PLR 1237011: IRS grants late election relief for a Canadian RRSP

Plain-English summary

The IRS granted a taxpayer 60 days from the ruling date to make an election under Revenue Procedure 2002-23 concerning a Canadian Registered Retirement Savings Plan. The election allows the taxpayer to defer current U.S. income taxation on income accrued in the plan under Article XVIII(7) of the U.S.-Canada income tax treaty. The ruling found that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government. The taxpayer was required to file amended returns for the specified years with Form 8891 and attach that form to later returns until final distribution from the plan.

Ruling snapshot

• Question: Could the taxpayer receive more time to make the treaty election for the Canadian RRSP?
• Outcome: Approved
• Key authorities: IRC §§ 894 and 9114; Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; U.S.-Canada Income Tax Treaty, art. XVIII(7)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201237011 Third Party Communication: None
Release Date: 9/14/2012 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:B01
PLR-143545-11
Date:
June 14, 2012

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

Legend

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

Financial Institution = -----------------------------------

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

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

Year 1 = -------

Year 2 = -------

Date A = -----------------------

Date B = ------------------

Dear -----------------

This is in reply to a letter dated Date A 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, with respect to Tax Years. Additional information was submitted in a letter
dated Date B.
PLR-143545-11 2

The ruling contained in this letter is based upon information and representations
submitted by 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 ruling, it is subject to verification on examination. The
information submitted for consideration is substantially as set forth below.

FACTS

Taxpayer is a Canadian citizen and also a United States permanent resident. Taxpayer
lived in Canada until Year 1 when she moved to the United States. While living and
working in Canada, Taxpayer established and contributed to a Canadian Registered
Retirement Savings Plan with Financial Institution (RRSP).

Taxpayer continued to maintain RRSP with Financial Institution after moving to the
United States. At all times relevant to this ruling request, recognition of the accrued
earnings in the RRSP has been deferred for U.S. income tax purposes. Taxpayer has
not withdrawn any funds or received any distributions from the RRSP.

Taxpayer prepared her U.S. income tax returns for Tax Years using commercially
available tax preparation software programs or other online tax preparation tools.
Neither the commercial software programs nor the other online guidance alerted
Taxpayer that she should elect to defer current U.S. income taxation on the earnings in
the RRSP pursuant to Article XVIII(7) of the U.S.-Canada Income Tax Treaty (Treaty)
when she prepared her U.S. income tax returns.

Taxpayer became aware of the need to file Form 8891, “U.S. Information Return for
Beneficiaries of Certain Registered Retirement Plans,” to defer current income taxation
of the earnings in the RRSP pursuant to the Treaty only after Taxpayer hired a
professional tax advisor in Year 2. The Internal Revenue Service has not
communicated with Taxpayer concerning the 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 the
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. §
PLR-143545-11 3

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).

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 an amended U.S. income tax return to which a Form 8891 reporting the RRSP is
attached. For each subsequent tax year, a Form 8891 must be attached to Taxpayer’s
U.S. income tax return through the year in which a final distribution is made from the
RRSP.

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.
PLR-143545-11 4

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.

Pursuant to a power of attorney on file with this office, a copy of this letter will be sent to
your authorized representative.

                                Sincerely,




                                Craig R. Gilbert
                                Special Counsel to the Deputy Associate Chief
                                  Counsel (International Field Service and Litigation)
                                Office of Associate Chief Counsel (International)

Enclosure:
Copy for 6110 purposes