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A Canadian Citizen with money in US 401k

A Canadian Citizen with money in US 401k

Old Jul 7th 2003, 12:26 am
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Default Re: A Canadian Citizen with money in US 401k

[email protected] (Vladimir Menkov) wrote in message news:...
    > In article ,
    > Nick B. wrote:
    > >You can leave it in the United States without any problem. As a US citizen
    > >you'd be wise to continue investing in a Roth IRA as well after your arrival
    > >in Canada as the IRS, for ludicrous technical reasons, does not recoginize
    > >tax deferral in an RRSP.
    > (1) Not quite; the US-Canada tax treaty provides for the IRS
    > recognizing the income deferral in a RRSP, as long as the RRSP was
    > created from contributions made *while a resident of Canada*; which
    > means, that, strictly speaking, a RRSP funded by a rollover from an
    > IRA will not be recognized by the IRS.
    > (2) By the same treaty, CCRA will recognize deferral in a *regular*
    > IRA account, but not in a 401(k) or a Roth IRA; so the migrating
    > taxpayer may find it desirable to roll over the funds from his 401(k)
    > plan to an IRA; it is better to do it while still a resident of the
    > USA.

401(k)'s do indeed meet the requirements of the treaty and are
protected (but not Roths).

It is advisable toroll a 401(k) over to an IRA after leaving a
company, but this is more due to the greater freedom one has in an
IRA, not due to different treatment in Canad (there is no different

    > (3) Domestic Canadian law allows for a tax-free rollover from an IRA
    > to an RRSP. However, if the taxpayer remains a US citizen, this may
    > not be a suitable course of action due to (1). Moreover, holding a
    > stateside IRA allows one to own US mutual funds in a tax-efficient
    > way, not available to him otherwise.

The reason that a transfer from a 401(k)/IRA to an RRSP is NOT
advised, is that , regardless if the taxpayer continues to be a US
citizen or not) the withdrawal would be completely taxable in US PLUS
penalized for early withdrawal.

Best to leave an IRA where it is, making sure however, before leaving
US, that the IRA managers will allow trading by non-residents (many do

    > See any good Canadian tax guide for details; there are such books in any
    > Canadian library.
    > --vld.
Old Jan 30th 2005, 1:43 am
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Default Re: A Canadian Citizen with money in US 401k

Well it is not going to continue tax free in Canada forever! So you've got to make a few decisions unless you want to be double taxed.
They can technically be transferred to an RRSP. (The reverse is not true)

You can find IRS and CCRA opinions and references at www.garygauvin.com/resources.htm
GaryGauvin is offline  

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