PLR 1338036: IRS grants a surviving spouse more time for a Canadian RRSP treaty election

Plain-English summary

A taxpayer and spouse became U.S. residents while holding Canadian registered retirement savings plans (RRSPs), but they did not make the election needed to defer U.S. tax on undistributed RRSP earnings. The spouse later died, and the surviving taxpayer, acting as executor, asked for more time under Treas. Reg. § 301.9100-3 to make the treaty election for the listed tax years. The IRS found that the taxpayer and spouse acted reasonably and in good faith and granted 60 days from the ruling date to make the election. The taxpayer must file amended U.S. returns with Form 8891 for both RRSPs and continue attaching Form 8891 for any RRSP without a final distribution.

Ruling snapshot

• Question: May the surviving taxpayer make the Rev. Proc. 2002-23 election for Canadian RRSPs after the deadline?
• 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: 201338036 [Third Party Communication:
Release Date: 9/20/2013 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-152836-12
Date:
May 29, 2013

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

Legend

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

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

Bank = -------------------------------

RRSP 1 = -------------------------------------

RRSP 2 = -------------------------------------

Year 1 = -------

Year 2 = -------

Date 1 = -------------------

Date 2 = ----------------------

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

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

PLR-152836-12 2

This is in reply to a letter from your representative dated November 27, 2012, as
supplemented by a letter dated January 3, 2013, requesting an extension of time under
Treas. Reg. § 301.9100-3 for Taxpayers 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.

FACTS:

In Year 1, Taxpayer established RRSP 1 and Spouse established RRSP 2. In Year 2,
Taxpayer and Spouse became residents of the United States. Taxpayer and Spouse
neither contributed to nor withdrew any money from RRSP 1 or RRSP 2 after becoming
residents of the United States. Spouse died on Date 1. Taxpayer was appointed as
Executor under Spouse’s will.

Taxpayer represents that he and Spouse timely filed their U.S. income tax returns for
Tax Years. Prior to Date 2, Taxpayer and Spouse were unaware of the need to make
an election to defer recognition of undistributed earnings in RRSP1 and RRSP2
pursuant to paragraph 7 of Article XVIII of the U.S. – Canada income tax treaty (the
“Treaty”). As soon as Taxpayer learned of need to make an election, he sought legal
advice and requested the consent of the Commissioner of the Internal Revenue Service
for an extension of time to make the election to defer U.S. income tax on income
accrued in RRSP 1 and RRSP 2.

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 RRSP1 and RRSP2, 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

PLR-152836-12 3

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 and Spouse satisfy 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
Taxpayers are 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 a Form
8891 (U.S. Information Return for Beneficiaries of Certain Canadian Registered
Retirement Plans) for RRSP1 and RRSP2. For each subsequent tax year through the
tax year in which a final distribution is made from RRSP1 and RRSP2, Taxpayer must
attach to his U.S. income tax return a Form 8891 for each RRSP from which a final
distribution has not been made.

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.

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 taxpayers requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

PLR-152836-12 4

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)

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