PLR 1131020: IRS granted more time to make elections for Canadian retirement plans

Plain-English summary

Two taxpayers who moved from Canada to the United States had Canadian Registered Retirement Savings Plans and had not made the election to defer U.S. taxation on accrued income. The IRS found that they acted reasonably and in good faith and that granting relief would not prejudice the government. It granted them 60 days from the ruling date to make the election under Revenue Procedure 2002-23. The ruling did not determine whether they were otherwise eligible, and it imposed continuing filing requirements for the affected plans.

Ruling snapshot

• Question: Whether the taxpayers could receive an extension of time to make the RRSP election under Treas. Reg. § 301.9100-3.
• Outcome: Approved.
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; U.S.-Canada Income Tax Convention, Article XVIII(7); Rev. Proc. 2002-23.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201131020 Third Party Communication: None
Release Date: 8/5/2011 Date of Communication: Not Applicable
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
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Refer Reply To:
CC:INTL
PLR-143878-10
Date: April 21, 2011

TY:

Legend

A = ----------------
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B = -------------------------
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Company 1 = ------------------------------
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Company 2 = ------------------------
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Tax Years = ---------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

Dear ------------------------:
PLR-143878-10 2

This is in reply to a letter dated October 14, 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
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 became residents of the United States in Year 1. Prior to Year 1, A and B were
residents of Canada. While a resident of Canada, A established three Canadian
Registered Retirement Savings Plans (RRSPs), one with Company 1 and two with
Company 2. While a resident of Canada, B established two RRSPs, one with Company
1 and one with Company 2.

At all times during A’s and B’s ownership of their RRSPs, they were unaware of the
need to make an election pursuant to Article XVIII(7) of the United States – Canada
Income Tax Convention to defer U.S. taxation on income accrued in their RRSPs. In
Year 3, A and B engaged a tax expert who discovered the failure to make the election
A and B state that the Internal Revenue Service has not communicated with them 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
under 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.
PLR-143878-10 3

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 satisfies 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 make an
election for Tax Years under Rev. Proc. 2002-23. 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 Year 2, and each
subsequent tax year 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.
PLR-143878-10 4

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.

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
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