PLR 1346008: IRS grants extra time for a Canadian RRSP treaty election

Plain-English summary

The IRS granted a married couple an extension of time to elect treaty treatment for undistributed income accrued in their Canadian RRSPs. The couple had moved to the United States, timely filed U.S. returns, and provided RRSP information to tax preparers who did not advise them about the election requirement. The IRS found that they acted reasonably and in good faith and that granting relief would not prejudice the government. They were given 60 days from the ruling date to make the election, subject to the conditions described in the letter.

Ruling snapshot

• Question: May the taxpayers make the Rev. Proc. 2002-23 election after the deadline under Treas. Reg. § 301.9100-3?
• Outcome: Approved, extension granted
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2002-23; Article XVIII(7) of the United States-Canada Income Tax Convention

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201346008 Third Party Communication: None
Release Date: 11/15/2013 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:B01
PLR-127343-13
Date:
August 21, 2013

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

Legend

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

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

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

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

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

Tax Preparer = -------------------------------------------

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

Year 1 = -------

Year 2 = -------

Year 3 = -------

Year 4 = -------
PLR-127343-13 2

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

This responds to a letter from your representative, dated --------------------, requesting an
extension of time under Treas. Reg. § 301.9100-3 for Taxpayer and Spouse to elect the
provisions of Rev. Proc. 2002-23, 2002-1 C.B. 744, with respect to Tax Years.

The ruling contained in this letter is based upon information and representations
submitted by Taxpayer and Spouse 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 requested ruling, it is subject to verification on examination.
The information submitted for consideration is substantially as set forth below.

FACTS

Taxpayer and Spouse were both born in Canada. They moved to the United States in
late Year 1 and became lawful permanent residents of the United States during Year 2.
Prior to moving to the United States, Taxpayer and Spouse established RRSP 1, RRSP
2, and RRSP 3 (collectively, “RRSPs”). As of the date of this ruling request, neither
Taxpayer nor Spouse has received any distributions from RRSPs.

Taxpayer and Spouse have filed a joint U.S. income tax return since moving to the
United States and have filed their U.S. returns on a timely basis for each of the Tax
Years. Neither Taxpayer nor Spouse has any U.S. income tax-related education, skills,
or training. After moving to the United States, Taxpayer and Spouse engaged different
certified public accountants (“CPAs”) to prepare their U.S. income tax returns. Although
they provided the CPAs with information regarding RRSPs, none of the CPAs advised
Taxpayer and Spouse of the requirement to make an election under Article XVIII(7) of
the United States-Canada Income Tax Convention (the “Treaty”) to defer recognition of
undistributed income accrued by RRSPs.

Taxpayer and Spouse engaged Tax Preparer to prepare their Year 3 return and
provided Tax Preparer with information regarding RRSPs. During Year 4, while
preparing the Year 3 return, Tax Preparer informed Taxpayer and Spouse of the
requirement to make an election under Article XVIII(7) of the Treaty.

As of the date of the ruling request, the Internal Revenue Service has not
communicated with Taxpayer and Spouse in any way regarding RRSPs.

RULING REQUESTED
PLR-127343-13 3

Taxpayer and Spouse request the consent of the Commissioner of Internal Revenue for
an extension of time under Treas. Reg. § 301.9100-3 to make an election pursuant to
Rev. Proc. 2002-23 to defer U.S. federal income taxation on income accrued by RRSPs
during Tax Years, as provided for by 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, 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 and Spouse an extension of time, provided that they 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 and Spouse satisfy the standards of Treas. Reg. § 301.9100-3. Accordingly,
Taxpayer and Spouse 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 Taxpayer is otherwise eligible to make the above-described election.

Pursuant to § 4.07 of Rev. Proc. 2002-23, once the election is made it cannot be
revoked, except with the consent of the Commissioner. For open Tax Years, Taxpayer
and Spouse must file amended U.S. income tax returns to which they attach a separate
Form 8891 for each RRSP. For each subsequent year through the year in which a final
distribution has been made from each RRSP, Taxpayer and Spouse must attach to their
U.S. income tax return a Form 8891 for each RRSP from which a final distribution has
not been made.
PLR-127343-13 4

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 the U.S. income tax return for the year in which
Taxpayer and Spouse obtained the ruling and should be associated with the amended
returns for open Tax Years.

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.

                                  Sincerely,



                                  __________________________________
                                  Elizabeth U. Karzon
                                  Chief, Branch 1
                                  Office of Associate Chief Counsel
                                  (International)

Enclosure:
Copy for 6110 purposes

cc: