PLR 1242004: IRS extends time for elections covering Canadian retirement plans

Plain-English summary

The IRS granted taxpayers 60 days to make elections under Rev. Proc. 2002-23 concerning Canadian registered retirement savings plans and registered pension plans. The taxpayers had moved from Canada to the United States and had not known that an election was needed to defer U.S. tax on income accrued in those retirement vehicles. The IRS found that they satisfied the standards for relief under Treas. Reg. § 301.9100-3, but stated that the extension did not determine whether they were otherwise eligible to make the elections. The ruling required amended U.S. income tax returns with Form 8891 for the RRSP and the required statements for the RPP.

Ruling snapshot

• Question: Could the taxpayers receive an extension of time to make the Rev. Proc. 2002-23 elections for their Canadian retirement plans?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; Article XVIII of the U.S.-Canada income tax treaty; IRC § 6110

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201242004 Third Party Communication: None
Release Date: 10/19/2012 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-103079-12
Date:
July 19, 2012

LEGEND

Husband: = ------------------
------------------------

Wife: = ------------------
------------------------

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

RPP = --------------------------------------------
----------------------------------------------

Country A = ---------

Country B = -----------

Employer = -------------------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------

Year 5 = -------

Year 6 = -------

Year 7 = -------

Year 8 = -------

Year 9 = -------

Year 10 = -------

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

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

This is in reply to a letter dated January 12, 2012, as amended by supplemental
information dated April 10, 2012, requesting an extension of time under Treas. Reg.
§ 301.9100-3 for Husband and Wife (Taxpayers) to elect the provisions of Rev. Proc.
2002-23, 2002-1 C.B. 744, 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

Wife was born in Country A. In Year 1, she moved to Canada. In Year 3, she began to
contribute to RRSP. In Year 4, she became a Canadian citizen and began to work for
Employer. She stopped contributing to RRSP in Year 4 and began to contribute to
RPP, as required by Employer.

Husband was born in Country B. In Year 2, he moved to Canada to work for Employer.
Husband began to contribute to RPP in Year 2. He became a Canadian citizen in
Year 5.

Husband and Wife each contributed to RPP until they resigned their positions in Year 6.
They elected to leave their funds in RPP as deferred pensions available only upon
retirement. In Year 6, Husband moved to the United States, followed by Wife in Year 7.
Taxpayers did not make any further contributions to RRSP or RPP. Taxpayers retired
in Year 8 and began to receive payments from RPP, which they reported on their Forms
1040. There have been no distributions from RRSP. Taxpayers both became U.S.
citizens in Year 9.

Taxpayers were not aware of the need to make an election pursuant to paragraph 7 of
Article XVIII of the U.S.–Canada income tax treaty in order to defer U.S. tax on income
accrued in RRSP and RPP until they read an article in a Canadian newspaper in late

Year 10 indicating that certain Canadian retirement vehicles might have filing
requirements with the IRS. After reading the article, Taxpayers met with a local
accountant, who recommended that they retain tax attorneys with experience in
international issues.

Taxpayers state that the Internal Revenue Service has not communicated with them
concerning RRSP or RPP or the lack of an election pursuant to Rev Proc. 2002-23.

RULING REQUESTED

Whether Taxpayers may receive an extension of time under Treas. Reg. § 301.9100-3
for Taxpayers 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
Taxpayers an extension of time, provided that Taxpayers satisfy the standards set forth
in Treas. Reg. § 301.9100-3(a).

Based solely on the information submitted and representations made, we conclude that
Taxpayers satisfy the standards of Treas. Reg. § 301.9100-3. Accordingly, Taxpayers
are 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
Taxpayers are 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, Taxpayers must
file amended U.S. income tax returns to which they attach a Form 8891 (U.S.
Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans)
for RRSP and copies of the statement described in section 4.01 of Rev. Proc. 2002-23
for each Taxpayer’s interest in RPP. For each subsequent tax year through the tax year
in which a final distribution is made from RRSP, Taxpayers must attach a Form 8891 for
RRSP to their U.S. income tax return. For each subsequent tax year through the tax
year in which Taxpayers have each received a final distribution from RPP, each
Taxpayer who has not received a final distribution from RPP must attach a copy of the
statement described in section 4.01 of Rev. Proc. 2002-23 for RPP to their 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 taxpayers requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

In accordance with the Powers 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 CC:INTL:Br1
                                   Office of the Associate Chief Counsel
                                   (International)

cc: