Question

Hi Mr. Hogan

I moved up to Canada from California last May. My current Canadian broker is suggesting that I transfer my IRA to a new RRSP. Based on his calculations I can only transfer 40% tax free. The remainder will need to be collapsed, taxes paid and transfer up to Canada. He suggests slowly contributing to the RRSP as I gain new RRSP deduction room.

I’m hesitant to pay US tax on the collapse of the IRA even though my broker says I’ll make it up on the exchange to Canadian dollar.

Thanks for you time.

XXXXXX

Answer

Hi XXXXX

Transferring your IRA to an RRSP is certainly an option and it can be advantageous to many clients. However, many Canadian advisors will simply advise to move the IRA assets up to Canada because the manager is not able to manage US assets. Transferring some portion of the IRA to your RRSP may certainly be an option, however I would not be as comfortable collapsing the IRA, paying tax and recontributing to the capital to an RRSP (even though you may have RRSP room). This could result in a lot of unnecessary taxes being paid in that particular year.

Transferring assets up from the US requires an overall cross border tax and investment approach that takes in all alternatives, advantages and disadvantages.

Please don’t hesitate to give me a call at 250-381-2400 and we can chat further about your situation.

Regards

Phil