PLR 1337009: Taxpayer receives more time to elect Canadian retirement-plan deferral

Plain-English summary

A U.S. citizen living in Canada asked for more time to elect deferral of U.S. federal income tax on undistributed earnings in a Canadian registered retirement savings plan. The taxpayer had not received distributions and said he was unaware of the election requirement until obtaining professional advice. The IRS granted 60 days from the ruling date to make the election under Rev. Proc. 2002-23. The taxpayer was required to file amended returns and Forms 8891 for open years and to attach Forms 8891 for later years through the year of final distribution.

Ruling snapshot

• Question: May the taxpayer make a late election to defer U.S. tax on undistributed Canadian RRSP earnings?
• Outcome: Approved, with a 60-day filing period and information-return 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: 201337009 [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:
--------------------------- ---------------------, ID No. ------------------
------------------------------------- Telephone Number:
---------------------------------- --------------------
-------------- Refer Reply To:
CC:INTL:BR1
PLR-139848-11
Date:
May 29, 2013

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

Legend

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

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

Year 1 = -------

Year 2 = -------

Year 3 = -------

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

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

This is in reply to a letter from your representative dated September 9, 2011, as
supplemented by letters dated January 14, 2013 and February 5, 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.

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.

PLR-139848-11 2

FACTS:

Taxpayer was born in the United States and is a U.S. citizen. He has lived in Canada
since Year 1, and he became a Canadian citizen in Year 2. Taxpayer established
RRSP while he was a resident of Canada.

Taxpayer has filed U.S. and Canadian income tax returns for Tax Years. However,
prior to Year 3, Taxpayer was unaware of the need to make an election under Rev. Rul.
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”). After seeking professional
advice in Year 3, Taxpayer learned of the requirement and immediately engaged a tax
professional to request an extension of time to file an election under Treas. Reg.
§301.9100-3.

Taxpayer represents that he has not received any distributions from RRSP and 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
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.

PLR-139848-11 3

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 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 Taxpayer attaches
Forms 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 to his U.S.
income tax return a Form 8891 for RRSP.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically my satisfy this requirement by
attaching a statement to their return that provides the date and control number of this
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.

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
                                       Office of the Associate Chief Counsel
                                       (International)