leaning bent, will love her.

That is an excellent assessment David. I agree with everything you say, except the part about Hillary eventually winning the presidency. She is done now. I believe the Palin pick has tremendous depth and long term consequences for the US, but also the Dems. When McCain finishes his term (and it will only be 1 term), Palin will become the first female president of the US. Americans will never elect a leftist black or leftist woman as president, but they will (and want to) elect a woman or black as president, so long as they love America, and don't believe it must be completely changed, as Clinton and Obama do.
The Democrats will be so demoralized by the loss of Obama, they will implode. They are closer to the NDP now than they are 'liberal', and they are a spent force politically. If they ever nominate a Jack Kennedy type - pro-life, pro traditional marriage, they might have a chance with middle America. But if they remain the party of Michael Moore and Nancy Pelosi, they will only elect people in California and New York.
I should have known you would know someone close to Palin. I told someone once that the 6 degrees of separation for most people is reduced to 2 or 3 degrees for David Ingram.  XXXX XXXXXXX

Well, I agree partly again.
However, I see a McCain win and one term as you suggest although Regan went two.
I see a Hilary <> Palin battle taking place in 2012 with Hilary winning, not Palin.
I think that Hilary stood a good chance against McCain if she was the presidential nominee because she would get the Democrats by default AND the left leaning republicans.
If zero is extreme left and 100 is extreme right, I put Obama at 30, Hilary at 45, McCain at 60 and Palin about 60 as well.
The pro-lifers will love Palin because of their decision to go through with the birth of a Downs Syndrome child.
However, the US still needs universal health care.  They will not get it with McCain and Palin.
Four years from now, if Hilary is still in the picture and wants to run, she has a better chance than you think.
In this election, Hilary is to Obama what McCain was to George Bush last time.
Forget about the SUB-PRIME Loan bust in the US.
75% of bankruptcies are caused by medical bills.
and of those, 75% "had" medical insurance which capped out too low.
I will send you something I got from Michael Moore today.

The good part i guess is that I have to live four and a half more years now to see what happens.

Tomorrow, I am putting in my old age pension application.  Can you believe it?  I hit 66 on Sept 3.  Sheesh!  could have put it in a year ago, but I can also get one year retroactive so if i do no want to lose a month, it goes in this weekend.




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