Restrictions on moving money in an RRSP for US resident

I am a Canadian Citizen but resident in the US since 2003. I understand that I cannot move existing investments to a new Fund unless the dealer is a registered dealer in the US. I have my investments with CIBC Investors Edge.

What are the restrictions in moving my funds around and is it worthwhile just to remove it and invest it in the US? I understand that the US will tax any gains in addition to the Canadian witholding tax.

Any information or links will be useful.

Here is some information I found on the web:

New Broker /SEC rules can prevent a U.S. resident from trading a Canadian R.R. S. P. With the exception of Canadian self-directed tax advantaged retirement plans and temporary residents, Canadian salespersons are prohibited under the Securities Exchange Act of 1934 from dealing with clients in the U.S. unless they are registered with a dealer registered in the U.S.

SEC rules prevent US residents from trading Canadian stock portfolios and Canadian residents from trading US stock portfolios. Since this rule also applies to RRSP accounts, care should be taken to ensure that your RRSP account will not require constant broker initiated transactions if you will be in the USA. Possible alternatives include the appointment of a resident Canadian trustee, or converting the RRSP to debt instrument investments.

Thank you.

When I cashed out my RRSP I was taxed a flat rate of 25% by Canada, and then at tax time in the US, that income was taxed. Then I just put whatever was left in a locked in CD, but you can pretty much do whatever you want with it. Spend it, buy stocks, stuff it in your mattress.

Thank you Reba for the quick response.

What part of the RRSP will be considered as "income" by the IRS? Is it the gains in the taxation year (year I make the withdrawal) or is it the gains for each year I was a US resident until the year of withdrawal? In any case what exchange rate is to be used?

If you have been living in the US for a few years, you should have already been claiming the interest as income on your annual taxes. I cashed mine just a few months after I moved here, so I have no idea how you'll be taxed if you've been here a few years already.

You may want to speak with a tax accountant knowledgeable about the US Canada tax treaty.

if u have been a resident of the USA, you should have been filling out FORM 8891 (google it) to report ur RRSP's to IRS. IRS wont tax you on anyhting (until you withdraw them) but regarding State taxes, it varies from state to state.

The new tax treaty treats RRSPs as IRAs, so I suspect a tax treaty claim can be used to get around that SEC rule.

You'd need to talk to the IRS really as there is no guidance on the new treaty as yet.

Hi Dennis,

Your accounts will be frozen at the Big 5 Canadian bank brokerages because of the regulatory rules you have referenced. However, you can trade or receive advice if your advisor is registered with the appropriate authorities (i.e. British Columbia Securities Commission, Ontario Securities Commission, U.S. Securities & Exchange Commission). It depends on where you reside and in which province your Canadian accounts are maintained. I can send you specific information if you like.

Cheers,

Paul

Hi Dennis,

Your accounts will be frozen at the Big 5 Canadian bank brokerages because of the regulatory rules you have referenced. However, you can trade or receive advice if your advisor is registered with the appropriate authorities (i.e. British Columbia Securities Commission, Ontario Securities Commission, U.S. Securities & Exchange Commission). It depends on where you reside and in which province your Canadian accounts are maintained. I can send you specific information if you like.

Cheers,

Paul

Paul: I have a similar problem to Dennis (except I haven't been in the US for years, just months). My RRSP accounts are maintained in Ontario. Can you send me some specific info? thanks.

If you've only just moved your tax home to the US, basically what it boils down to is that you can keep your RRSP in Canada, but you have to declare it on Form 8891 and you can't contribute to it anymore. But there's no tax on it, it's treated like an IRA.

If you're filing as a non-resident then you're still resident in Canada for tax purposes so it makes no difference to your RRSP.

Bear in mind because these new rules came in last year hardly anyone is aware of them.

Hi Dennis,

Your accounts will be frozen at the Big 5 Canadian bank brokerages because of the regulatory rules you have referenced. However, you can trade or receive advice if your advisor is registered with the appropriate authorities (i.e. British Columbia Securities Commission, Ontario Securities Commission, U.S. Securities & Exchange Commission). It depends on where you reside and in which province your Canadian accounts are maintained. I can send you specific information if you like.

Cheers,

Paul

Hi Paul,

Any information you could provide would be greatly appreciated. Thanks!

Vali