PLR 201337006: Taxpayer receives more time to elect Canadian RRSP tax deferral

Plain-English summary

A Canadian citizen and U.S. lawful permanent resident asked for more time to elect deferral of U.S. tax on undistributed earnings in a Canadian registered retirement savings plan. The IRS found that the election was a regulatory election and granted 60 days from the ruling date to make it under Rev. Proc. 2002-23. The taxpayer also had to file amended U.S. returns for open years with Form 8891 and attach that form for later years through the year of final distribution. The extension did not determine whether the taxpayer otherwise qualified for the election.

Ruling snapshot

• Question: May the taxpayer make a late election to defer U.S. tax on income accrued in the Canadian RRSP?
• 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 of the U.S.-Canada income tax treaty.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201337006
[Third Party Communication:
Release Date: 9/13/2013
Date of Communication: Month DD, YYYY]
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
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---------------------, ID No. ------------------
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Telephone Number:
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Refer Reply To:
CC:INTL:BR1
PLR-125884-12
Date:
May 29, 2013

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

Legend

Taxpayer = ------------------------------------
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Trustee A = ---------------------------
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Trustee B = -----------------------------------------
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Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------

Year 5 = -------

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

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

This is in reply to a letter from your representative dated June 8, 2012, as supplemented by a letter dated February 13, 2013, 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.
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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:

Taxpayer represents that he is a citizen of Canada who has been a tax resident of Canada since Year 1. In Year 2, Taxpayer began to work in the United States. In Year 3, Taxpayer became a lawful permanent resident of the United States. Taxpayer represents he has filed timely U.S. tax returns on either Form 1040NR or Form 1040 for Year 2 and all subsequent tax years.

Taxpayer established a registered retirement savings plan (“RRSP”) in Year 2 with Trustee A. RRSP was transferred to Trustee B in Year 4. Taxpayer has not received any distributions from RRSP

Taxpayer represents that he was unaware of the need to make an election under Rev. Proc. 2002-23 to defer recognition of undistributed earnings in RRSP pursuant to Article VIII(8) of the U.S.-Canada income tax treaty (the “Treaty”) prior to Year 5. In Year 5, a tax professional advised Taxpayer of the need to make an election. Taxpayer immediately engaged the tax professional to request an extension of time to make an election under Treas. Reg. §301.9100-3.

Taxpayer represents that the Internal Revenue Service has not communicated with him concerning 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 for Tax Years pursuant to Rev. Proc. 2002-23 to defer U.S. federal income taxation on income accrued in RRSP, 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
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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 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 each open Tax Year, Taxpayer must file an amended U.S. income tax return to which he attaches Form 8891 (U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans). For each subsequent tax year through the tax year in which the final distribution is made from RRSP, Taxpayer must attach a Form 8891 to his U.S. income tax return

A copy of this letter must also 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.

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.
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In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

M. Grace Fleeman
Senior Technical Reviewer, CC:INTL:Br1
Office of the Associate Chief Counsel
(International)