PLR 201245005: IRS grants extra time to amend a 2010 estate basis allocation

Plain-English summary

The IRS granted a decedent's personal representative 120 additional days to amend Form 8939 for a 2010 estate. The timely filed form had omitted basis allocations for closely held business interests, and the representative sought to allocate basis under section 1022. The ruling found that the requirements for relief under section 301.9100-3 were satisfied and directed the representative to attach the ruling to the amended form. The IRS did not decide whether the property was otherwise eligible for the section 1022 basis allocation.

Ruling snapshot

• Question: Could the estate receive extra time to amend Form 8939 and allocate section 1022 basis to eligible property?
• Outcome: Approved
• Key authorities: IRC §§ 1022, 165, 172, and 6018; Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Third Party Communication: None
Number: 201245005
Date of Communication: Not Applicable
Release Date: 11/9/2012
Person To Contact:
------------------, ID No. -----------------
Index Number: 1022.00-00, 9100.00-00
Telephone Number:
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------------------------------------------ Refer Reply To:
--------------------------------------------------------------- CC:PSI:4
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PLR-104824-12
Date:
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July 31, 2012
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RE:

Legend

Decedent = -----------------------------------------------------

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

This responds to your personal representative’s letter of January 31, 2012, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to file an amended Form 8939 (Allocation of Increase in Basis for Property Acquired from a Decedent).

The facts and representations submitted are as follows. Decedent died in 2010.
At his death, Decedent owned business interests in several closely-held companies. The personal representative for Decedent’s estate timely filed a Form 8939, but failed to allocate basis to the closely-held business interests. The personal representative of Decedent’s estate is requesting an extension of time pursuant to § 301.9100-3 to amend Form 8939 to revise item 1, line 4 of Schedule A for Trust A and items 1 through 5, line 4 of Schedule A for Trust B and allocate basis provided by section 1022 of the Internal Revenue Code (Code) to such property.

Law and Analysis:

Section 1022(a) provides that property acquired from a decedent who died after December 31, 2009, is treated as transferred by gift, and the basis of the person acquiring the property from such a decedent is the lesser of the adjusted basis of the decedent or the fair market value of the property at the date of the decedent's death.
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Section 1022(b)(1) provides, in general, that the basis of property under section 1022(a) is increased by basis increase that is allocated to the property.

Section 1022(b)(2)(A) provides, in general, that basis increase is the portion of the aggregate basis increase that is allocated to the property.

Section 1022(b)(2)(B) and (C) provide that the aggregate basis increase is $1,300,000; and that the aggregate basis increase is increased by--(i) the sum of the amount of any capital loss carryover under section 1212(b), and the amount of any net operating loss carryover under section 172 that would (but for the decedent's death) be carried from the decedent's last taxable year to a later taxable year of the decedent, plus (ii) the sum of the amount of any losses that would have been allowable under section 165 if the property acquired from the decedent had been sold at fair market value immediately before the decedent's death.

Section 1022(c)(1) provides that in the case of property that is qualified spousal property, the basis of such property under section 1022(a) (as increased under section 1022(b)) is increased by spousal property basis increase allocated to the property.

Section 1022(c)(2)(A) provides, in general, that spousal property basis increase is the portion of the aggregate spousal property basis increase which is allocated to the property. Section 1022(c)(2)(B) provides that the aggregate spousal property basis increase is $3,000,000.

Section 1022(d)(1)(A) provides, in general, that the basis of property acquired from a decedent may be increased under section 1022(b) or (c) only if the property was owned by the decedent at the time of death. Section 1022(d)(1)(B) describes property that is considered to be owned by the decedent at the time of death.

Section 1022(d)(2) provides that the basis adjustments under sections 1022(b) and (c) shall not increase the basis of any interest in property above its fair market value in the hands of the decedent as of the date of the decedent's death.

Section 1022(d)(3) provides, in general, that the executor is to allocate the basis adjustments under sections 1022(b) and (c) on the return required by section 6018 and that any allocation made may be changed only as provided by the Secretary.

Section 1022(e) describes property that is considered to be acquired from the decedent for purposes of section 1022.

Subtitle A of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001, P.L. 107-16 (115 Stat. 76-81), enacted section 2210, which made chapter 11 (the estate tax) inapplicable to the estate of any decedent who died in 2010 and chapter 13
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(the generation skipping transfer (GST) tax) inapplicable to generation-skipping transfers made in 2010. On December 17, 2010, Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA), P.L. 111-312 (124 Stat. 3296), became law, and section 301(a) of TRUIRJCA retroactively reinstated the estate and GST taxes. However, section 301(c) of TRUIRJCA allows the executor of the estate of a decedent who died in 2010 to elect to apply the Code as though section 301(a) of TRUIRJCA did not apply with respect to chapter 11 and for property acquired or passing from a decedent (within the meaning of section 1014(b)). Thus, section 301(c) of TRUIRJCA allows the executor of the estate of a decedent who died in 2010 to elect not to have the provisions of chapter 11 apply to the decedent’s estate, but rather, to have the provisions of section 1022 apply (the Section 1022 Election).

Notice 2011-66, 2011-35 I.R.B. 184, section I.A. provides that the executor of the estate of a decedent who died in 2010 makes the Section 1022 Election by filing a Form 8939 on or before November 15, 2011. (Notice 2011-76, 2011-40 I.R.B. 479, extended the due date of the Form 8939 and thus, the election, from November 15, 2011 to January 17, 2012.)

Notice 2011-66, section I.D.1, provides that the Internal Revenue Service will not grant extensions of time to file a Form 8939 and will not accept a Form 8939 or amended Form 8939 filed after the due date except in four limited circumstances provided in section I.D.2. Under this section of Notice 2011-66, an executor may apply for relief under § 301.9100-3.

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 a regulatory election, or a statutory election (but no more than 6 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 301.9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due date is prescribed by a regulation (and not expressly provided by statute). Requests for relief under § 301.9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government.

Section 301.9100-3(b)(1)(ii) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer failed to make the election because of intervening events beyond the taxpayer’s control.

Based on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Therefore, the personal representative of Decedent’s estate is granted an extension of time of 120 days from
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the date of this letter to amend Form 8939 to revise items 1, line 4 of Schedule A for Trust A and items 1 through 5, line 4 of Schedule A for Trust B and allocate basis provided by section 1022 of the Code to eligible property. A copy of this letter should be attached to the Form 8939. A copy is enclosed for this purpose.

Except as expressly provided herein, we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the Code. Specifically, we express or imply no opinion on whether the property is eligible to allocate basis provided by section 1022 of the Code.

This ruling is directed only to the taxpayers requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

The rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: _____
James F. Hogan
Chief, Branch 4
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures: Copy for § 6110 purposes
One copy of this letter