PLR 1348008: IRS grants a trust more time to make a section 663(b) election

Plain-English summary

A trust mistakenly filed its federal income tax return using a fiscal year instead of the calendar year. It intended to make a section 663(b) election for distributions credited to beneficiaries within the first 65 days of the proper taxable year, but the election was not timely filed. The IRS found that the trust satisfied the requirements for relief under the section 301.9100 regulations and granted 120 days from the letter date to make the election. The ruling does not decide whether the distributions were otherwise properly paid or credited, or whether they were made in the stated amounts.

Ruling snapshot

• Question: Could the trust receive an extension of time to make a section 663(b) election for distributions credited to its beneficiaries?
• Outcome: approved
• Key authorities: IRC § 663(b); Treas. Reg. §§ 1.663(b)-2, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 201348008                                                Third Party Communication: None
Release Date: 11/29/2013                                         Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.12-00
                                                                 Person To Contact:
-----------------------------------------------                  -----------------------, ID No. -------------------
--------------------------------------                           ---------------------------------------------------
-------------------                                              Telephone Number:
----------------------------                                     ----------------------
                                                                 Refer Reply To:
                                                                 CC:PSI:B02
                                                                 PLR-117024-13
                                                                 Date:
                                                                 July 18, 2013

                                                        Legend

Trust             =        --------------------------------------
                  --------------------------------

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

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

Date 3            =        --------------------------

Date 4            =        ----------------------

Date 5            =        ------------------------

Beneficiary 1 =            -----------------------------------
                           --------------------------

Beneficiary 2 =            ----------------------------------
                           --------------------------

Beneficiary 3 =            -------------------------------------
                           --------------------------

Beneficiary 4 =            -------------------------------------------------------------------
                           ------------------------

Beneficiary 5 =            ------------------------------------------------------------------
                           ------------------------

a                 =        ------------------
PLR-117024-13                                 2


b               =        ------------------

c               =        ------------------

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

        This letter responds to a letter dated March 27, 2013 submitted on behalf of Trust
by its authorized representative, requesting that the Service grant Trust an extension of
time under § 301.9100-3 of the Procedure and Administration Regulations to file an
election under § 663(b) of the Internal Revenue Code (Code).

       The information submitted states that Trust improperly filed its federal income tax
return on fiscal year basis, with its final taxable year ending Date 1. Its proper taxable
year, the calendar year, should have ended Date 2.

       The taxpayer represents that on Date 3 (which is within the calendar year ending
Date 2), Trust’s accountant prepared accountings crediting both Beneficiary 1’s and
Beneficiary 2’s accounts with final distributions of a in cash. These accountings related
only to one portion of Trust (“Portion 1”). Trust’s accountant mailed the accountings
relating to Portion 1 to Beneficiary 1 and Beneficiary 2 on Date 4 (which is within sixty-
five days following the close of the calendar year ending Date 2).

      On Date 4, Trust’s accountant prepared the final accountings for the remaining
assets in Trust (“Portion 2”) crediting the beneficiaries in the following amounts:

            o Beneficiary 1 was credited b in cash.
            o Beneficiary 2 was credited b in cash, real property, and as satisfaction of a
              settlement agreement.
            o Beneficiary 3 was credited b in cash.
            o Beneficiary 4 was credited c in cash.
            o Beneficiary 5 was credited c in cash.

       Trust’s accountant mailed the accountings relating to Portion 2 to the
beneficiaries on Date 5 (which is within sixty-five days following the close of the
calendar year ending Date 2).

        The trustee of Trust intended to file a § 663(b) election with regard to these
distributions, but due to inadvertence the election was not timely filed.

       Section 663(b)(1) provides that in general, if within the first 65 days of any
taxable year of an estate or a trust, an amount is properly paid or credited, such amount
shall be considered paid or credited on the last day of the preceding taxable year.
Section 663(b)(2) provides that § 663(b)(1) shall apply with respect to any taxable year
of an estate or a trust only if the executor of such estate or the fiduciary of such trust (as
PLR-117024-13                       3

the case may be) elects, in such manner and at such time as the Secretary prescribes
by regulations, to have § 663(b)(1) apply for such taxable year.

        Section § 1.663(b)-2(a)(1) of the Income Tax Regulations provides that if a trust
return is required to be filed for the taxable year of the trust for which the election is
made, the election shall be made in the appropriate place on such return. The election
under § 1.663(b)-2(a)(1) shall be made not later than the time prescribed by law for
filing such return (including extensions thereof). Such election shall become irrevocable
after the last day prescribed for making it.

       Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time under the rules 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 301.9100-1(b) defines the term “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 the rules governing automatic extensions of time for
making certain elections. Section 301.9100-3 provides the standards the Commissioner
will use to determine whether to grant an extension of time for regulatory elections that
do not meet the requirements of § 301.9100-2.

        Under § 301.9100-3, a request for relief will be granted when the taxpayer
provides the evidence (including affidavits described in § 301.9100-3(e)) to establish to
the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of relief will not prejudice the interests of the Government.

         Based solely on the information submitted and the representations made, we
conclude that Trust has satisfied the requirements of §§ 301.9100-1 and 301.9100-3.
As a result, Trust is granted an extension of time of 120 days from the date of this letter
to file an election under § 663(b). The election should be made by filing an income tax
return for its taxable year ending Date 1, amended to include the election, with the
appropriate service center. A copy of this letter should be attached to the amended
return.

        Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the Code. In addition, § 301.9100-1(a) provides that the granting of an extension of
time for making an election is not a determination that the taxpayer is otherwise eligible
to make the election. Finally, we express or imply no opinion concerning whether the
distributions were properly paid or credited and in the proper amounts.
PLR-117024-13                        4

      This ruling is directed only to the taxpayer 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 will be sent to Trust’s authorized representative.

                                         Sincerely,


                                         Associate Chief Counsel
                                         (Passthroughs & Special Industries)



                                    By: _______________________________
                                       Bradford Poston
                                       Senior Counsel, Branch 2
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)




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