PLR 200442016: Late Form 1128 treated as timely for partnership tax year change

Plain-English summary

A partnership sought to change its tax year end from December 31 to October 31 following a change in ownership. It filed the short period return on time but missed the deadline for Form 1128, filing that application shortly afterward because of an error or misunderstanding. The IRS found that the partnership acted reasonably and in good faith and treated the late Form 1128 as timely under the election relief regulations. The ruling covers only the filing deadline. It does not decide whether the partnership is permitted to use the requested October 31 tax year.

Ruling snapshot

• Question: Could the partnership's late Form 1128 be treated as timely filed for a tax year change?
• Outcome: Approved as to filing timeliness; eligibility for the new year was not decided.
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1(b), 301.9100-3(a).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200442016
Release Date: 10/15/04
9100.00-00, 9100.09-00

-------------------------
Person To Contact:
-------------------
-------------------------, ID No. -------------
------------------------------------------------ Telephone Number:
---------------------
-----------------------------------
Refer Reply To:
-------------------------------
CC:ITA:05 – PLR-112995-04
Date:
June 28, 2004
------------------------

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

This is in reference to a Form 1128, Application to Adopt, Change, or Retain a Tax Year, submitted on behalf of the above-named taxpayer requesting permission to change its accounting period, for federal income tax purposes, from a taxable year ending December 31, to a taxable year ending October 31, effective October 31, -------. The taxpayer has requested that the Form 1128 be considered timely filed under the authority contained in section 301.9100-3 of the Procedure and Administration Regulations.

The information furnished indicates that the taxpayer is required to change to an October 31 year-end as a result of a change in ownership. The taxpayer timely filed its tax return for the year ending October 31, ------- but failed to file a Form 1128. The taxpayer’s Form 1128 requesting to change its accounting period to a tax year ending October 31, -------, was due on or before May 15, -------, but was not timely filed; however, the form was filed shortly thereafter. The information furnished also provides that the late filing was due to an error or misunderstanding.

The taxpayer is a partnership and engages in the business of investments. The taxpayer uses an accrual method as its overall method of accounting.

Section 442 of the Internal Revenue Code (the Code) provides that a taxpayer must obtain approval to change its taxable year.

Section 1.442-1(b) of the Income Tax Regulations provides that in order to secure the Commissioner's consent to adopt an accounting period, the taxpayer must file an application on Form 1128 with the Commissioner on or before (a) the 15th day of the second calendar month following the close of the short period or (b), if Rev. Proc. 2002-38, 2002-1 C.B.1037, is applicable, no later than the due date (including extensions) for filing the return for the short period required to effect such change.
PLR-112995-04
2

Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections that do not meet the requirements of section 301.9100-2 (automatic extensions), such as the instant case, must be made under the rules of section 301.9100-3. Requests for relief subject to section 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that the granting of relief will not prejudice the interests of the government.

Based on the facts and information submitted and the representations made, it is held that the taxpayer has acted reasonably and in good faith, and that the granting of relief will not prejudice the interests of the government. Accordingly, the requirements of the regulations for the granting of relief have been satisfied in this case, and the taxpayer’s late-filed Form 1128 requesting permission to adopt a tax year ending October 31, effective October 31, -------, is considered timely filed.

The ruling contained in this letter is based upon facts and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. Verification of the factual information, representations, and other data may be required as part of an examination process.

This ruling addresses the granting of section 301.9100-3 relief only. No opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable thereto, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. Specifically, no opinion is expressed as to whether the taxpayer is permitted under the Code and applicable regulations to adopt the tax year requested in the subject Form 1128.

A copy of this letter ruling and the taxpayer's Form 1128 are being forwarded to the service center where the taxpayer files its federal income tax returns with instructions that the Form 1128 be considered timely filed, and processed in accordance with established procedures under Rev. Proc. 2002-38.

In accordance with the provisions of a power of attorney currently on file, we are sending a copy of this letter ruling to the taxpayer’s authorized representative.
PLR-112995-04
3

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.

Sincerely,

WILLIAM A. JACKSON
Chief, Branch 5
Office of Associate Chief Counsel
(Income Tax & Accounting)

Enclosures:
Copy of this letter
Copy for section 6110 purposes