PLR 1039015: IRS granted more time to elect out of GO Zone depreciation

Plain-English summary

A partnership had timely filed its tax return but accidentally omitted the statement needed to elect out of the Gulf Opportunity Zone additional first-year depreciation deduction. The IRS granted the partnership 60 days to make the election for all qualifying property placed in service during the redacted tax year. The election had to be made by filing an amended return with the required statement. The ruling did not address whether any particular property was eligible for the additional depreciation deduction.

Ruling snapshot

• Question: Could the taxpayer receive more time to elect out of GO Zone additional first-year depreciation?
• Outcome: Approved
• Key authorities: IRC § 1400N(d); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Notice 2006-77

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201039015 Third Party Communication: None
Release Date: 10/1/2010 Date of Communication: Not Applicable
Index Number: 9100.22-00
Person To Contact:
------------------------------------------------- -----------------, ID No. -----------------
---------------------------------------------- Telephone Number:
------------------------ ---------------------
------------------------------------ Refer Reply To:
CC:ITA:7
PLR-115949-10
Date:
June 23, 2010

Re

Taxpayer = -----------------------------------------------------------------------
A = ----------------------------------
B = ----------------------------
C = -------
Date1 = --------------------------
SB/SE Official = ------------------------

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

   This letter responds to a letter dated March 30, 2010, and supplemental

correspondence, requesting an extension of time pursuant to § 301.9100-3 of the
Procedure and Administration Regulations to make the election not to deduct the Gulf
Opportunity (GO) Zone additional first year depreciation under § 1400N(d) of the
Internal Revenue Code for all classes of qualified Gulf Opportunity Zone property (GO
Zone property) placed in service in the taxable year ended Date1 (the C taxable year).

FACTS

     Taxpayer represents that the facts are as follows:

     Taxpayer, a partnership, owns and operates ------------------------------------------------

---------------- through its wholly owned LLC, A. A is wholly owned by Taxpayer and is
treated as a disregarded entity.

   Taxpayer timely filed its federal income tax return for the taxable year ended

Date1. On this return, Taxpayer did not deduct the GO Zone additional first year
depreciation deduction provided by § 1400N(d) for all qualified GO Zone property
placed in service during the C taxable year. However, Taxpayer inadvertently failed to
attach the statement to elect not to deduct the GO Zone additional first year
PLR-115949-10 2

depreciation. Taxpayer’s return for the C taxable year was prepared by its tax return
preparer, B, who did not advise Taxpayer of the need to attach such statement to its
return. During the C taxable year, Taxpayer placed in service the following classes of
qualified GO Zone property: 5-year property, 7-year property, computer software as
defined by § 167(f)(1)(B), and nonresidential real property.

RULING REQUESTED

    Accordingly, Taxpayer requests an extension of time pursuant to § 301.9100-3 of

the Procedure and Administration Regulations to make the election not to deduct the
GO Zone additional first year depreciation under § 1400N(d) for all classes of property
that is placed in service in the taxable year ended Date1 (the C taxable year) and that
qualifies for the GO Zone additional first year depreciation.

LAW AND ANALYSIS

   Section 1400N(d)(1) provides a 50-percent additional first year depreciation

deduction for the taxable year in which qualified GO Zone property is placed in service
by a taxpayer.

   Section 1400N(d)(2)(B)(iv) provides that a taxpayer may elect not to deduct the

GO Zone additional first year depreciation for any class of property placed in service
during the taxable year. See also § 4.01 of Notice 2006-77, 2006-40 I.R.B. 590. The
term “class of property” is defined in § 4.02 of Notice 2006-77 as meaning: each class of
property described in § 168(e) (for example, 5-year property); water utility property as
defined in § 168(e)(5) and depreciated under § 168; computer software as defined in,
and depreciated under, § 167(f)(1) and the regulations thereunder; qualified leasehold
improvement property as defined in § 168(k)(3) and § 1.168(k)-1(c) of the Income Tax
Regulations and depreciated under § 168; nonresidential real property as defined in §
168(e)(2)(B) and depreciated under § 168; or residential rental property as defined in §
168(e)(2)(A) and depreciated under § 168.

   Section 4.03 of Notice 2006-77 provides, in part, that the election not to deduct

GO Zone additional first year depreciation must be made by the due date (including
extensions) of the federal tax return for the taxable year in which the GO Zone property
is placed in service by the taxpayer. The election must be made in the manner
prescribed on Form 4562, “Depreciation and Amortization,” and its instructions. The
instructions to Form 4562 for the C taxable year provided that the election not to deduct
the GO Zone additional first year depreciation is made by attaching a statement to the
taxpayer’s timely filed tax return indicating that the taxpayer is electing not to deduct the
GO Zone additional first year depreciation and the class of property for which the
taxpayer is making the election.
PLR-115949-10 3

   Under § 301.9100-1, the Commissioner has discretion to grant a reasonable

extension of time under the rules set forth in § § 301.9100-2 and 301.9100-3 to make a
regulatory election.

   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.

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

CONCLUSIONS

    Based solely on the facts and representations submitted, we conclude that the

requirements of '' 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
Taxpayer is granted 60 calendar days from the date of this letter to make the election
not to deduct the GO Zone additional first year depreciation under § 1400N(d) for all
property that is placed in service by Taxpayer in the taxable year ended Date1 and that
qualifies for the GO Zone additional first year depreciation. This election must be made
by Taxpayer filing an amended federal tax return for the taxable year ended Date1, with
a statement indicating that Taxpayer is electing not to deduct the GO Zone additional
first year depreciation for all property placed in service in that taxable year.

    Except as specifically set forth above, we express no opinion concerning the

federal income tax consequences of the facts described above under any other
provisions of the Code. Specifically, no opinion is expressed or implied on whether any
item of depreciable property placed in service in the taxable year ended Date1, is
eligible for the GO Zone additional first year depreciation deduction.

 In accordance with the power of attorney, we are sending copies of this letter to

Taxpayers= authorized representatives. We are also sending a copy of this letter to the
SB/SE Official.
PLR-115949-10 4

  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.

                                             Sincerely,

                                             Kathleen Reed

                                             Kathleen Reed
                                             Branch Chief, Branch 7
                                             Office of Associate Chief Counsel
                                             (Income Tax and Accounting)

Enclosures (2):
copy of this letter
copy for section 6110 purposes