PLR 201219004: IRS grants more time for a Canadian RRSP tax-deferral election

Plain-English summary

The IRS granted a taxpayer 60 days to elect to defer U.S. income taxation on income accrued in three Canadian Registered Retirement Savings Plans under Revenue Procedure 2002-23 and the U.S.-Canada Income Tax Convention. The taxpayer was a dual citizen of the United States and Canada, had not received distributions from the plans, and was unaware of the election procedures. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting the extension would not prejudice the government. The taxpayer must file amended U.S. income tax returns with Form 8891 for the covered years and continue attaching the form for each plan until its final distribution.

Ruling snapshot

• Question: May the taxpayer receive more time to make a treaty-based election to defer U.S. tax on income accrued in Canadian RRSPs?
• Outcome: approved
• 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: 201219004
Third Party Communication: None
Release Date: 5/11/2012
Date of Communication: Not Applicable
Index Number: 9100.00-00, 9114.03-06
Person To Contact:
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------------, ID No. -----------------
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Telephone Number:
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Refer Reply To:
CC:INTL:B01
PLR-133761-11
Date:
February 8, 2012

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

Legend

Taxpayer = ----------------------
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RRSP 1 = -------------------------------------
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RRSP 2 = -------------------------------------
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RRSP 3 = -------------------------------------
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Tax Years = ---------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

Company X = -------------------

Dear --------------:
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This is in reply to a letter dated August 1, 2011, requesting an extension of time under Treas. Reg. § 301.9100-3 for Taxpayer 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

Taxpayer became a U.S. citizen in Year 1. Taxpayer currently holds dual citizenship in the United States and Canada. Taxpayer owns three Canadian Registered Retirement Savings Plans (RRSPs), RRSP 1, RRSP 2, and RRSP 3 respectively. RRSP 1 was established in Year 2. RRSP 2 and RRSP 3 were established in Year 3. Taxpayer has not received any distributions from his RRSPs.

Taxpayer has a high school education and is currently employed by Company X. Taxpayer prepares his own U.S. income tax returns. Taxpayer was unaware of the procedures for making an election under Rev. Proc. 2002-23 to defer U.S. taxation on income accrued in the RRSPs based on Article XVIII(7) of the United States – Canada Income Tax Convention. Taxpayer became aware of the procedures for making the election when he researched RRSP accounts on the Internet. As a result, he sought advice from an accountant and submitted the instant ruling request.

As of the date of this ruling request, the Internal Revenue Service has not communicated with Taxpayer in any way regarding his RRSP accounts.

RULING REQUESTED

Taxpayer 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 his 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.
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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 Taxpayer an extension of time, provided that Taxpayer satisfies the standards set forth in Treas. Reg. § 301.9100-3(a).

Based solely on the information submitted and representations made, we conclude that Taxpayer satisfies the standards of Treas. Reg. § 301.9100-3. Accordingly, Taxpayer 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 Taxpayer is 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, Taxpayer must file amended U.S. income tax returns to which he attaches a Form 8891 (U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans) for each RRSP. For each subsequent tax year through the tax year in which a final distribution is made from each RRSP, Taxpayer must attach a Form 8891 for each RRSP from which a final distribution has not been made to his U.S. income tax return.

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 Taxpayer's U.S. income tax return for the year in which Taxpayer obtained the ruling and should be associated with Taxpayer’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