PLR 200444003: Trust receives time to elect earlier charitable deduction

Plain-English summary

A trust named charities as eight of its ten beneficiaries. It had income in one tax year but paid the charities in the following year, when it incorrectly treated the payments as beneficiary distributions. The trust missed the deadline to elect a charitable deduction for the earlier year under section 642(c)(1). The IRS granted a 60-day extension to make that election on an amended return for the earlier year. The trust also had to amend the later year's return to remove the inconsistent deduction and distribution treatment.

Ruling snapshot

• Question: Could the trust make a late election to treat the following year's charitable payments as paid in the earlier tax year?
• Outcome: Approved; a 60-day extension was granted, with amended returns required for both years.
• Key authorities: IRC §§ 170(c), 642(c)(1), 661; Treas. Reg. §§ 1.642(c)-1(b), 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200444003
Release Date: 10/29/04
Index Number: 9100.26-00, 642.03-00

-------------------------------------------------- Person To Contact:
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Refer Reply To:
CC:PSI:B02 – PLR-102171-04
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Date:
July 13, 2004

Trust = -----------------------------------------------------------------------------------------------------
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X = -----------------------------------------------------------------------------------------------------
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Year = -------
1
Year = -------
2
d1 = ----------------

x = -----------

y = -----------

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

This is in reply to a letter dated December 22, 2003, and subsequent correspondence, submitted by the Trust’s authorized representative on behalf of the Trust, requesting that the Service grant the Trust an extension of time pursuant to ' 301.9100-3 of the Procedure and Administration Regulations to make an election under ' 642(c)(1) of the Internal Revenue Code for its Year 1 taxable year.

The information submitted states that X, the grantor of the Trust, died on d1.
The Trust provides that, after the payment of taxes and other expenses, the trustee shall distribute the trust principal in equal shares to the named beneficiaries. Eight of the ten named beneficiaries are represented as being qualified charitable organizations described in § 170(c).

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PLR-102171-04

In Year 1, Trust had gross income of $x and made no distributions to the charities. In Year 2, Trust made total distributions to the charities of $y, which were incorrectly treated as distributions under § 661. The date to file an effective election under ' 642(c)(1) for the Year 1 taxable year, allowing a deduction for amounts paid to charity in Year 2, had passed. Therefore, the Trust requested an extension to file a ' 642(c)(1) election for Year 1 under ' 301.9100-3.

Section 642(c)(1) provides that in the case of an estate or trust, there shall be allowed as a deduction in computing its taxable income any amount of the gross income, without limitation, which pursuant to the terms of the governing instrument is, during the taxable year, paid for a purpose specified in ' 170(c). If a charitable contribution is paid after the close of such taxable year and on or before the last day of the taxable year following the close of such taxable year, then the trustee or administrator may elect to treat such contribution as paid during such taxable year. The election shall be made at such time and in such manner as the Secretary prescribes by regulation.

Section 1.642(c)-1(b)(2) of the Income Tax Regulations provides that the election under ' 642(c)(1) shall be made not later than the time, including extensions thereof, prescribed by law for filing the federal income tax return for the succeeding taxable year.

Section 1.642(c)-1(b)(3) provides that the election shall be made by filing with the income tax return (or amended return) for the taxable year in which the contribution is treated as paid a statement which (i) states the name and address of the fiduciary, (ii) identifies the estate or trust for which the fiduciary is acting, (iii) indicates that the fiduciary is making an election under ' 642(c)(1) in respect of contributions treated as paid during such taxable year, (iv) gives the name and address of each organization to which any such contribution is paid, and (v) states the amount of each contribution and date of actual payment or, if applicable, the total amount of contributions paid to each organization during the succeeding taxable year, to be treated as paid in the preceding taxable year.

Under ' 301.9100-1(c), the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Code, except E, G, H, and I. 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). Section 301.9100-1(b) defines a regulatory election to include 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.

PLR-102171-04
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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 301.9100-1(a)

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 ' 301.9100-2.

Based on the information submitted and the representations made, we conclude that the requirements of ' 301.9100-3 have been satisfied. As a result, the Trust is granted an extension of time for 60 days from the date of this letter to file an election under ' 642(c)(1) for the Trust=s Year 1 taxable year. The election must be made on the amended return for the Trust=s Year 1 taxable year. An amended Year 2 return must be filed which does not claim any deduction for amounts of Year 1 gross income paid to the charities in Year 2 and does not treat any distributions to charities as deductible under § 661. The amended returns must be filed within the sixty day period with the service center where the Trust files its returns. A copy of this letter should be attached to the amended returns. Copies are included for that purpose.

Except as specifically set forth above, we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the Code.

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

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to the Trust’s authorized representative.

Sincerely,

HEATHER C. MALOY
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures: 3
2 copies of this letter
Copy for ' 6110 purposes