IRS grants more time for an RRSP election under the U.S.-Canada treaty

Plain-English summary

The IRS granted a taxpayer an extension to make an election 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 from Canada to the United States, later became a U.S. citizen, and had not known that Form 8891 and the treaty election were required. The IRS concluded that the taxpayer acted reasonably and in good faith and that relief would not prejudice the government. The taxpayer had 60 days from the ruling letter to make the election and was required to attach Form 8891 to amended and later returns as specified.

Ruling snapshot

• Question: Could the taxpayer receive additional time to make the RRSP election under Rev. Proc. 2002-23?
• Outcome: Approved, with 60 days from the ruling letter date to make the election.
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; Article XVIII(7) of the U.S.-Canada Income Tax Treaty.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201335010 Third Party Communication: None
Release Date: 8/30/2013 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-139676-12
Date:
May 17, 2013

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

LEGEND

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

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

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

Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------

Year 5 = -------

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

RRSP Account = ----------------------
----------------------------

Date 1 = ---------------------------
PLR-139676-12 2

$A = ------------------------

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

This is in reply to a letter from your representative dated ----------------------------------
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.

The ruling contained in this letter is 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

Taxpayer was born and raised in Canada. In Year 2, Taxpayer moved to the United
States in connection with his employment and eventually became a lawful permanent
resident of the United States. In Year 3, Taxpayer married Spouse, a U.S. citizen, and
in Year 4, Taxpayer became a U.S. citizen as well.

In Year 1, while still a Canadian citizen and resident, Taxpayer established and
contributed to a Canadian registered retirement savings plan (RRSP) with Financial
Institution, hereinafter referred to as his RRSP Account. Taxpayer continued to
maintain his RRSP Account with Financial Institution after moving to the United States.
As of Date 1, the amount held in Taxpayer’s RRSP Account was $A.

Taxpayer represents that, other than with respect to treatment of the accrued earnings
in his RRSP Account, he has complied with U.S. Federal income tax laws since moving
to the United States. With respect to Tax Years, Taxpayer and Spouse filed joint U.S.
income tax returns. Taxpayer self-prepared those returns using commercially available
tax preparation software. Taxpayer represents that prior to Year 5 he was not aware of
the need to file Form 8891, “U.S. Information Return for Beneficiaries of Certain
Registered Retirement Plans,” to defer current income taxation on the earnings in his
RRSP Account pursuant to Article XVIII(7) of the U.S.-Canada Income Tax Treaty (the
“Treaty”). In Year 5, Taxpayer learned, as the result of a news story, of his obligation to
file Form 8891 and the need to make an election pursuant to the Treaty.

Taxpayer represents that the Internal Revenue Service has not communicated with
Taxpayer or Spouse concerning his RRSP Account. Taxpayer represents that he has
not made withdrawals or received any distributions from his RRSP Account.
PLR-139676-12 3

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 for Tax Years
pursuant to Rev. Proc. 2002-23 to defer U.S. federal income taxation on income
accrued in the RRSP Account, as provided for in Article XVIII(7) of the Treaty.

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).

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 under Rev. Proc. 2002-23 for his RRSP Account for Tax Years. 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 open Tax Years, Taxpayer
and Spouse must file amended U.S. income tax returns to which they attach Forms
8891 for Taxpayer’s RRSP Account. For each subsequent tax year through the year in
PLR-139676-12 4

which a final distribution is made from the RRSP Account, Taxpayer and Spouse must
attach a Form 8891 for Taxpayer’s RRSP Account 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 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)