PLR 201017033: Taxpayer granted more time to elect Canadian RRSP tax deferral

Plain-English summary

The IRS granted a Canadian citizen who became a U.S. resident 60 days to elect treaty-based deferral of U.S. taxation on income accrued in two Canadian Registered Retirement Savings Plans. The taxpayer had not known about the election requirement and learned of it only when a current tax preparer reviewed earlier returns. The IRS found that the taxpayer met the standards for relief under the extension-of-time regulations and noted that the election, once made, could not be revoked without the Commissioner's consent. The taxpayer was required to file Form 8891 for 2004 and later tax years through the year of final distribution.

Ruling snapshot

• Question: Can a U.S. resident receive more time to elect treaty-based tax deferral for Canadian RRSPs?
• Outcome: approved
• Key authorities: U.S.-Canada Income Tax Treaty, Article XVIII(7); Rev. Proc. 2002-23; Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201017033
Third Party Communication: None
Release Date: 4/30/2010
Date of Communication: Not Applicable
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:INTL
PLR-142549-09
Date:
January 22, 2010

A = --------------------------------
------------------------------------------------------------------------------

Tax Years = ---------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

Dear ----------------:

This is in reply to a letter dated September 17, 2009, requesting an extension of time under Treas. Reg. § 301.9100-3 for A to elect the provisions of Rev. Proc. 2002-23, 2002-1 C.B. 744, for Tax Years. The information submitted for consideration is substantially as set forth below.

The ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. Verification of the factual information, representations, and other data may be required as a part of the audit process.

A is a Canadian citizen who established two Canadian Registered Retirement Savings Plans (RRSPs) prior to Year 1. A became a U.S. resident in Year 2. A was not aware, nor was she ever advised by her previous tax advisor, that she had to make an election, under paragraph 7 of Article XVIII of the U.S.-Canada Income Tax Treaty, to defer U.S.
PLR-142549-09
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taxation on income accrued in her RRSPs, until her current tax preparer began reviewing her past returns in Year 3.

A states that the Internal Revenue Service has not communicated with her in any way regarding her RRSPs.

Treas. Reg. § 301.9100-1(c) provides that the Commissioner has discretion to grant a taxpayer a reasonable extension of time, under the rules set forth in Treas. Reg. § 301.9100-3, to make a regulatory election under all subtitles of the Internal Revenue Code, except subtitles E, G, H, and I.

Treas. Reg. § 301.9100 -1(b) provides that an election includes an application for relief in respect of tax, and defines a regulatory election as an election whose due date is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or announcement.

Treas. Reg. § 301.9100-3(a) provides that requests for relief subject to this section will be granted when the taxpayer provides the evidence (including affidavits described in Treas. Reg. § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.

In the present situation, the election provided in Rev. Proc. 2002-23 is a regulatory election within the meaning of Treas. Reg. § 301.9100-1(b). Therefore, the Commissioner has discretionary authority under Treas. Reg. § 301.9100–1(c) to grant A an extension of time, provided that A satisfies the standards set forth in Treas. Reg. § 301.9100-3(a).

Based on the facts and circumstances of this case, we conclude that A satisfies the standards of Treas. Reg. § 301.9100-3. Accordingly, A is granted an extension of time until 60 days from the date of this ruling letter to elect the provisions of Rev. Proc. 2002- 23 for Tax Years.

Pursuant to section 4.07 of Rev. Proc. 2002-23, the election once made cannot be revoked except with the consent of the Commissioner. For each RRSP for which the election is made, A must file a Form 8891 for 2004 and all subsequent tax years until, and including, the tax year in which a final distribution is made from the RRSP

As provided in Treas. Reg. § 301.9100-1(a), the granting of an extension of time is not a determination that A is otherwise eligible to make the above-described election.

No ruling has been requested, and none is expressed, as to the application of any other section of the Code or regulations to the facts presented.
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A copy of this ruling letter should be associated with A’s and her husband’s amended tax returns for Tax Years.

This ruling is directed only to the taxpayer who has requested it. I.R.C. § 6110(k)(3) provides that it may not be used or cited as precedent.

Sincerely,

_________
M. Grace Fleeman
Senior Technical Reviewer
CC:INTL:Br1

Enclosure:
Copy for 6110 purposes