PLR 200946011: A taxpayer received more time to elect one rental real estate activity

Plain-English summary

The IRS granted a taxpayer an extension to elect under section 469(c)(7) to treat all interests in rental real estate as a single rental real estate activity. The taxpayer was represented to be engaged in a qualifying real property business but had filed the return without the required election statement. The election had to be made on an amended return within 60 days, and no later than the authorized period for filing that return. The ruling did not decide whether the taxpayer met the real-property-business or material-participation requirements.

Ruling snapshot

• Question: May the taxpayer make a late election to treat all rental real estate interests as one activity?
• Outcome: Approved
• Key authorities: IRC § 469(c)(7); Treas. Reg. §§ 1.469-9(g)(3) and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200946011
Third Party Communication: None
Release Date: 11/13/2009
Date of Communication: Not Applicable
Index Number: 9100.00-00, 469.03-03
Person To Contact:
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-----------------------, ID No. -------------
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Telephone Number:
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Refer Reply To:
CC:PSI:B1
PLR-111935-09
Date: August 11, 2009

Legend

Taxpayer = ---------------------------
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Year = -------

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

This responds to a letter dated February 23, 2009, submitted by your authorized representative on your behalf, requesting a ruling that you be granted an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 469(c)(7) of the Internal Revenue Code and § 1.469-9(g)(3) of the Income Tax Regulations to treat all interests in rental real estate as a single rental real estate activity.

Facts

According to the information submitted, Taxpayer represents that in Year he was in a real property business as defined by § 469 and was qualified under § 469(c)(7)(B) to make an election to treat all interests in rental real estate as a single rental real estate activity. However, Taxpayer filed his return for Year without the statement required under § 1.469-9(g)(3).
PLR-111935-09
2

Law and Analysis

Under § 469(c)(2), the term "passive activity" generally includes any rental activity. Section 469(c)(7) provides a limited exception to this rule for taxpayers in a real property business. Specifically, § 469(c)(7)(A) indicates that if a taxpayer meets the requirements of § 469(c)(7)(B), the taxpayer's rental real estate activity will no longer be presumptively passive. By its terms, the exception under § 469(c)(7)(A) is to be applied as if each interest of the taxpayer in rental real estate were a separate activity. However, a taxpayer may elect to treat all interests in rental real estate as a single activity.

Section 1.469-9(g)(3) provides that a qualifying taxpayer makes the election to treat all interests in rental real estate as a single rental real estate activity by filing a statement with the taxpayer's original income tax return for the taxable year. Section 1.469-9(g)(3) describes the information that must be contained in the statement.

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 subtitles E, G, H, and I. Section 301.9100-1(b) defines the term "regulatory election" as including an election whose deadline is prescribed by a regulation published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards that 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.

Section 301.9100-3(a) provides that 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 the grant of relief will not prejudice the interests of the government.

Section 301.9100-3(b) provides that subject to paragraphs (b)(3)(i) through (iii) of § 301.9100-3, when a taxpayer reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make the election, the taxpayer will be deemed to have acted reasonably and in good faith.
PLR-111935-09
3

Conclusion

Based solely on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, Taxpayer is granted an extension of time of sixty (60) days from the date of this letter (but in no event later than the authorized period for filing an amended return for Year) to make an election under § 469(c)(7)(A) to treat all his interests in rental real estate as a single rental real estate activity effective Year. The election must be in the form of the statement required by § 1.469-9(g)(3) and attached to an amended return for Year. A copy of this letter should be attached to the election.

Except as specifically provided herein, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether Taxpayer satisfies the requirements under § 469(c)(7)(B) or whether Taxpayer materially participates in any activity.

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.

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

Sincerely,

Curt G. Wilson

Curt G. Wilson
Associate Chief Counsel
(Passthroughs and Special Industries)

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