Late foreign-earned-income election granted

Plain-English summary

A taxpayer began working for a foreign affiliate abroad but did not timely file Form 2555 or otherwise elect the section 911 foreign-earned-income exclusion. Because Treasury Regulation section 1.911-7 sets the election deadline, the IRS had discretionary authority to extend it under the section 301.9100 regulations. The IRS concluded that the taxpayer met the reasonable-and-good-faith standard and granted 60 days from the ruling date to make the election. A copy of the ruling had to be attached to the relevant federal income tax return.

Ruling snapshot

• Question: Whether the taxpayer should receive more time to elect the section 911 exclusion
• Outcome: Approved, with 60 days to make the election
• Key authorities: I.R.C. §§ 911, 6511(a); Treas. Reg. §§ 1.911-7, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201539018                                              [Third Party Communication:
Release Date: 9/25/2015                                        Date of Communication: Month DD, YYYY]
Index Number: 911.11-00, 911.11-01,
              9100.17-00                                       Person To Contact:
                                                               ------------------, ID No. --------------
--------------------------------                               Telephone Number:
------------------------------                                 ----------------------
 --------------------------------                              Refer Reply To:
                                                               CC:INTL:B02
                                                               PLR-146619-14
                                                               Date:
                                                               May 29, 2015


                  TY: -------



Legend
Taxpayer                   =         --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
--
-------------------------------------------------------------

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

Company A                  =        ---------------------------------------
Country B                  =        ----------------------

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

       This is in response to a letter dated November 18, 2014, submitted on your
behalf by your authorized representative, requesting an extension of time under Treas.
Reg. § 301.9100-3 to elect the provisions of section 911 of the Internal Revenue Code
(“Code”) for Taxpayer’s Year 1. Additional information was submitted on March 20,
2015.

       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 rulings, it is subject to verification on examination.

      Taxpayer began working for a foreign affiliate of Company A in Country B on
Date 1. Taxpayer failed to file Form 2555, Foreign Earned Income, or Form 2555-EZ,
                                            2
PLR-146619-14

Foreign Earned Income Exclusion, to claim the section 911 foreign earned income
exclusion for Year 1 and did not make a section 911 election within the time prescribed
by Treas. Reg. § 1.911-7(a)(2)(i).

       Section 911(a) of the Code allows qualified citizens and residents of the United
States living abroad to elect to exclude from gross income the foreign earned income
and housing cost amounts of such individuals. Treas. Reg. § 1.911-7(a) sets forth the
procedural rules for making a valid section 911 election. The election must be made on
Form 2555 or on a comparable form, and must be filed with the income tax return or
with an amended return. With respect to the timing of the election, Treas. Reg. § 1.911-
7(a)(2)(i) provides that a valid section 911 election must be made:

      (A) With an income tax return that is timely filed (including any extensions of time
      to file);

      (B) With a later return filed within the period prescribed in section 6511(a)
      amending a timely filed income tax return;

      (C) With an original return filed within one year after the due date of the return
      (determined without regard to any extension of time to file); or

      (D) With an income tax return filed after the period described in paragraphs
      (a)(2)(i)(A), (B), or (C) of this section provided -

             (1) The taxpayer owes no federal income tax after taking into account the
             exclusion and files Form 1040 with Form 2555 or a comparable form
             attached either before or after the Internal Revenue Service discovers that
             the taxpayer failed to elect the exclusion; or

             (2) The taxpayer owes federal income tax after taking into account the
             exclusion and files Form 1040 with Form 2555 or a comparable form
             attached before the Internal Revenue Service discovers that the taxpayer
             failed to elect the exclusion.

        Treas. Reg. § 301.9100-1(c) provides that the Commissioner has discretion to
grant a taxpayer a reasonable extension of time, under the rules set forth in Treas. Reg.
§ 301.9100-3, to make a regulatory election under all subtitles of the Code, except
subtitles E, G, H, and I.

         Treas. Reg. § 301.9100-1(b) provides that an election includes an application for
relief in respect of tax, and defines a regulatory election as an election whose due date
is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or
PLR-146619-14                                 3

announcement.

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

        Treas. Reg. § 301.9100-3(b) (1) provides that, except as provided in paragraph
(b)(3)(i) through (iii), a taxpayer is deemed to have acted reasonably and in good faith if
the taxpayer:

         i.    requests relief under this section before the failure to make the regulatory
               election is discovered by the Internal Revenue Service;

        ii.    failed to make the election because of intervening events beyond the
               taxpayer's control;

        iii.   failed to make the election because, after exercising reasonable diligence
               (taking into account the taxpayer's experience and the complexity of the
               return or issue), the taxpayer was unaware of the necessity for the
               election;

        iv.    reasonably relied on the written advice of the IRS; or

        v.     reasonably relied on a qualified tax professional, including a tax
               professional employed by the taxpayer, and the tax professional failed to
               make, or advise the taxpayer to make, the election.

        In this case, Treas. Reg. § 1.911-7(a) fixes the time to make the election under
section 911. Therefore, the Commissioner has discretionary authority under Treas.
Reg. § 301.9100-1(c) to grant Taxpayer an extension of time, provided that Taxpayer
satisfies the standards set forth under Treas. Reg. § 301.9100-3(a).

        Based on the facts and circumstances of this case, we conclude that Taxpayer
satisfies Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayer is granted an extension of
time until 60 days from the date of this ruling letter to elect the foreign earned income
exclusion for Year 1.

       The taxpayer should attach a copy of this letter ruling to his/her federal income
tax return for the relevant year.
PLR-146619-14                                   4




      This ruling is directed only to the taxpayer who requested it. I.R.C. section
6110(k)(3) provides that it may not be used or cited as precedent.

       Pursuant to a power of attorney on file in this office, a copy of this ruling letter is
being furnished to Taxpayer’s authorized representatives.

                                        Sincerely,



                                        Kristine Crabtree
                                        Assistant to the Branch Chief, Branch 2
                                        (International)