Written Determination 1301013: IRS revokes an earlier ruling on cancellation-of-debt reporting

Plain-English summary

The IRS revoked an earlier private letter ruling that concluded certain debt discharges were triggered by state law and therefore were not reportable under IRC § 6050P. The IRS's current view was that the discharges resulted from an agreement between the parties, making them identifiable events under Treas. Reg. § 1.6050P-1(b)(2) and subject to reporting. The revocation was not applied retroactively because the conditions in Rev. Proc. 2012-1 for limiting retroactive effect were satisfied. The letter concerns only the taxpayer who requested the earlier ruling.

Ruling snapshot

• Question: Should an earlier ruling on reporting debt discharges under IRC § 6050P be revoked?
• Outcome: Revocation
• Key authorities: IRC § 6050P and § 7805(b); Treas. Reg. § 1.6050P-1(b)(2); Rev. Proc. 2012-1

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201301013 [Third Party Communication:
Release Date: 1/4/2013 Date of Communication: Month DD, YYYY]
Index Number: 6050P.00-00
Person To Contact:
----------------------------- ------------------, ID No. -------------
------------------------------ Telephone Number:
--------------------------------------------- ---------------------
----------------------- Refer Reply To:
------------------------------ CC:PA:02
PLR-104257-12
Date:
October 01, 2012

Legend

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

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

This is to notify you that private letter ruling PLR 201021018 (PRL-147680-09) dated February 5, 2010 issued in response to Taxpayer’s request dated October 8, 2009 is hereby revoked. The letter ruling is being revoked because it is not in accord with the current views of the Service. See Section 11.04 of Rev. Proc. 2012-1, 2012-1 I.R.B. 1, 50.

Our previous letter ruled that discharges made by Taxpayer were triggered by operation of state law, and that the reporting requirements of section 6050P did not apply. It is the current view of the Service, however, that the discharges occurred not by operation of state law but rather as a result of an agreement by the parties to discharge the debt. Therefore, the transaction was an “identifiable event” under Treas. Reg. § 1.6050P-1(b)(2) and the reporting requirements apply.

Section 7805(b) provides that the Secretary of the Treasury may prescribe the extent to which any ruling or regulation relating to the internal revenue laws may be applied without retroactive effect. Section 11.04 of Rev. Proc. 2012-1 provides, in part, that if a letter ruling is revoked, the revocation applies to all years open under the statute, unless the Service uses its discretionary authority under section 7805(b) to limit the revocation’s retroactive effect. Section 11.06 of Rev. Proc. 2012-1 provides that where the revocation is for reasons other than a change in facts described in section 11.05, it generally will not be applied retroactively provided that: (1) there has been no change in the applicable law; (2) the letter ruling was originally issued for a proposed transaction; and (3) the taxpayer directly involved in the letter ruling acted in good faith in relying on the letter ruling, and revoking the ruling retroactively would be to the taxpayer’s detriment.

PLR-104257-12 2

Because the factors in section 11.06 of Rev. Proc. 2012-1 have been satisfied, pursuant to the authority contained in section 7805(b), the revocation of the February 5, 2010 letter will not be applied retroactively.

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

                                   Sincerely,



                                   Charles A. Hall
                                   Senior Technician Reviewer, Branch 1
                                   (Procedure & Administration)

Enclosures:
Copy of letter
Copy of letter for section 6110 purposes

cc: -----------------------