PLR 1225002: IRS grants more time for a Canadian RRSP election

Plain-English summary

A U.S. resident asked for more time to make an election under Rev. Proc. 2002-23 for a Canadian registered retirement savings plan. The taxpayer had established the plan before becoming a U.S. resident and was unaware that the election was needed to defer U.S. tax on income accrued in the plan. The IRS concluded that the taxpayer satisfied the reasonable-cause and no-government-prejudice standards under Treas. Reg. § 301.9100-3. It granted an extension until 60 days after the ruling letter to make the election, while noting that the extension did not determine the taxpayer's underlying eligibility.

Ruling snapshot

• Question: Could the taxpayer receive additional time to make the Canadian RRSP election?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201225002 Third Party Communication: None
Release Date: 6/22/2012 Date of Communication: Not Applicable
Index Number: 9100.22-00
Person To Contact:
--------------------- ---------------------, ID No. ---------------------
-------------------------- ---------------------------------------------------
----------------------------- Telephone Number:
---------------------
Refer Reply To:
CC:INTL:BR1
PLR-103321-12
Date: March 26, 2012

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

Legend

Taxpayer = --------------------------------------------------------------------------------------
-----------------------
RRSP = -------------------------------------
Financial = ------------------------
Institution
Current Value = -------------------
Tax Years = -----------------
Year 1 = -------
Year 2 = -------
Year 3 = -------
Month A = ------------------

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

This is in reply to a letter dated December 20, 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. 7444, for Tax Years.

The rulings contained in this letter are 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 request for rulings, it is subject to verification on examination.

FACTS
PLR-103321-12 2

In Year 1, Taxpayer established a Canadian Registered Retirement Savings Plan
(“RRSP”) prior to becoming a U.S. resident. Taxpayer became a U.S. resident in Year

2. Taxpayer has not contributed any money to the RRSP since Year 3 and has not
   withdrawn any money from the RRSP since becoming a U.S. resident. The trustee of
   RRSP is Financial Institution and the market value of RRSP as of the date of the ruling
   request is Current Value.

Taxpayer was not aware of the need to make an election pursuant to paragraph 7 of
Article XVIII of the United States – Canada Income Tax Treaty on Form 8891 in order to
defer U.S. tax on income accrued in the RRSP. In Month A, Taxpayer read a news
article that dealt with IRS rules about Canadian RRSP accounts, did further research on
the rules, and sought professional advice.

RULING REQUESTED

Whether Taxpayer may receive 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.

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
Taxpayer an extension of time, provided that Taxpayer satisfies the standards set forth
in Treas. Reg. § 301.9100-3(a).
PLR-103321-12 3

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 RRSP. For each subsequent tax year through the tax year in which the 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.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.

                                   Sincerely,


                                   M. Grace Fleeman
                                   Senior Technical Reviewer, Branch 1
                                   (International)

Enclosure (1)
Copy for 6110 purposes