PLR 1226005: IRS grants more time to file Form 3115 for abandoned lease improvements

Plain-English summary

A taxpayer asked for more time to file Form 3115 to change its accounting method for lessee improvements abandoned when a lease terminated. The taxpayer had instructed a courier to send the form by certified mail, but the courier failed to mail it on the instructed date. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied and granted 30 calendar days from the ruling date to file Form 3115. The ruling did not express an opinion on whether the Commissioner would ultimately consent to the accounting-method change.

Ruling snapshot

• Question: May a taxpayer receive more time to file Form 3115 for a change involving abandoned lease improvements?
• Outcome: Approved
• Key authorities: IRC § 446(e); Treas. Reg. §§ 301.9100-1 through 301.9100-3; Rev. Proc. 97-27

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201226005 Third Party Communication: None
Release Date: 6/29/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.10-01 ---------------, ID No. -----------------
Telephone Number:
---------------------
------------------ Refer Reply To:
---------------- CC:ITA:B06
-------------------------- PLR-104112-12
-------------------- Date:
-------------------------------- March 26, 2012

In re: Request for Extension of Time to File Form 3115, Application for Change in
Method of Accounting.

Taxpayer = --------------------------
-----------------------

Courier = ---------------------------------------------------------

Date 1 = ----------------------

Date 2 = ---------------------------

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

    This letter responds to a letter dated January 20, 2012, requesting an extension

of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations for
Taxpayer to file a Form 3115, Application for Change in Method of Accounting, to
change its method of accounting for lessee improvements abandoned at the termination
of a lease, beginning with the taxable year beginning Date 1, and ending Date 2 (year of
change).

FACTS

      Taxpayer represents that the facts are as follows:

   Taxpayer did not timely file the Form 3115 under the provisions of Rev. Proc. 97-

27, 1997-1 C.B. 680, for the year of change. On Date 2, Courier picked up the Form
PLR-104112-12 2

3115 at Taxpayer’s office. Taxpayer instructed Courier to mail the Form 3115, by
certified mail, on Date 2. Courier failed to mail the Form 3115 on Date 2.

RULING REQUESTED

  Taxpayer requests an extension of time pursuant to § 301.9100-3 to file the Form

3115 to change its method of accounting for lessee improvements abandoned at the
termination of a lease, beginning with the year of change.

LAW AND ANALYSIS

   Rev. Proc. 97-27, 1997-1 C.B. 680, provides the general procedures under

§ 446(e) of the Internal Revenue Code and § 1.446-1(e) of the Income Tax Regulations
for obtaining the consent of the Commissioner of Internal Revenue to change a method
of accounting for federal income tax purposes.

   Section 5.01(1)(a) of Rev. Proc. 97-27 provides that a taxpayer changing a

method of accounting pursuant to Rev. Proc. 97-27 must file its Form 3115 during the
year of change.

   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 30 calendar days from the date of this letter to file the Form 3115 to
change its method of accounting for lessee improvements abandoned at the termination
of a lease, beginning with the year of change.
PLR-104112-12 3

  The ruling contained in this letter is based upon information and representations

submitted by Taxpayer and accompanied by a penalty of perjury statement executed by
an appropriate party. While this office has not verified any of the materials submitted in
support of the letter ruling request, such material is subject to verification on
examination.

   Except as specifically set forth above, no opinion is expressed or implied

concerning the federal tax consequences of any aspect of the facts described above
under any other provisions of the Code. Specifically, no opinion is expressed or implied
as to whether the Commissioner will grant consent to Taxpayer to make its change in
accounting method.

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

Taxpayer’s authorized representatives. We are also sending a copy of this letter to the
appropriate operating division director.

  This letter 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 yours,


                                             Kathleen Reed

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

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