PLR 201310015: Parent receives more time to file a § 337(d) loss statement

Plain-English summary

The IRS considered a parent company's request for more time to file a statement needed to elect relief under Treas. Reg. § 1.337(d)-2(c) for a loss on the sale of subsidiary stock. The parent said it had relied on a qualified tax professional who failed to make or recommend the election. The IRS found that the parent acted reasonably and in good faith, and granted a 60-day extension under Treas. Reg. § 301.9100-3. The extension was conditioned on the consolidated group's qualifying substantively and its aggregate tax liability not being lower than it would have been if the election had been timely.

Ruling snapshot

• Question: May the parent file the § 1.337(d)-2(c) statement late?
• Outcome: Approved, a 60-day extension was granted subject to stated conditions.
• Key authorities: IRC § 337; Treas. Reg. §§ 1.337(d)-2, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201310015
Third Party Communication: None
Release Date: 3/8/2013
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.29-00, 337.16-00
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Telephone Number:
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------------------------------------------------ Refer Reply To:
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CC:CORP:B04
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PLR-126335-12
Date:

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December 07, 2012
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Legend

Parent = ------------------------------------------
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Subsidiaries = ---------------------------------------------------------------
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Parent Official = --------------------
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Date A = ---------------------------

Date B = ---------------------------

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

This letter responds to a letter dated June 14, 2012, requesting an extension of time under §§ 301.9100-1, et seq., of the Procedure and Administration Regulations to file an election. In particular, Parent is requesting an extension of time to file a statement under § 1.337(d)-2(c) of the Income Tax Regulations (the “Election”). Additional information was submitted in letters dated September 13 and December 4, 2012. The material information submitted for consideration is summarized below.
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Parent was the common parent of a consolidated group (the “Parent Consolidated Group”). Subsidiaries were direct, wholly-owned subsidiaries of Parent and members of the Parent Consolidated Group.

On Date A, Parent sold all its stock in Subsidiaries to Purchaser. Parent recognized a loss on the sales, for which Parent has represented that none of the loss is disallowed or deferred under § 267. Parent has also represented that it is not seeking to alter a return position for which a penalty has been or could be imposed under § 6662.

An election under § 1.337(d)-2(c) to deduct the loss recognized on the sale of Subsidiaries’ stock was required to be filed with or as part of the Parent Consolidated Group's return for the taxable year ended Date B. However, for various reasons, the Election was not filed. After the due date for the Election, it was discovered that the Election had not been filed. Subsequently, this request was submitted.

Section 1.337(d)-2(a)(1) provides a general rule that no deduction is allowed for any loss recognized by a member of a consolidated group with respect to the disposition of stock of a subsidiary.

Section 1.337(d)-2(a)(2)(ii) provides that a disposition means any event in which gain or loss is recognized, in whole or in part.

Section 1.337(d)-2(c)(2) provides that loss is not disallowed under §1.337(d)-2 (a)(1) to the extent the taxpayer establishes that the loss is not attributable to the recognition of built-in gain on the disposition of an asset (including stock and securities).

Section 1.337(d)-2(c)(1) provides that § 1.337(d)-2(c) applies with respect to stock of a subsidiary only if a separate statement entitled “§ 1.337(d)-2(c) statement” is included with the return in accordance with § 1.337(d)-2(c)(3).

Section 1.337(d)-2(c)(3) provides that the statement required under § 1.337(d)- 2(c)(1) must be included with or as part of the taxpayer's return for the year of the disposition.

In general, § 1.337(d)-2 applies with respect to dispositions on or after March 3, 2005, and before September 17, 2008.

Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I.

Sections 301.9100-1 through 301.9100-3 provide the standards the
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Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of
§ 301.9100-2. Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish 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(a).

The time for filing the Election is fixed by the regulations (i.e., § 1.337(d)-2(c)(3)).
Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an extension of time for Parent to file the Election, provided Parent establishes to the satisfaction of the Commissioner that it acted reasonably and in good faith, that the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and that granting relief will not prejudice the interests of the government.

Information, affidavits, and representations submitted by Parent and Parent Official explain the circumstances that resulted in the failure to timely file the Election. The information establishes that Parent reasonably relied on a qualified tax professional who failed to make, or advise Parent to make, the Election, and that the request for relief was filed before the failure to make the Election was discovered by the Internal Revenue Service. See §§ 301.9100-3(b)(1)(i) and (v).

Based on the facts and information submitted, including the affidavits submitted and the representations made, we conclude that Parent has established that it acted reasonably and in good faith in failing to timely file the Election, that the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and that granting relief will not prejudice the interests of the government. Accordingly, provided the Parent Consolidated Group qualifies substantively to file the Election, we grant an extension of time under § 301.9100-3, until sixty (60) days from the date on this letter, for Parent to file the Election.

The above extension of time is conditioned on the Parent Consolidated Group’s tax liability, if any, not being lower in the aggregate for all years to which the Election applies than it would have been if the Election had been timely made (taking into account the time value of money). We express no opinion as to the Parent Consolidated Group’s tax liability for the years involved. A determination thereof will be made by the Director’s office upon audit of the Federal income tax returns involved. Further, we express no opinion as to the Federal income tax effect, if any, if it is determined that the Parent Consolidated Group’s tax liability is lower. Section 301.9100- 3(c).

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
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referenced in this letter. In particular, we express no opinion with respect to whether Parent qualifies substantively to make the Election. In addition, we express no opinion as to the tax effects or consequences of filing the Election late under the provisions of any other section of the Internal Revenue Code or regulations, or as to the tax treatment of any conditions existing at the time of, or resulting from, filing the Election late that are not specifically set forth in the above ruling.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer 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 the ruling, it is subject to verification on examination. In addition, notwithstanding that an extension is granted under § 301.9100-3 to file the Election, any penalties and interest that would otherwise be applicable continue to apply.

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

A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, a taxpayer filing its returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

Sincerely,

_Ken Cohen_____
Ken Cohen
Senior Technician Reviewer, Branch 3
Office of Associate Chief Counsel (Corporate)

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