Determination 201002034: IRS retroactively revoked an installment-sale ruling

Plain-English summary

The IRS retroactively revoked an earlier ruling that treated the sale of a 25 percent interest in a limited liability company as a sale of underlying real estate eligible for installment-method reporting under section 453. The earlier ruling had relied on the representation that the entity was a disregarded entity eligible for exclusion from all or part of subchapter K under section 761(a). The IRS concluded that the entity did not qualify under section 761 because it was not an unincorporated organization and its participants were not co-owners of the property. The sale was therefore treated as a sale of a partnership interest rather than a sale of the entity's assets.

Ruling snapshot

• Question: Should the earlier ruling allowing installment-method treatment for a sale of underlying real estate be revoked?
• Outcome: Revocation
• Key authorities: IRC §§ 453 and 761(a); Rev. Proc. 2009-1, § 11.05(1)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201002034
Third Party Communication: None
Release Date: 1/15/2010
Date of Communication: Not Applicable
Index Number: 453.06-03, 453.11-00,
761.00-00
Person To Contact:
--------------------, ID No. ----------
--------------------------
Telephone Number:
------------------------
--------------------
----------------------------------------- Refer Reply To:
CC:ITA:B04
PLR-142707-09
Date:
October 01, 2009

LEGEND

Partnership 4 = --------------------------

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

This letter revokes PLR 200937007 (March 10, 2009). The ruling concluded that your sale of a 25 percent interest in Partnership 4 was a sale of your interest in the underlying real estate that qualified for installment method reporting under § 453 of the Internal Revenue Code.

The ruling’s conclusions were based on information and representations you submitted, specifically that Partnership 4 was a limited liability company and a disregarded entity under § 761(a). However, Partnership 4 is not eligible to elect to be excluded from the application of all or part of subchapter K under § 761 as Partnership 4 is not an unincorporated organization and the participants are not the co-owners of the property. Thus, your sale of your interest in Partnership 4 is treated as a sale of a partnership interest and not as a sale of the assets held by Partnership 4.
PLR-142707-09
2

As there has been a misstatement or omission of controlling facts on which the letter ruling was based, the Service is retroactively revoking PLR 200937007. See Section 11.05(1) of Rev. Proc. 2009-1, 2009-1 I.R.B. 1, 48, which provides that an Associate Office will revoke a letter ruling and apply the revocation retroactively to the taxpayer for whom the letter ruling was issued if there has been a misstatement or omission of controlling facts.

Sincerely,

Michael J. Montemurro
Branch Chief, Branch 4
Office of Associate Chief Counsel
(Income Tax & Accounting)

cc: