PLR 200602009: Estate given 60 days to make missed 65-day distribution election

Plain-English summary

An estate distributed funds within the first 65 days of a new tax year and included the payment on its prior year income tax return. It had overlooked the § 663(b) election required to treat that payment as made in the prior year. The IRS found that the estate met the standards for late-election relief and granted 60 days from the ruling date to make the election. To use the extension, the estate had to file an amended prior year return with the election and a copy of the ruling. The letter did not address other tax consequences of the distribution.

Ruling snapshot

• Question: Could the estate make a late § 663(b) election for a distribution paid in the first 65 days of the following year?
• Outcome: Approved a 60-day extension, requiring an amended return with the election.
• Key authorities: IRC § 663(b); Treas. Reg. §§ 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200602009
Release Date: 1/13/2006
Index number: 663.04-00, 9100.12-00

------------------------------------- Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:2 – PLR-124774-05
Date:
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August 18, 2005
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Estate= ----------------------------------
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A = -------------------------

$x = -----------------

Year 1= ------

Year 2= ------

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

This responds to a letter dated March 31, 2005, and subsequent correspondence submitted on behalf of Estate, requesting that the Service grant Estate an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an election under § 663(b) of the Internal Revenue Code.

The information submitted states that Estate files its income tax return on a calendar year basis. A, the executor of the Estate made a distribution in the amount of $x (Distribution) within the first 65 days of Year 2. Estate included Distribution on its federal income tax return for Year 1 as permitted under § 663(b) but failed to make the § 663(b) election.

Section 663(b) provides that if within the first 65 days of any taxable year of an estate or trust, an amount is properly paid or credited, such amount shall be considered 2 PLR-124774-05

paid or credited on the last day of the preceding taxable year, provided that the executor of the estate or the fiduciary of the trust so elects in such manner and at such time as the Secretary prescribes by regulations.

If an estate return is required to be filed for an estate’s taxable year for which a § 663(b) election is to be made, the election is made in the appropriate place on the Form 1041, “U.S. Income Tax Return for Estates and Trusts.” The election is made not later than the time prescribed by law for filing the return (including extensions thereof). The election is irrevocable after the last day prescribed for making it.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, 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 301.9100-1(b) defines the term “regulatory election” as 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.

Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.

Based solely on the information submitted and the representations made, we conclude that the requirements of § 301.9100-1 and § 301.9100-3 have been satisfied. As a result, Estate is granted an extension of time of 60 days from the date of this letter to make an election under § 663(b), by filing an income tax return, amended to include the election, for Year 1, with the appropriate service center, with a copy of this letter attached. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent. 3 PLR-124774-05

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

Sincerely,

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

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

cc: