My_question_is: Applicable to both US and Canada
Subject: Borrowing against RRSP for downpayment on Cdn property if I
already own a US property
Expert: taxman at centa.com
Date: Tuesday January 23, 2007
Time: 11:40 AM -0500
QUESTION:
I am a Canadian citizen (who also has US citizenship). I live with my
US-citizen husband in the US. I am listed as the owner of our US residence.
We are looking into buying a vacation place in B.C. (primary residence will
still be in the US). I have an RRSP in Canada. Can I borrow against my
RRSP for part of the downpayment without getting hit with the early
withdrawal charges? If I can, am I limited to $20,000 withdrawal?
----------------------------------------
david ingram replies:
Congratulations!
I do not remember anyone ever asking me this question before.
The answer is NO! A Non-resident of Canada can NOT have a Home Buyers Loan
loan from their RRSP.
In addition, you could not do an HBP if you already own a home.
However, you can withdraw any money and only pay 25% tax to Canada and use
the tax paid to Canada
as a credit against any US tax you will owe on the earnings.
Remember that the existence of your RRSP must be reported to the Department
of the Treasury on Form TDF 90-22.1 and its internal earnings on an annual
basis on form 8891.
Penalties for failure to report the Canadian RRSP which is a foreign account
AND a foreign trust (see bottom two questions on Schedule B of 1040) are up
to $500,000 PLUS 5 years in jail AND 35% of the amount of money in the RRSP
plus 5% for every year you did not report it.
The good news is that they - the IRS and the Department of Treasury are
accepting late filed and catch-up forms. No one that we have filed late for
has been penalized but I have seen $10,000 and $60,000 fines and my
understanding is that over 1,070 Americans that dealt with one Vancouver
Accountant/advisor by the name of Jerome Schneider are being fined for not
filing their TDF 90 forms on his advice. Schneider also received a $100,000
fine and an 18 month jail sentence for his participation. See more about
this at:
http://www.usworkvisas.biz/CEN-TAPEDE/archive/Week-of-Mon-20050207/001614.ht
ml
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