PLR 201126013: Married taxpayers received more time to make Canadian RRSP elections

Plain-English summary

Two taxpayers who had moved from Canada to the United States asked for more time to elect under Rev. Proc. 2002-23 to defer U.S. tax on income accrued in their Canadian Registered Retirement Savings Plans. They had not made the elections when they became U.S. residents because their preparer did not handle their returns at that time. The IRS found that they met the standards for relief under Treas. Reg. § 301.9100-3 and granted 60 days from the ruling date to make the elections. The ruling also required Forms 8891 for each affected plan and later tax years until final distributions. It did not determine whether the taxpayers were otherwise eligible to make the elections.

Ruling snapshot

• Question: Could the taxpayers receive more time to elect U.S. tax deferral for income accrued in their Canadian RRSPs?
• Outcome: Approved, with a 60-day extension and continuing Form 8891 filing requirements.
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; U.S.-Canada Income Tax Convention, Article XVIII(7).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201126013
Third Party Communication: None
Release Date: 7/1/2011
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.22-00, 9114.03-06
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Telephone Number:
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----------------------------------------- Refer Reply To:
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CC:INTL
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PLR-140818-10
Date:
March 23, 2011

TY:--------------

Legend

A = --------------------
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B = --------------------
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Company 1 = ----------------------------------------
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Company 2 = -------------------------------

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

Year 1 = -------

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

This is in reply to a letter dated September 27, 2010, requesting an extension of time under Treas. Reg. § 301.9100-3 for A and B to elect the provisions of Rev. Proc. 2002- 23, 2002-1 C.B. 744, for Tax Years.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted
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in support of the requested rulings, it is subject to verification on examination. The information submitted for consideration is substantially as set forth below.

FACTS

A and B have been lawful permanent residents of the United States since Year 1. Prior to becoming residents of the United States, A and B were residents of Canada. Prior to Year 1, A established one Canadian Registered Retirement Savings Plan (RSSP) with Company 1 and B established two RRSPs with Company 1.

Company 2 prepares the joint income tax returns for A and B. However, Company 2 did not prepare their returns at the time A and B became U.S. residents. While researching A’s and B’s U.S. tax obligations regarding their Canadian investments, Company 2 discovered that A and B had failed to make elections under Rev. Proc. 2002-23 to defer U.S. taxation on income accrued in their RRSPs based on Article XVIII(7) of the United States – Canada Income Tax Convention (Convention). Company 2 then advised A and B of the need to make the elections and suggested that they request an extension of time to make elections pursuant to Rev. Pro. 2002-23.

As of the date of this ruling request, the Internal Revenue Service has not communicated with A or B in any way regarding their RRSPs.

RULING REQUESTED

A and B request the consent of the Commissioner of the Internal Revenue Service for an extension of time under Treas. Reg. § 301.9100-3 to make an election for Tax Years pursuant to Rev. Proc. 2002-23 to defer U.S. federal income taxation on income accrued in their RRSPs.

LAW AND ANALYSIS

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.
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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 and B an extension of time, provided that A and B satisfy the standards set forth in Treas. Reg. § 301.9100-3(a).

Based solely on the information submitted and representations made, we conclude that A and B satisfy the standards of Treas. Reg. § 301.9100-3. Accordingly, A and B are granted an extension of time until 60 days from the date of this ruling letter to elect the provisions Rev. Proc. 2002-23 for Tax Years. As provided in Treas. Reg. § 301.9100- 1(a), the granting of an extension of time is not a determination that A and B are otherwise eligible to make the above-described election.

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 Tax Years, and all subsequent tax years until the tax year in which a final distribution is made from each RRSP, A and B must file Form 8891 for each RRSP for which the election is made and from which a final distribution has not been made. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

A copy of this letter must be attached to A’s and B's U.S. income tax return for the year in which A and B obtained the ruling and should be associated with A’s and B’s amended returns for Tax Years.

This letter ruling is directed only to the taxpayers who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.
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Pursuant to a power of attorney on file with this office, a copy of this letter will be sent to your authorized representatives.

Sincerely-,

___
M. Grace Fleeman
Senior Technical Reviewer, Branch 1
Office of Associate Chief Counsel
(International)

Enclosure:
Copy for 6110 purposes

cc: