PLR 1314027: IRS grants late election relief for a Canadian retirement plan

Plain-English summary

A U.S. citizen living in Canada had an RRSP established before moving to the United States. The taxpayer filed U.S. returns but did not know about the election needed to defer U.S. tax on RRSP income under Article XVIII(7) of the U.S.-Canada tax treaty. After a CPA identified the issue, the IRS granted 60 days to make the election under Rev. Proc. 2002-23 for the specified tax years. The taxpayer must file amended U.S. returns with Form 8891 and continue attaching the form for later years through the year of the RRSP’s final distribution.

Ruling snapshot

• Question: May the taxpayer make a late treaty election for income accruing in a Canadian RRSP?
• Outcome: Approved, subject to the filing requirements in the ruling.
• Key authorities: U.S.-Canada Treaty Article XVIII(7); Rev. Proc. 2002-23; Treas. Reg. § 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201314027 [Third Party Communication:
Release Date: 4/5/2013 Date of Communication: Month DD, YYYY]
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
------------------ ---------------------, ID No. ---------------------
---------------------------------- ---------------------------------------------------
----------------------------------- Telephone Number:
-------------- ----------------------
Refer Reply To:
CC:INTL:BR1
PLR-139557-11
Date:
December 31, 2012

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

Legend

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

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

Year 1 = -------

Year 2 = -------

Year 3 = -------

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

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

This is in reply to a letter dated September 6, 2011, and supplemented by letters dated
October 18, 2012 and November 28, 2012, 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-139557-11 2

Taxpayer is a Canadian resident and a citizen of the United States. In Year 1, Taxpayer
moved to the United States and in Year 2, she returned to live in Canada. Taxpayer
established RRSP during her residency in Canada prior to Year 1. All contributions to
the RRSP were made while a resident of Canada and not while a resident of the United
States. Taxpayer timely filed all U.S. federal income tax returns for Tax Years and was
not aware of the rules regarding the U.S. taxation of Canadian retirement plans or the
need to make an election to defer taxation of income accruing in an RRSP under Article
XVIII(7) of the Treaty.

In Year 3, Taxpayer engaged a CPA firm to prepare her 20---- U.S. income tax return
and was informed that she needed to make an election to benefit from XVIII(7) of the
Treaty. She immediately took action to request an extension of time to file an election to
defer U.S. income tax on income earned in RRSP.

RULING REQUESTED

Whether Taxpayer may receive 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.

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).
PLR-139557-11 3

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
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
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 each year of Tax Years,
Taxpayer must file amended U.S. income tax returns and attach 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 the RRSP to
her 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 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.

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

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 this
letter ruling.

                                    Sincerely,



                                    Quyen Huynh
                                    Senior Counsel, CC:INTL:Br1
                                    Office of the Associate Chief Counsel (In
                                    (International)

Enclosure (1)
Copy for §6110 purposes

cc: