PLR 1222021: IRS grants more time to defer tax on Canadian retirement savings

Plain-English summary

The IRS granted a U.S. resident 60 days to make an election under Rev. Proc. 2002-23 for deferral of U.S. federal income tax on income accruing in a Canadian Registered Retirement Savings Plan. The taxpayer had not known about the election and had not received distributions from the plan. The taxpayer must make the election for the specified tax years, file amended U.S. returns with Form 8891, and attach Form 8891 to later returns through the year of final distribution. The ruling grants more time but does not decide whether the taxpayer is otherwise eligible to make the election.

Ruling snapshot

• Question: May the taxpayer make a late election to defer U.S. tax on income accruing in a Canadian RRSP?
• 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: 201222021 Third Party Communication: None
Release Date: 6/1/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.22-00, 9114.03-06 ----------------------, ID No. -----------------
Telephone Number:
---------------------
-------------------------- Refer Reply To:
-------------------------- CC:INTL:B01
-------------------------- PLR-138229-11
Date:
February 28, 2012

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

Legend

Taxpayer = --------------------------
-------------------------

RRSP = ------------------------
-------------------------------------

Attorney = ---------------------------------------

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

Year 1 = -------

Year 2 = -------

Date 1 = -----------------------

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

This is in reply to your letter dated September 12, 2011, as amended by supplemental
information dated February 5, 2012, requesting an extension of time under Treas. Reg.
§ 301.9100-3 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 you and accompanied by a penalty of perjury statement executed by you.
While this office has not verified any of the material submitted in support of the

PLR-138229-11 2

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. resident in Year 1. Prior to becoming a U.S. resident,
Taxpayer established a Canadian Registered Retirement Savings Plans (RRSP). Since
becoming a U.S. resident, Taxpayer has been preparing his own tax returns. He was
not aware of the need to make an election to defer U.S. taxation on income accruing in
his RRSP pursuant to Article XVIII(7) of the United States-Canada Income Tax
Convention (the “Treaty”).

In Year 2, Taxpayer became aware of the need to make an election after reading
various articles related to the Internal Revenue Service’s Offshore Voluntary Disclosure
Initiative. After Taxpayer realized the need to make an election, he consulted Attorney,
who advised Taxpayer that he should make an election pursuant to the provisions of
Rev. Proc. 2002-23.

As of Date 1,Taxpayer represents that he has not received any distributions from his
RRSP. Taxpayer also represents that the Internal Revenue Service has not
communicated with him in any way regarding his RRSP.

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
RRSP, as provided for in Article XVIII(7) of the Treaty for Tax Years.

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.

PLR-138229-11 3

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
elections 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 Form 8891 (U.S. Information
Return for Beneficiaries of Certain Canadian Registered Retirement Plans) for RRSP.
For each subsequent tax year through the tax year in which a final distribution is made
from RRSP, Taxpayer must attach a Form 8891 for RRSP 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 taxpayer who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

                                  Sincerely,


                                  M. Grace Fleeman
                                  Senior Technical Reviewer
                                  Office of Chief Counsel (International)

Enclosure:
Copy for 6110 purposes

cc: