Basis – a blog about tax law

An RRSP FAQ

Inspired by discussions with coworkers, I created an RRSP FAQ (Google Docs link).

The FAQ began life as an internal document, but most of it had broader applicability, so I thought I would share it with the world. (The public version excises or anonymizes details that were specific to my employer’s benefits.)

Citizenship-Based Taxation

Of the many perversities in US tax law, perhaps the most fundamental and notorious is its imposition of tax on the worldwide income of nonresident US citizens. Let’s look briefly at what this means, what the consequences are for US citizens living and working in Canada, and what basis exists in law for citizenship tax.

Canadian Foreign Tax Credit

In this foundational post, I’ll cover the basics—and some not-so-basic subtleties—of the Canadian foreign tax credit (FTC). I’ll focus mainly on its application to individuals (not corporations) with “non-business” income such as from foreign employment, pensions, and investments.

They do care!

In my last post on effectively connected 401(k) payments, I complained that there was no clear user-facing documentation from the IRS on the split between contributions (ECI) and plan earnings (non-ECI).

Effectively Complicated Income

I ended my post on 60(j) rollovers with a cliffhanger, by hinting that the rate of US tax on a nonresident alien’s IRA or 401(k) distribution might depend on the extent to which the income is “effectively connected with the conduct of a trade or business within the United States”—a term of art from IRC § 871 that I quoted without the elaboration it deserves.

Update: IRS doesn’t like lump-sum after all?

In a previous post on the rollover of a US retirement plan to an RRSP, I argued that the IRS viewed “periodic” as non-restrictive in treaty pension provisions.

The 60(j) rollover: 15% or 40%?

[Edit Jan 2021: This post has a follow-up: Update: IRS doesn’t like lump-sum after all?]

In keeping with stereotypes, Canadian tax law is nice to US retirement plans, but the US does not reciprocate.

The advance refund is not an advance refund

Pandemic tax relief encompasses far more than deadline pushes; governments are also writing checks. The US, under the CARES Act^[1]Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (2020), is giving many of its citizens and residents a $1200 payment. The IRS calls this an “Economic Impact Payment” (EIP), but the codification in IRC § 6428 calls it an “advance refund amount”^[2]IRC § 6428(f).

 [+]

References
↑1	Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (2020)
↑2	IRC § 6428(f)

Deadlines, Extensions, and Pandemics

With COVID-19 wreaking havoc on people and business, the due dates for filing and paying personal income tax have been extended in both Canada and the US.

Source and residence

There are 195 countries^[1]www.worldometers.info/geography/how-many-countries-are-there-in-the-world/, and you probably pay most of them no income tax. Why?

 [+]

References
↑1	www.worldometers.info/geography/how-many-countries-are-there-in-the-world/