Taxpayer gets 60 days to opt out of bonus depreciation

Plain-English summary

A taxpayer timely filed its return without claiming bonus depreciation for any class of qualified property, as it intended. Its accounting firm failed to attach the statement required to elect out of additional first-year depreciation, and another accounting firm later discovered the omission. The IRS found that the taxpayer satisfied the standards for discretionary filing relief. It granted 60 calendar days to file an amended return with a statement electing not to deduct bonus depreciation for all qualifying property classes placed in service during the year.

Ruling snapshot

• Question: Could a taxpayer perfect its intended election out of bonus depreciation after its CPA omitted the required statement from a timely return?
• Outcome: Approved
• Key authorities: IRC § 168(k); Treas. Reg. §§ 1.168(k)-1(e), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201548009 Third Party Communication: None
Release Date: 11/27/2015 Date of Communication: Not Applicable
9100.04-00
Person To Contact:
------------------------------ -----------------------, ID No. ----------------
---------------------------------------- Telephone Number:
-------------------------------- --------------------
--------------------------- Refer Reply To:
CC:ITA:B07
PLR-107081-15
Date:
August 18, 2015

Re: Request for Extension of Time to Make the Election Not to Deduct the Additional
First Year Depreciation

Legend

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

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

A = ------

B = ---------------------------------------------------------------------------------------------------------------

C = -----------------------------------------

D = --------------------------------

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

   This ruling responds to a letter dated January 20, 2015, submitted by Taxpayer

requesting an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to make the election not to deduct the
additional first year depreciation under § 168(k) of the Internal Revenue Code for all
classes of qualified property placed in service by Taxpayer during the taxable year
ended Date 1 (the A taxable year).

FACTS
PLR-107081-15 2

   Taxpayer represents that the facts are as follows:

  Taxpayer is in the business of B and files its federal income tax return on a

calendar year-end basis. Taxpayer placed in service qualified property as defined in
§ 168(k)(2) during the A taxable year.

   Taxpayer timely filed its federal income tax return for the A taxable year. On this

return, Taxpayer, as intended, did not claim the additional first year depreciation
deduction for any classes of qualified property placed in service. However, Taxpayer’s
return did not have attached the election statement not to claim the additional first year
depreciation deduction for all classes of qualified property placed in service , as
required by § 1.168(k)-1(e)(3)(ii) of the Income Tax Regulations.,

    Taxpayer engaged C, a Certified Public Accounting (CPA) firm, to prepare its

federal income tax return for the A taxable year. In preparing the return, C inadvertenly
failed to attach or to advise Taxpayer to attach the election statement.

   D, a CPA firm, discovered Taxpayer’s failure to attach the election statement to

the federal income tax return for the A taxable year. D advised Taxpayer to file this
request to the correct the omission.

RULING REQUESTED

  Taxpayer requests an extension of time pursuant to §§ 301.9100-1 and

301.9100-3to file the election not to deduct the additional first year depreciation under
§ 168(k) for all classes of qualified property placed in service during the A taxable year.

LAW AND ANALYSIS

   Section 168(k)(1) provides a 50-percent additional first year depreciation

deduction for the placed-in-service year for qualified property (i) acquired by a taxpayer
after December 31, 2007, and before January 1, 2015, or acquired by a taxpayer
generally after December 31, 2011, and (ii) placed in service by the taxpayer before
January 1, 2015 (or January 1, 2016, for qualified property described in § 168(k)(2)(B)
or (C)).

   Section 168(k)(5) provides a 100-percent additional first year depreciation

deduction for the placed-in-service year for qualified property acquired by a taxpayer
after September 8, 2010, and generally before January 1, 2012, and placed in service
by the taxpayer before January 1, 2012 (or January 1, 2013, for qualified property
PLR-107081-15 3

described in § 168(k)(2)(B) or (C)). See section 3 of Rev. Proc. 2011-26, 2011-16 I.R.B.
664, 665.

    Section 168(k)(2)(D)(iii) provides that a taxpayer may elect not to deduct the

additional first year depreciation for any class of property placed in service during the
taxable year. The term “class of property” is defined in § 1.168(k)-1(e)(2) as meaning,
in general, each class of property described in § 168(e) (for example, 5-year property).
See section 5.01 of Rev. Proc. 2008-54, 2008-2 C.B. 722, and section 3.01 of Rev.
Proc. 2011-26, 2011-16 I.R.B. at 665 (rules similar to the rules in § 1.168(k)-1 for
“qualified property” or for “30-percent additional first year depreciation deduction” apply
for purposes of § 168(k) as currently in effect).

   Section 1.168(k)-1(e)(1) provides that the election not to deduct additional first

year depreciation for a class of property applies to all qualified property that is in that
class of property and placed in service in the same taxable year.

   Section 1.168(k)-1(e)(3)(i) provides that the election not to deduct additional first

year depreciation must be made by the due date (including extensions) of the federal
tax return for the taxable year in which the property is placed in service by the taxpayer.

   Section 1.168(k)-1(e)(3)(ii) provides that the election not to deduct additional first

year depreciation must be made in the manner prescribed on Form 4562, “Depreciation
and Amortization,” and its instructions. The instructions to Form 4562 for the A taxable
year provided that the election not to deduct the additional first year depreciation is
made by attaching a statement to the taxpayer’s timely filed tax return (including
extensions) indicating that the taxpayer is electing not to deduct the additional first year
depreciation and the class of property for which the taxpayer is making the election.

   Under § 301.9100-1, the Commissioner has discretion to grant a reasonable

extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a
regulatory election.

   Sections 301.9100-1 through 301.9100-3 provide the standards the

Commissioner will use to determine whether to grant an extension of time to make an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for making elections that do
not meet the requirements of § 301.9100-2.

    Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be

granted when the taxpayer provides evidence 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.

CONCLUSION
PLR-107081-15 4

   Based solely on the facts and representations submitted, we conclude that the

requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
Taxpayer is granted 60 calendar days from the date of this letter to make the election
not to deduct the additional first year depreciation under § 168(k) for all classes of
property placed in service during the A taxable year that qualify for the additional first
year depreciation deduction. This election must be made by Taxpayer filing an
amended federal income tax return for the A taxable year, with a statement indicating
that Taxpayer is electing not to deduct the additional first year depreciation for all
classes of property placed in service during that taxable year.

   Except as specifically set forth above, we express no opinion concerning the

federal income tax consequences of the facts described above under any other
provisions of the Code (including other subsections of §168). Specifically, no opinion is
expressed or implied on whether any item of depreciable property placed in service
during the A taxable year is eligible for the additional first year depreciation deduction.

  In accordance with the power of attorney, we are sending a copy of this letter to

Taxpayer’s authorized representatives. We are also sending a copy of this letter to the
appropriate Small Business/Self-Employed Division (SB/SE) area office.

  This letter 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 yours,



                                              _____________________
                                              Willie E. Armstrong, Jr.
                                              Senior Technician Reviewer, Branch 07
                                              Office of Associate Chief Counsel
                                              (Income Tax & Accounting)

Enclosures (2):
copy of this letter
copy for section 6110 purposes

cc: