PLR 1343014: Canadian RRSP treaty election extension granted

Plain-English summary

The IRS considered a married couple who had moved from Canada to the United States while continuing to hold Canadian registered retirement savings plans. Their accountant had not told them to file Form 8891 to make the treaty election that defers U.S. tax on undistributed plan earnings. The IRS granted the couple an extension of time under Treas. Reg. section 301.9100-3 to make the election for the specified tax years. They must make the election within 60 days of the ruling letter and attach the required forms or statement to relevant tax returns.

Ruling snapshot

• Question: May taxpayers receive more time to make a treaty election for undistributed earnings in Canadian RRSP accounts?
• Outcome: Approved
• Key authorities: IRC § 9100; Treas. Reg. §§ 301.9100-1, 301.9100-3; Rev. Proc. 2002-23; U.S.-Canada income tax treaty, Article XVIII(7)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201343014 Third Party Communication: None
Release Date: 10/25/2013 Date of Communication: Not Applicable
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
---------------------------------------- ------------------------------, ID No. ------------
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--------------------------------------------- Telephone Number:
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Refer Reply To:
CC:INTL:B01
PLR-112349-13
Date:
July 31, 2013

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

LEGEND

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

Taxpayer Husband = ---------------------
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Taxpayer Wife = --------------------------
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Tax Years = ----------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------

Accounting Firm = ----------------

RRSP Accounts = -------------------------------
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PLR-112349-13 2

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

This is in reply to your letter dated --------------------------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, with respect to Tax Years.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayers 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

Taxpayers are former Canadian citizens and residents. In Year 1, Taxpayers moved to
the United States in connection with a transfer by Taxpayer Husband’s employer. In
Year 2, Taxpayer Husband became a U.S. citizen. In Year 3, Taxpayer Wife became a
U.S. citizen.

Prior to moving to the United States in Year 1, Taxpayers established multiple Canadian
registered retirement savings plans (RRSP Accounts). Taxpayers continued to maintain
their RRSP Accounts after moving to the United States.

Taxpayers represent that they have timely filed U.S. income tax returns for Year 1 and
all subsequent years. Prior to Year 4, they retained the same U.S. accountant to
prepare their returns. Taxpayers represent that they made full disclosure of their
financial affairs to their U.S. accountant and relied on his advice in complying with their
U.S. tax filing requirements. Taxpayers represent that their accountant did not inform
PLR-112349-13 3

them of the need to file Form 8891, “U.S. Information Return for Beneficiaries of Certain
Registered Retirement Plans,” to defer current income taxation on the undistributed
earnings in their RRSP Accounts pursuant to Article XVIII(7) of the U.S.-Canada Income
Tax Treaty (the “Treaty”).

In Year 4, Taxpayers retained Accounting Firm to help with their filing obligations
because they felt their U.S. accountant had provided them with contradictory advice
regarding their state income taxes. Accounting Firm informed Taxpayers of the need to
file Form 8891 in order to defer U.S. tax on the earnings in their RRSP Accounts. After
Taxpayers became aware of the need to make the election under Article XVIII(7) of the
Treaty, they asked Accounting Firm to submit this request so that they might obtain an
extension to file Form 8891 out of time. Taxpayers represent that prior to Year 4 they
were not aware of their U.S. tax filing obligations with respect to their RRSP Accounts.

As of the date of this ruling request, Taxpayers had not received any distributions from
their RRSP Accounts.

RULING REQUESTED

Taxpayers request 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 their RRSP Accounts, 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.

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
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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 under Rev. Proc. 2002-23 for RRSP Accounts for Tax Years. 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 open Tax Years, Taxpayers
must file amended U.S. income tax returns to which they attach Forms 8891 for their
RRSP Accounts. For each subsequent tax year through the year in which a final
distribution is made from their RRSP Accounts, Taxpayers must attach a Form 8891 for
each RRSP Account from which a final distribution has not been made to their U.S.
income tax return.

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.

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

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,


                                   M. Grace Fleeman
                                   Senior Technician Reviewer, Branch 1
                                   (International)

Enclosure (1)