PLR 1232012: IRS grants more time to file a LIFO election after a restructuring

Plain-English summary

A successor discovered that a taxpayer had failed to file Form 970 when an internal restructuring resulted in the incorporation of a division as the taxpayer. The taxpayer had adopted the LIFO inventory method under IRC § 472 and used it in its reports for the relevant and later years. The IRS granted a 30-day extension to file Form 970 under the regulatory-election relief rules. The ruling did not express an opinion on whether the taxpayer had otherwise used the LIFO method correctly.

Ruling snapshot

• Question: May the successor file Form 970 late on the taxpayer's behalf to elect the LIFO inventory method?
• Outcome: Approved.
• Key authorities: IRC § 472; Treas. Reg. §§ 1.472-3 and 301.9100-1 through 301.9100-3; § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201232012 Third Party Communication: None
Release Date: 8/10/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.11-00 -----------, ID No. -----------------
Telephone Number/Fax Number:
-------------------- --------------------
-------------------------------------------------- Refer Reply To:
Attention: ------------------ CC:ITA:6
----------------------- PLR-114117-12
---------------------------------- Date:
May 14, 2012

In Re: Request for Extension of Time to File Form 970, Application To Use LIFO
Inventory Method.

Legend

Successor = --------------------------------------------------
----------------------

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

Division = --------------------------

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

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

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

This letter is in reply to a private letter ruling request dated March 28, 2012, filed by
Successor on behalf of Taxpayer. Successor requests an extension of time under §
301.9100-1(c) of the Procedure and Administration Regulations to file Form 970,
Application To Use LIFO Inventory Method, on behalf of Taxpayer. Taxpayer elected
the last-in, first-out inventory method described in § 472 of the Internal Revenue Code
(LIFO inventory method) for its inventory and was required by § 1.472-3(a) of the
Income Tax Regulations to file a Form 970. The Form 970 was to have been filed by
Taxpayer for the taxable year, beginning Date 1 and ending Date 2.

In the process of evaluating a potential change in method of accounting for inventory,
Successor discovered that Taxpayer had failed to file Form 970 for the taxable year
ending Date 2. Successor states that Taxpayer was required to file Form 970 for this
PLR-114117-12 2

taxable year because an internal restructuring resulted in the incorporation of Division
as Taxpayer. Successor represents that Taxpayer implemented the LIFO inventory
method described in § 472 for the taxable year ending Date 2 and has used the LIFO
inventory method for all subsequent taxable years. Successor also represents that the
LIFO inventory method was used by Taxpayer in its reports to shareholders, partners,
or other proprietors, to beneficiaries, and for credit purposes for the taxable year ending
Date 2 and for all subsequent taxable years. Promptly after discovery of this failure to
timely file Form 970, Successor filed on behalf of Taxpayer this request for an extension
of time to file the Form 970.

Section 472 provides that a taxpayer may use the LIFO method in inventorying goods
specified in an application to use such method, filed at such time, and in such manner,
as the Secretary may prescribe.

Section 1.472-3 provides that the LIFO inventory method may be adopted and used
only if the taxpayer files with its income tax return for the taxable year as of the close of
which the method is first to be used in a statement of its election to use such inventory
method. The statement is to be made on Form 970.

Section 301.9100-1(c) provides that 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 certain regulatory elections. Section 301.9100-1(b) defines a 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 301.9100-2 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.

Requests for relief under § 301.9100-3 will be granted when a taxpayer provides
evidence to establish to the satisfaction of the Commissioner (1) that the taxpayer acted
reasonably and in good faith, and (2) that granting relief will not prejudice the interests
of the Government. See § 301.9100-3(a).

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, we
hereby grant an extension of time for Successor to file Form 970 for Taxpayer. This
extension shall be for a period of 30 days from the date of this ruling. Please attach a
copy of this ruling to the Form 970.

The ruling contained in this letter is based upon information and representations
submitted by Successor and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the materials submitted
PLR-114117-12 3

in support of the request for rulings, such material is subject to verification on
examination.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. Specifically, we express no opinion as to whether Taxpayer has correctly
used the LIFO inventory method.

This ruling is directed only to Successor, who requested it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to Successor’s authorized representatives.

                                               Sincerely,




                                               ROY HIRSCHHORN
                                               Chief, Branch 6
                                               Office of Associate Chief Counsel
                                               (Income Tax & Accounting)