PLR 201019013: IRS grants extra time to elect U.S. tax deferral for a Canadian retirement plan

Plain-English summary

The IRS granted a U.S. citizen an extension of time to elect the provisions of Rev. Proc. 2002-23 for a Canadian Registered Retirement Savings Plan. The election, made on Form 8891 under the U.S.-Canada income tax treaty, would defer U.S. tax on income accrued in the plan. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government, so the taxpayer had 60 days from the ruling letter to make the election. The ruling did not determine that the taxpayer was otherwise eligible for the election and required Form 8891 for 2004 and later tax years until final distribution.

Ruling snapshot

• Question: Could the taxpayer receive more time to make the Form 8891 election for a Canadian RRSP?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; Article XVIII of the U.S.-Canada income tax treaty; IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201019013
Third Party Communication: None
Release Date: 5/14/2010
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-142463-09
Date:
January 26, 2010

Legend

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

Year 1 = --------

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

This is in reply to a letter dated September 16, 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 A 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 U.S. citizen who established a Canadian Registered Retirement Savings Plan (RRSP) in Year 1. A was not aware, nor was she advised by her previous tax advisor, that she had to make an election, pursuant to paragraph 7 of Article XVIII of the U.S.- Canada income tax treaty, on Form 8891 to defer U.S. tax on income accrued in her RRSP, until her current tax preparer recently discovered the failure to file Form 8891.

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

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. A must file Form 8891 for 2004 and all subsequent tax years until 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.

A copy of this ruling letter should be associated with A’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: