PLR 1338038: IRS grants Canadian RRSP holders more time to make a treaty election

Plain-English summary

A married couple who moved from Canada to the United States had Canadian registered retirement savings plans (RRSPs) and had not made the election needed to defer U.S. tax on income accrued in those plans. They asked for more time under Treas. Reg. § 301.9100-3 to elect the treatment provided by Rev. Proc. 2002-23 for the listed tax years. The IRS found that they 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 election. The couple must file amended returns and Form 8891 for each RRSP for open years, and include Form 8891 with later returns through the year of final distribution.

Ruling snapshot

• Question: May the taxpayers 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: 201338038 [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-153554-12
Date:
May 31, 2013

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

Legend

Taxpayers = ------------------------

                                 ------------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------

Year 5 = -------

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

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

RRSP 3 = --------------------------

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

PLR-153554-12 2

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

This is in reply to a letter dated December 14, 2012, 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 in this letter are based upon information and representations submitted by
the taxpayers and accompanied by penalty of perjury statements 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

Taxpayers, husband and wife, are Canadian citizens. In Year 1, Taxpayers moved to
the United States and became U.S. residents. Taxpayers established RRSP 1, RRSP 2
and RRSP 3 (RRSPs) in Canada prior to moving to the United States. Since moving to
the United States they have not made any further contributions or taken any
distributions from any of the RRSPs. Taxpayers have filed timely U.S. income tax
returns for all relevant tax years beginning in Year 1. Taxpayers hired a tax return
preparer to assist them with their U.S. income tax filing obligations for Year 1 through
Year 2. In Year 3 through Year 4, Taxpayers self-prepared and filed their own income
tax returns. In Year 5, Taxpayers hired a different tax return preparer to help prepare
their income tax returns and they were informed for the first time of the need to make an
election pursuant to paragraph 7 of Article XVIII of the U.S.-Canada income tax treaty in
order to defer U.S. tax on income accrued in their RRSPs. After learning about the
requirement to make an election, Taxpayers sought legal advice and subsequently
decided to file this request for an extension of time to make the election pursuant to
Rev. Proc. 2002-23.

As of the date of this ruling request, Taxpayers state that the Internal Revenue Service
had not communicated with them concerning their RRSPs.

RULING REQUESTED

Whether Taxpayers may receive an extension of time under Treas. Reg. § 301.9100-3
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. §

PLR-153554-12 3

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
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
Taxpayers satisfy the standards of Treas. Reg. § 301.9100-3. Accordingly, Taxpayers
are 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,
Taxpayers must file Form 1040X (Amended U.S. Individual Income Tax Return), and
attach a Form 8891 (U.S. Information Return for Beneficiaries of Certain Canadian
Registered Retirement Plans) for each RRSP. For each subsequent tax year through
the tax year in which the final distribution is made from an RRSP, Taxpayers must
attach a Form 8891 for the RRSP 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.

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 this
letter ruling.

PLR-153554-12 4

This letter ruling is directed only to the taxpayers who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter will be sent to
your authorized representatives.

                                    Sincerely,



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

Enclosure:
Copy for §6110 purposes

cc: