A Canadian citizen who was a U.S. long term resident under the U.S. expatriation rules was deemed for Code purposes to receive a taxable distribution of his entire interest in his IRA (the “Deemed Distribution”) immediately before his relinquishing of his green card and returning to Canada. When he then made an actual withdrawal of those amounts (the “Withdrawal”) in order to contribute them to his RRSP, they were not subject to further U.S. income tax.
CRA first noted that 2017-0682301E5 essentially indicated that that s. 56(12) deemed the Deemed Distribution to be includible in the taxpayer’s income under s. 56(1)(a)(i)(C.1) and that the Withdrawal would not be so includible if it did not exceed the Deemed Distribution (because it would not be “subject to income taxation” in the U.S. respecting s. 56(1)(a)(i)(C.1).
CRA concluded that the RRSP contribution did not generate a s. 60(j) deduction. The Withdrawal did not qualify as an “eligible amount” for s. 60.01 purposes because it was the amount of the Deemed Distribution (not the Withdrawal) that was included in the Taxpayer’s income under s. 56(12) and s. 56(1)(a)(i)(C.1). Conversely, the amount of the Deemed Distribution also was not an “eligible amount” as it is not a “payment received” for the purpose of s. 60.01.