Taxpayer receives more time to elect Canadian retirement-plan tax deferral

Plain-English summary

The IRS granted a Canadian taxpayer 60 days from the ruling date to elect under Rev. Proc. 2002-23 to defer U.S. federal income tax on income accrued in a Canadian registered retirement savings plan. The taxpayer had moved to the United States and had not known that an election was required under Article XVIII(7) of the United States-Canada income tax treaty. The IRS found that the taxpayer satisfied the standards for late-election relief under Treas. Reg. § 301.9100-3. The taxpayer and spouse were required to file amended returns for open years with Form 8891 and attach that form to later returns until final distribution. The extension did not determine whether the taxpayer was otherwise eligible for the election.

Ruling snapshot

• Question: Could the taxpayer make a late election to defer U.S. tax on income accrued in a Canadian retirement plan?
• Outcome: Approved, with a 60-day deadline and amended-return and information-reporting conditions.
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; Article XVIII(7) of the United States-Canada income tax treaty; IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201334010 Third Party Communication: None
Release Date: 8/23/2013 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-137940-12
Date:
May 22, 2013

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

Legend

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

Spouse = -----------------------
-------------------------

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

Tax Preparer 1 = --------------------------------

Tax Preparer 2 = ---------------------------------------------------

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

Year 1 = -------

Year 2 = -------

Year 3 = -------

     -

PLR-137940-12 2

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

This responds to your letter dated June 30, 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. 744 for Tax Years.

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 rulings, it is subject to verification on examination. The
information submitted for consideration is substantially as set forth below.

FACTS

Taxpayer is a Canadian citizen, who established RRSP in year 1. In year 2, Taxpayer
moved to the U.S. Taxpayer has not received any distributions from RRSP. During Tax
Years, Taxpayer and Spouse were subject to U.S. income tax as U.S. residents, and
they jointly filed Forms 1040 on a timely basis.

Neither Taxpayer nor Spouse has tax-related education, skills, or training. During Tax
Years, Taxpayer and Spouse engaged Tax Preparer 1 to prepare their U.S. income tax
returns. Tax Preparer 1 did not notify Taxpayer of the requirement to make an election
under Article XVIII(7) of the United States-Canada Income Tax Convention (“the
Treaty”) to defer recognition of undistributed income accrued by RRSP. Accordingly,
Taxpayer was unaware that such an election was required.

In Year 3, Taxpayer and Spouse engaged Tax Preparer 2 to prepare their U.S. income
tax returns. While evaluating Taxpayer and Spouse’s Year 3 U.S. income tax
obligations, Tax Preparer 2 discovered that Taxpayer and Spouse were not compliant
with U.S. tax law with respect to RRSP.

As of the date of the ruling request, the Internal Revenue Service has not
communicated with Taxpayer in any way regarding RRSP.

RULING REQUESTED

Taxpayer requests the consent of the Commissioner of Internal Revenue for an
extension of time under Treas. Reg. § 301.9100-3 to make an election pursuant to Rev.
Proc. 2002-23, 2002-1 C.B. 744 to defer U.S. federal income taxation on income
accrued by RRSP during Tax Years, as provided for by Article XVIII(7) of the Treaty.

LAW AND ANALYSIS
PLR-137940-12 3

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, 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 and Spouse an extension of time, provided that Taxpayer and Spouse satisfy
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, once the election is made it cannot be
revoked, except with the consent of the Commissioner. For open Tax Years, Taxpayer
and Spouse must file amended U.S. income tax returns and attach 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 and Spouse must attach a Form 8891 for
RRSP 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.
PLR-137940-12 4

A copy of this letter must be attached to the U.S. income tax return for the year in which
Taxpayer obtained the ruling and should be associated with the amended returns for
open 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.

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

                                    Sincerely,



                                    __________________________________
                                    M. Grace Fleeman
                                    Senior Technical Reviewer, Branch 1
                                    Office of Associate Chief Counsel
                                    (International)

Enclosure:
Copy for 6110 purposes