Estate receives 120-day extension for 2010 carryover-basis election

Plain-English summary

The executor of an estate for a decedent who died in 2010 hired an accountant to handle estate-tax filings. The accountant failed to advise the executor that Form 8939 had to be filed by January 17, 2012, to elect section 1022's modified carryover-basis regime, and a form filed shortly after the deadline was rejected. Because the executor reasonably relied on a qualified tax professional who failed to make or recommend the election, the IRS found that the section 301.9100-3 requirements were met. It granted 120 days from the ruling date to file Form 8939, make the section 1022 election, and allocate additional basis to eligible estate property.

Ruling snapshot

• Question: Should the estate receive an extension to file Form 8939 and elect the section 1022 carryover-basis rules for a decedent who died in 2010?
• Outcome: Approved; the executor received 120 days from the letter date to make the election and allocate additional basis.
• Key authorities: IRC § 1022; TRUIRJCA § 301(c); Notices 2011-66 and 2011-76; Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201605012                                              Third Party Communication: None
Release Date: 1/29/2016                                        Date of Communication: Not Applicable
Index Number: 1022.00-00, 9100.00-00
                                                               Person To Contact:
------------------------------------                           --------------------------, ID No. --------------
------------------------------------------                     Telephone Number:
-----------------------------                                  ----------------------
----------------------------------------                       Refer Reply To:
                                                               CC:PSI:B4
                                                               PLR-115094-15
                                                               Date:   SEPTEMBER 16, 2015




Legend

Decedent                   =        -----------------------------
Decedent’s Estate          =        --------------------------------------------------------------------
Executor                   =        ----------------------
Accountant                 =        ------------------
Date 1                     =        ------------------------

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

       This responds to your personal representative's letter of April 21, 2015,
requesting an extension of time pursuant to § 301.9100-3 of the Procedure and
Administration Regulations to file a Form 8939 (Allocation of Increase in Basis for
Property Acquired from a Decedent) to make an election under § 1022 of the Internal
Revenue Code (Section 1022 Election) and to allocate basis to eligible property
transferred as a result of Decedent's death.

        The facts and representations submitted are as follows. Decedent died in 2010.
The Executor of Decedent's Estate retained Accountant to advise them on estate tax
matters and prepare the necessary tax filings for the Decedent’s estate. Accountant
failed to advise Executor that Notice 2011-66 required the executor of an estate to file
Form 8939 before January 17, 2012, for a decedent who died in 2010. On Date 2, a
date shortly after the due date of January 17, 2012, Accountant prepared and filed Form
8939. The Form was rejected due to the late filing. Consequently, Executor failed to
make a Section 1022 Election for Decedent's estate. Executor of Decedent’s estate is
requesting an extension of time pursuant to § 301.9100-3 to file the Form 8939 to make
the § 1022 Election to allocate basis provided by § 1022 to eligible property transferred
as a result of Decedent’s death.
PLR-115094-15                                 2


Law and Analysis

       Section 1022(a) provides that property acquired from a decedent who died after
December 31, 2009, is treated as transferred by gift, and the basis of the person
acquiring the property from such a decedent is the lesser of the adjusted basis of the
decedent or the fair market value of the property at the date of the decedent's death.

      Section 1022(b)(1) provides, in general, that the basis of property under
§ 1022(a) is increased by basis increase that is allocated to the property.

      Section 1022(b)(2)(A) provides, in general, that basis increase is the portion of
the aggregate basis increase that is allocated to the property.

        Section 1022(b)(2)(B) and (C) provide that the aggregate basis increase is
$1,300,000; and that the aggregate basis increase is increased by—(i) the sum of the
amount of any capital loss carryover under § 1212(b), and the amount of any net
operating loss carryover under § 172 that would (but for the decedent's death) be
carried from the decedent's last taxable year to a later taxable year of the decedent,
plus (ii) the sum of the amount of any losses that would have been allowable under
§ 165 if the property acquired from the decedent had been sold at fair market value
immediately before the decedent's death.

       Section 1022(c)(1) provides that in the case of property that is qualified spousal
property, the basis of such property under § 1022(a) (as increased under § 1022(b)) is
increased by spousal property basis increase allocated to the property.

        Section 1022(c)(2)(A) provides, in general, that spousal property basis increase
is the portion of the aggregate spousal property basis increase which is allocated to the
property. Section 1022(c)(2)(B) provides that the aggregate spousal property basis
increase is $3,000,000.

        Section 1022(d)(1)(A) provides, in general, that the basis of property acquired
from a decedent may be increased under § 1022(b) or (c) only if the property was
owned by the decedent at the time of death. Section 1022(d)(1)(B) describes property
that is considered to be owned by the decedent at the time of death.

       Section 1022(d)(2) provides that the basis adjustments under § 1022(b) and (c)
shall not increase the basis of any interest in property above its fair market value in the
hands of the decedent as of the date of the decedent's death.
PLR-115094-15                                3

       Section 1022(d)(3) provides, in general, that the executor is to allocate the basis
adjustments under § 1022(b) and (c) on the return required by § 6018 and that any
allocation made may be changed only as provided by the Secretary.

     Section 1022(e) describes property that is considered to be acquired from the
decedent for purposes of § 1022.

       Subtitle A of title V of the Economic Growth and Tax Relief Reconciliation Act of
2001, P.L. 107-16 (115 Stat. 76-81), enacted section 2210, which made chapter 11 (the
estate tax) inapplicable to the estate of any decedent who died in 2010 and chapter 13
(the generation skipping transfer (GST) tax) inapplicable to generation-skipping
transfers made in 2010. On December 17, 2010, the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA), P.L. 111-312
(124 Stat. 3296), became law, and section 301(a) of TRUIRJCA retroactively reinstated
the estate and GST taxes. However, § 301(c) of TRUIRJCA allows the executor of the
estate of a decedent who died in 2010 to elect to apply the Code as though § 301(a) of
TRUIRJCA did not apply with respect to chapter 11 and for property acquired or passing
from a decedent (within the meaning of § 1014(b)). Thus, § 301(c) of TRUIRJCA allows
the executor of the estate of a decedent who died in 2010 to elect not to have the
provisions of chapter 11 apply to the decedent's estate, but rather, to have the
provisions of § 1022 apply.

       Notice 2011-66, 2011-35 I.R.B. 184, section I.A. provides that the executor of the
estate of a decedent who died in 2010 makes the Section 1022 Election by filing a Form
8939 on or before November 15, 2011. Notice 2011-76, 2011-40 I.R.B. 479, extended
the due date of the Form 8939 and thus, the election from November 15, 2011 to
January 17, 2012.

       Notice 2011-66, section I.D.1, provides that the Internal Revenue Service will not
grant extensions of time to file a Form 8939 and will not accept a Form 8939 filed after
the due date except in four limited circumstances provided in section I.D.2. Under this
section of Notice 2011-66, an executor may apply for relief under § 301.9100-3.

      Section 301.9100-3 provides the standards used to determine whether to grant
an extension of time to make an election whose date is prescribed by a regulation (and
not expressly provided by statute).

       Requests for relief under § 301.9100-3 will be granted when the taxpayer
provides the evidence to establish to the satisfaction of the Commissioner that the
taxpayer acted reasonably and in good faith, and that granting relief will not prejudice
the interests of the government.
PLR-115094-15                                  4

      Section 301.9100-3(b)(1)(v) provides that a taxpayer is deemed to have acted
reasonably and in good faith if the taxpayer 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.

        Based on the facts submitted and the representations made, we conclude that
the requirements of § 301.9100-3 have been satisfied. Therefore, Executor of
Decedent's estate is granted an extension of time of 120 days from the date of this letter
to make the Section 1022 Election on a Form 8939 and allocate additional basis to
eligible property as provided by § 1022. A copy of this letter should be attached to the
Form 8939.

       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
referenced in this letter.

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

      The rulings contained in this letter are 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.

         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,



                                       Melissa C. Liquerman
                                       Chief, Branch 4
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

Enclosures (2)

       Copy of this letter
       Copy for § 6110 purposes