PLR 200013034: Extra time granted for binding contract election

Plain-English summary

A taxpayer acquired a company under a contract entered into before the enactment of § 197 and did not make a valid binding contract election on its return. That election could cause the earlier law to apply to property acquired under a qualifying contract. The IRS granted the taxpayer 60 days from the letter date to make the election with an amended return and send the required copies. The ruling expressly did not decide whether the contract had remained binding from August 10, 1993, through the acquisition.

Ruling snapshot

• Question: Could the taxpayer receive more time to make the § 197 binding contract election?
• Outcome: Approved: the election could be filed within 60 days, subject to the filing requirements.
• Key authorities: Treas. Reg. §§ 1.197-1T(d) and 301.9100-3.

Full text (IRS public release)

Index Number: 197.01-00 200013034

CC:DOM:P&SI:6--PLR-114320-99
DEC 22 1999

In re: Late Binding Contract Election

LEGEND:
Taxpayer =

Company =
D1 =
D2 =
D3 =
D4 =

Dear :

This letter responds to your request dated August 19, 1999, submitted on behalf of Taxpayer requesting an extension of time to make a binding contract election under §1.197-1T(d) of the Temporary Income Tax Regulations.

Taxpayer acquired Company on D3, pursuant to a contract entered into on D1, and modified on D2. Taxpayer did not make a valid binding contract election on its tax return for the taxable year ended D4 for its acquisition of Company.

Generally, if a taxpayer acquires property pursuant to a written binding contract in effect on August 10, 1993, and at all times thereafter before the acquisition and makes the binding contract election with respect to the contract, then the law in effect prior to the enactment of the Omnibus Budget Reconciliation Act of 1993 will apply to all property acquired pursuant to the contract. Section 1.197-1T(d) (1) (i).

Section 1.197-1T(d)(2)(i) provides that the binding contract election must be made by the due date (including extensions of time) of the electing taxpayer's Federal income tax return for the election year. If, however, the taxpayer's Federal income tax return for the election year is filed before April 14, 1994, the election may be made by amending that return no later than September 12, 1994. Section 1.197-1T(b) (5) provides that the term "election year" means the taxable year that includes

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August 10, 1993.

Section 1.197-1T(d) (2) (ii) provides that the binding contract election is made by attaching the election statement described in §1.197-1T(e) to the taxpayer's original or amended income tax return for the election year. Section 1.197- 1T(d) (2) (iii) provides that an attempted election that does not satisfy the requirements of §1.197-1T(d) (2) is not valid.

Section 1.197-1T(e) (1) provides that for an election under
§1.197-1T(d) to be valid, the electing taxpayer must file with its Federal income tax return for the election year a written election statement, as an attachment to Form 4562 (Depreciation and Amortization), that satisfies the requirements of §1.197- 1T(e) (2). The electing taxpayer must also forward a copy of the election statement to the Statistics Branch (QAM:S:6111), IRS Ogden Service Center, ATTN: Chief, Statistics Branch, P.O. Box 9941, Ogden, UT 84409.

Section 301.9100-1(c) of the Procedure and Administration Regulations provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in
§§301.9100-2 and 301.9100-3 to make a regulatory election. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of section 301.9100-2.

Requests for relief under §301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. Section 301.9100- 3(a).

Based solely on the facts and the representations made, the requirements of §§301.9100-1 and 301.9100-3 have been met. Consequently, Taxpayer is granted an extension of time for making the binding contract election under §1.197-1T(d), until 60 days following the date of this letter. Taxpayer must file the election with its amended Federal income tax return for its taxable year ended on D4 and must comply with all the

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requirements of §1.197-1T(d) (2) (ii) and (e). In addition, a copy of this letter along with a copy of the election should be sent to the District Director. A copy is enclosed for that purpose.

Except as specifically ruled upon above, no opinion is expressed or implied concerning the Federal income tax consequences of the transaction described above. Specifically, we express no opinion concerning whether the contract to acquire Company was binding on August 10, 1993, and at all times thereafter before the acquisition.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Internal Revenue Code provides that it may not be used or cited as precedent.

We are sending a copy of this letter to the District Director, District. In accordance with the power of attorney on file with this office, a copy of this letter is being sent to your authorized representatives. .

Sincerely yours,

PAUL F. KUGLER

Assistant Chief Counsel
(Passthroughs and Special
Industries)

Enclosures:
Copy of this letter
Copy for section 6110 purposes

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