PLR 200517012: Trust receives extension for charitable deduction election

Plain-English summary

A trust made charitable distributions in the year after its grantor died and later amended its prior-year income tax return to claim a deduction. An estate tax audit had reduced the estate's charitable deduction, and the trust missed the deadline to elect to treat the later distributions as paid in the prior year under IRC § 642(c)(1). The IRS granted the trust 60 days to make the election on an amended return, with a copy of the ruling attached. It did not decide whether the trust had calculated the deduction correctly.

Ruling snapshot

• Question: Could the trust make a late election to deduct next-year charitable distributions in the prior year?
• Outcome: Approved, with 60 days to file the election on an amended return.
• Key authorities: IRC § 642(c)(1); 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: 200517012
Third Party Communication: None
Release Date: 4/29/2005
Date of Communication: Not Applicable
Index Number: 9100.26-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B02
PLR-143266-04
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Date:
December 22, 2004

A = ---------------
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Trust = --------------------------------------
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Charities = --------------------------------------------------------------------------------------
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d1 = ------------------

Year 1 = -------

Year 2 = -------

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

This is in reply to your letter dated August 6, 2004, and subsequent correspondence, submitted on behalf of Trust, requesting that the Service grant 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 A, the grantor of Trust, died on d1 of Year

1. Trust, as amended, provides that after certain bequests, the residue of Trust shall be
   distributed to charitable organizations, as defined under the Internal Revenue Code. In
   PLR-143266-04 2

Year 2, distributions were made to Charities. No deduction under § 642(c) for the amount distributed to Charities from Trust’s gross income for Year 1 was claimed on Trust’s income tax return. Following an audit of A’s estate tax return, the charitable deduction for A’s estate was reduced to the amount of charitable contributions made from the gross estate, not including income earned on A’s estate following A’s death. Trust’s Year 1 income tax return was amended to claim a charitable deduction under
§ 642(c) for the amount distributed to Charities from Trust’s gross income for Year 1. However, 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 already passed. Therefore, Trust requests an extension to file a § 642(c)(1) election for Year 1 under
§ 301.9100-3.

Section 642(c) 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 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,
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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 § 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, Trust is granted an extension of time for 60 days from the date of this letter to file an election under § 642(c) for Trust’s Year 1 taxable year. The election must be made on the amended return for Trust’s Year 1 taxable year. The amended return must be filed within the sixty (60) day period with the service center where Trust files its returns. A copy of this letter should be attached to the amended return.

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, including whether the deduction under § 642(c) was calculated correctly by Trust.

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

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

Sincerely,

Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries )

Enclosures (2)
Copy of this letter
Copy for section 6110 purposes