PLR 1138004: IRS grants extra time to elect U.S. tax deferral for a Canadian RRSP

Plain-English summary

A former Canadian resident who became a U.S. resident owned a Canadian Registered Retirement Savings Plan and had not made the election to defer U.S. tax on income accrued in the plan. The taxpayer asked for more time under Treas. Reg. § 301.9100-3 to make the election under Rev. Proc. 2002-23 and Article XVIII(7) of the U.S.-Canada income tax treaty. The IRS found that the taxpayer satisfied the standards for relief and granted 60 days from the ruling date to make the election. The extension did not determine whether the taxpayer was otherwise eligible.

Ruling snapshot

• Question: Whether a taxpayer could make a late election to defer U.S. tax on income accrued in a Canadian RRSP.
• 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; Article XVIII(7) of the U.S.-Canada income tax treaty.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201138004 Third Party Communication: None
Release Date: 9/23/2011 Date of Communication: Not Applicable
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
---------------------------- ---------------, ID No. -----------------
------------------------- Telephone Number:
------------------------------------ ---------------------
Refer Reply To:
CC:INTL
PLR-105678-11
Date:
June 22, 2011

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

Legend

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

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

Year 1 = -------

Year 2 = -------

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

This is in reply to a letter dated January 27, 2011, 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 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 is a former Canadian resident who became a U.S. resident in Year 1. Prior to Year 1,
A was a resident of Canada. A is the beneficiary of a Canadian Registered Retirement
Savings Plan (RRSP), which was opened before he became a U.S. resident. Since
becoming a U.S. resident in Year 1, A has not received a distribution from the RRSP.
PLR-105678-11 2

A believed he would not be subject to U.S. income taxation on amounts in the RRSP
until he received a distribution from it. A was also unaware of the procedures for
making an election under Rev. Proc. 2002-23 to defer U.S. taxation on income accrued
in the RRSP based on Article XVIII(7) of the United States – Canada Income Tax
Convention.

RULING REQUESTED

A requests 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 pursuant to Rev.
Proc. 2002-23 to defer U.S. federal income taxation on income accrued in the RRSP.

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.

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 solely on the information submitted and representations made, 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 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 is otherwise eligible to
make the above-described election.
PLR-105678-11 3

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 the
RRSP, A must file Form 8891 for the RRSP 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 U.S. income tax return for the year in which
A obtained the ruling and should be associated with A’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.

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: