Subject: Form 8891 - Need reading US smoke/mirrors
Of course as many have probably found out that the IRS form 8891 as clear as
mud. Definitions, the IRS phone agent told me in the box: "beneficiary"
and "annuitant."; that I should be checking annuitant. However, if I check
that box according to the instructions I would miss the critical line 6
step. So which is the correct one to check? Then you just enter plan
balance? Is that it.
Thanks
---------------------------------------
david ingram replies:
The proper box to check off if you bought it and it is yours is Beneficiary
and then answer all the questions.
For the Earnings, I do NOT break them into interest, dividends, etc because
it does not work cleanly because of exchange.
I use the both lines of explanation for line 10e and state the following:
"A combination of internal earnings, change in value and a 30% devaluation
of the
US dollar relative to Canadian currency has resulted in a profit/loss of
$xx,xxxx.00
However, the following came directly to me from the Dept of Treasury in an
informal note last September.
=================
....
Hi there: We are trying to make Form 8891 better. Do you agree with the
comments set forth below?
For reasons that are not entirely clear, Form 8891 provides different filing
instructions for the "annuitant" and "beneficiary," even though they are the
same person under the ITA. Form 8891 defines a beneficiary as someone who
would have to pay U.S. income tax on RRSP/RRIF investment earnings if he or
she had not made a treaty election. It defines an annuitant as the person
designated as the annuitant under an RRSP/RRIF trust. However, the ITA
defines an RRSP or RRIF annuitant as the person entitled to receive
retirement income from the trust, or, in the event of the account holder's
death, the surviving spouse or common-law partner - a definition that also
includes the trust's beneficiary.
The Form 8891 instructions indicate that an annuitant should not complete
the treaty election in section 6 of the form. As a result, a taxpayer who
follows the instructions for an annuitant will not provide sufficient
information to make the election. RRSP and RRIF owners should consider
following the instructions for a beneficiary to ensure that they claim a
treaty exemption from taxes on investment earnings, or should indicate that
they have previously made a treaty election.
Thanks!
Attorney
Office of Chief Counsel (International)
Internal Revenue Service
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