PLR 1338027: IRS grants a Canadian taxpayer more time to make a retirement-plan treaty election

Plain-English summary

A Canadian taxpayer moved to the United States while holding three Canadian registered retirement savings plans and did not make a timely election under Rev. Proc. 2002-23 to defer recognition of undistributed earnings under the U.S.-Canada income tax treaty. The taxpayer requested an extension under Treas. Reg. § 301.9100-3. The IRS found that the taxpayer acted reasonably and in good faith and that relief would not prejudice the government, so it granted 60 days from the ruling date to make the elections. The taxpayer must file amended returns and Form 8891 for open years and attach Form 8891 to later returns through the year of final distribution.

Ruling snapshot

• Question: May the taxpayer make the Rev. Proc. 2002-23 election after the deadline under Treas. Reg. § 301.9100-3?
• Outcome: Approved, 60-day extension granted.
• 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: 201338027 Third Party Communication: None
Release Date: 9/20/2013 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:BR1
                                                            PLR-146603-11
                                                            Date:
                                                            May 31, 2013

LEGEND

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

Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------

RRSP1 = -------------------------------------

RRSP2 = ---------

RRSP3 = ----------------------------

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

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

This is in reply to a letter from your authorized representative dated October 14, 2011,
as amended by supplemental information, 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.
PLR-146603-11 2

The rulings contained in this letter are 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 request for rulings, it is subject to verification on examination.

FACTS

Taxpayer, a Canadian citizen, moved to the United States in Year 1 to teach and do
research at a university. At that time Taxpayer had maintained RRSP1, RRSP2 and
RRSP3 in Canada, and no withdrawals were made from any of the RRSP accounts
during Tax Years. Taxpayer was unaware of requirements under U.S. law of the need
to make the timely election under Rev. Proc. 2002-23 to defer recognition of
undistributed earnings in her Canadian retirement accounts pursuant to Article XVIII(7)
of the U.S.-Canada Income Tax Treaty (the “Treaty”) until she consulted a professional
tax preparer in Year 4. When Taxpayer was informed of the filing requirements, she
immediately requested an extension of time under Treas. Reg. § 301.9100-3 to elect the
provisions of Rev. Proc. 2002-23 for Tax Years.

As of the date of this ruling request, Taxpayer represents that the Internal Revenue
Service had not communicated with Taxpayer concerning RRSP accounts.

RULING REQUESTED

Whether Taxpayer may receive 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.

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-146603-11 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
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
elections 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 open Tax Years, Taxpayer
must file amended U.S. income tax returns to which she attaches a Form 8891 (U.S.
Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans)
for RRSP1, RRSP2, and RRSP3. For each subsequent tax year through the tax year in
which a final distribution is made from an 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 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 Powers 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,


                                       Elizabeth U. Karzon
                                       Chief, Branch 1, CC:INTL:Br1
                                       Office of the Associate Chief Counsel
                                       (International)

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