PLR 1245012: IRS grants an estate more time to make a section 1022 election

Plain-English summary

The IRS granted a deceased person's estate an additional 120 days to file Form 8939, make the section 1022 election, and allocate basis to eligible property. The estate's personal representative relied on accounting and legal firms for advice about whether Form 8939 was required, but the form was not prepared before the January 17, 2012 deadline. The IRS concluded that the requirements for relief under § 301.9100-3 were satisfied. The ruling applies only to the requesting taxpayer and does not decide other tax consequences.

Ruling snapshot

• Question: Could the estate receive more time to file Form 8939 and make the section 1022 election after missing the filing deadline?
• Outcome: Approved, a 120-day extension was granted
• Key authorities: IRC § 1022; Treas. Reg. § 301.9100-3; Form 8939

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

                                                          Third Party Communication: None

Number: 201245012 Date of Communication: Not Applicable
Release Date: 11/9/2012 Person To Contact:
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Index Number: 1022.00-00, 9100.00-00 ----------------------------------------
Telephone Number:
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----------------------------------- Refer Reply To:
---------------------------- CC:PSI:B04
PLR-112679-12
Date: AUGUST 07, 2012

      -------------------------------------------

RE:

Legend

Decedent -------------------------------------------
Trust ---------------------------------------------------------
Accounting Firm ----------------------------------
Law Firm --------------------------------

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

    This responds to your personal representative’s letter of March 15, 2012,

requesting an extension of time pursuant to § 301.9100-3 of the Procedure and
Administration Regulations to file a Form 8939, Allocation of Increase in Basis for
Property Acquired from a Decedent to make the Section 1022 Election and to allocate
basis provided by § 1022 of the Internal Revenue Code (Code) to eligible property
transferred as a result of Decedent’s death.

      The facts and representations submitted are summarized as follows:

    Decedent died in 2010. At the time of her death, all assets were either titled in

Decedent’s revocable trust, Trust, or passed to Trust under the terms of Decedent’s will.
The trustee of Trust, who also served as personal representative for Decedent’s estate,
retained Accounting Firm and Law Firm to advise him on estate tax matters including
the necessity to file a Form 8939. Accounting Firm and Law Firm determined that the
personal representative should file a Form 8939, but failed to prepare the Form 8939
before the filing deadline of January 17, 2012. Consequently, the personal
representative failed to make a Section 1022 Election for Decedent’s estate.

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

PLR-112679-12 2

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.

  Section 1022(b)(1) provides, in general, that the basis of property under

§ 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 § 1212(b), and the amount of any net
operating loss carryover under § 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
§ 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 § 1022(a) (as increased under § 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 § 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 §§ 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 §§ 1022(b) and (c) on the return required by § 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 § 1022.

PLR-112679-12 3

   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 § 2210, which made chapter 11 (the
estate tax) inapplicable to the estate of any decedent who died in 2010 and chapter 13
(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 § 301(a) of TRUIRJCA retroactively reinstated the estate and
GST taxes. However, § 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 § 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 § 1014(b)). Thus, § 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 § 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 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.

   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
the date of this letter to make the Section 1022 Election on a Form 8939 and allocate
additional basis to eligible property as provided by § 1022. A copy of this letter should
be attached to the Form 8939.

  In accordance with the Power of Attorney on file with this office, we have sent a

copy of this letter to your authorized representatives.

   Except as expressly provided herein, we neither express nor imply any opinion

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

  The rulings contained in this letter are based upon information and

representations submitted by the Taxpayer and accompanied by a penalty of perjury

PLR-112679-12 4

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.

  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,



                                       _________________________
                                       James F. Hogan
                                       Chief, Branch 4
                                       Office of the Associate Chief Counsel
                                       (Passthroughs and Special Industries)




   Enclosures
         Copy for § 6110 purposes
         Copy of this letter