PLR 200119014: Prior home ownership ruling revoked without retroactive effect

Plain-English summary

The IRS revoked an earlier letter ruling that treated a taxpayer as owning a residence during the time a partnership held it for purposes of section 121. The IRS said the earlier ruling no longer matched its current view. The taxpayer requested protection from retroactive application. Exercising its authority under section 7805(b), the IRS made the revocation effective without retroactive effect for that taxpayer. The letter does not replace the revoked ruling with a new decision on the residence's ownership period.

Ruling snapshot

• Question: Would the IRS revoke the prior section 121 ownership ruling, and would that revocation apply retroactively?
• Outcome: The prior ruling was revoked, but the revocation has no retroactive effect for this taxpayer.
• Key authorities: IRC §§ 121 and 7805(b); Rev. Proc. 2001-1, §§ 12.04, 12.05, and 12.11.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200119014
Washington, DC 20224
Release Date: 5/11/2001
Index Number: 121.01-02
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:1-PLR-114170-00
Date:
February 5, 2001

LEGEND:

Taxpayer =

Partnership =

Residence =

On October 28, 1999, the Internal Revenue Service issued LTR 200004022 (PLR- 111497-99) to Taxpayer. The purpose of this letter is to inform you that LTR 200004022 is hereby revoked in accordance with section 12.04 of Rev. Proc. 2001-1, 2001-1 I.R.B. 1 (January 2, 2001).

LTR 200004022 held that for purposes of section 121 of the Code, that Taxpayer is treated as owning Residence for the period of time that Residence was held in Partnership. We hereby revoke LTR 200004022 because it is not in accord with the current views of the Service.

Section 7805(b)(8) of the Code provides that the Secretary of the Treasury or his delegate may prescribe the extent, if any, to which any ruling (including any judicial decision or any administrative determination other than by regulation) relating to the internal revenue laws shall be applied without retroactive effect.

Section 12.04 of Rev. Proc. 2001-1 provides that a letter ruling found to be in error or not in accord with the current views of the Internal Revenue Service may be revoked or modified, unless it was a part of a closing agreement. If a letter ruling is revoked, the revocation applies to all years open under the statute of limitations unless the Service uses its discretionary authority under section 7805(b) to limit the retroactive effect of the revocation. Section 12.05 provides that, except in rare or unusual circumstances, the revocation or modification of a letter ruling will not be applied retroactively to the taxpayer to whom the letter ruling was issued provided that, inter alia, the taxpayer relied in good faith on the letter ruling and revoking or modifying the letter ruling would be to the taxpayer’s detriment. Section 12.11 prescribes the procedures for requesting relief under section 7805(b). 2 PLR-114170-00

In accordance with section 12.11 of Rev. Proc. 2001-1, Taxpayer submitted a statement requesting that we limit the retroactive application of this revocation. Based upon that statement, and pursuant to the authority of section 7805(b) of the Code, we hereby provide that this revocation of LTR 200004022 will apply to Taxpayer without retroactive effect.

Sincerely,
/s/Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)