PLR 200333004: Fund receives more time for dividends-paid election

Plain-English summary

A fund intended to make an election under § 855(a) on its return, but the firm handling its filing sent the IRS an unsigned request for a return extension. The fund later filed the return and election late. The IRS found good cause and extended the election deadline to the date the fund filed. It instructed the service center to treat the election as timely. The ruling addresses only the election's timeliness; it does not decide the fund's regulated investment company status, excuse a late-return penalty, or resolve whether the relief changes its aggregate tax liability.

Ruling snapshot

• Question: May the fund's late § 855(a) election be treated as timely?
• Outcome: Approved: the election deadline was extended to the return filing date.
• Key authorities: IRC § 855(a); Treas. Reg. §§ 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200333004
Washington, DC 20224
Release Date: 8/15/2003
Index Number: 855.00-00 9100.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:FIP:2 PLR-168533-02
Date:
April 9, 2003

In re:

Fund =

Date 1 =

Date 2 =

Date 3 =

Date 4 =

Date 5 =

Firm =

Dear
:

This is in reply to an undated letter in which Fund requests an extension of time to file an election under section 855(a) of the Internal Revenue Code (“section 855 election”).

PLR-168533-02
2

FACTS

Fund is a corporation registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Fund has elected to be treated as a regulated investment company (“RIC”) in accordance with Subchapter M of the Code. Fund’s taxable year is a fiscal year ending on Date 1.

For its taxable year ending Date 2, Fund intended to file a section 855 election.
The due date, without extensions, for filing the return in which the election had to be made was Date 3.

Firm had the responsibility for filing Form 7004 requesting an extension of time for filing the return in which Fund was to make a section 855 election. Firm prepared the Form 7004 but did not send it to the officer of Fund who was responsible for signing the Form 7004 before sending it to the Internal Revenue Service. Instead, Firm inadvertently sent the unsigned Form 7004 to the Internal Revenue Service.

On Date 4 Fund’s officer with the responsibility for signing the Form 7004 realized that Fund had not received the Form 7004 from Firm and had not properly filed it with the Internal Revenue Service.

On Date 5 Fund filed a late return making the section 855(a) election.

Fund makes the following representations:

1. The request for relief was filed by Fund before the failure to make the regulatory election was discovered by the Service.

2. Granting the relief will not result in Fund having a lower tax liability in the aggregate for all years to which the regulatory election applies than Fund would have had if the election had been timely made (taking into account the time value of money).

3. Fund does not seek to alter a return position for which an accuracy-related penalty has been or could have been imposed under section 6662 of the Code at the time Fund requested relief and the new position requires or permits a regulatory election for which relief is requested.

4. Being fully informed of the required regulatory election and related tax consequences, Fund did not choose to not file the election.

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APPLICABLE LAW

Section 301.9100-1(c) of the regulations provides, in part, that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election (defined in section 301.9100-1(b) as an election whose deadline is prescribed by regulations or by a revenue ruling, a revenue procedure, a notice, or an announcement published in the Internal Revenue Bulletin), or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I.

Section 301.9100-3(a) through (c)(1)(i) of the regulations sets forth rules that the Internal Revenue Service generally will use to determine whether, under the facts and circumstances of each situation, the Commissioner will grant an extension of time for regulatory elections that do not meet the requirements of section 301.9100-2. Section 301.9100-3(b) provides that subject to paragraphs (b)(3)(i) through (iii) of section 301.9100-3, when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the Service, the taxpayer will be deemed to have acted reasonably and in good faith; and section 301.9100-3(c) provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made (taking into account the time value of money).

CONCLUSION

Based upon the facts and representations submitted, it is held that Fund has shown good cause for granting a reasonable extension of time to allow it to make a section 855 election. Accordingly, the time for filing the election is extended to Date 5.

No opinion is expressed as to whether the Fund’s tax liability is not lower in the aggregate for all years to which the regulatory election applies than its tax liability would have been if the election had been timely made (taking into account the time value of money). Upon audit of the federal income tax return involved, the director's office will determine the taxpayer's tax liability for the years involved. If the director's office determines the taxpayer's liability is lower, that office will determine the federal income tax effect.

This ruling is limited to the timeliness of Fund’s election. This ruling does not relieve Fund from any penalties it may owe as a result of the failure to file a federal income tax return on time. This ruling's application is limited to the facts, Code sections, and regulations cited herein. No opinion is expressed as to whether Fund qualifies as a RIC under subchapter M, part I, of the Code.

A copy of this letter is being forwarded to the service center where Fund files its returns with instructions that although its return was not timely filed, Fund is to be treated as having made a timely section 855 election.

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Except as specifically provided otherwise, no opinion is expressed on the federal income tax consequences of the transaction described above.

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

In accordance with the terms of a power of attorney on file in this office, the original of this letter is being sent to you and copies are being sent to the taxpayer and the second-named person on the power of attorney.

Sincerely yours,

William E. Coppersmith
Chief, Branch 2
Office of Associate Chief Counsel
(Financial Institutions & Products)