Ezel / IRS Rulings / 201717032
Private Letter Ruling 201717032 Released April 28, 2017 Revocation

Commodity-linked-note ruling was revoked prospectively

Apply this to your situation

This page covers one taxpayer's ruling from 2017, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.

Currency note: this determination was released in 2017
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Eighteen funds had received a private letter ruling that income and gain from certain commodity-linked notes counted as qualifying income under section 851(b)(2). The IRS later concluded that issuing a private ruling on that question no longer reflected its current position. The funds asked the IRS to use its section 7805(b) authority to limit the effect of revocation, and the IRS granted that relief. The earlier ruling was revoked only for commodity-linked notes the funds acquired after June 30, 2017.

Ruling snapshot

  • Question: Would the IRS revoke the funds' earlier commodity-linked-note ruling, and would the revocation apply retroactively?
  • Outcome: revocation, limited to notes acquired after June 30, 2017
  • Key authorities: IRC §§ 851(b)(2), 7805(b); Rev. Proc. 2017-1 § 11.04

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201717032                                              Third Party Communication: None
Release Date: 4/28/2017                                        Date of Communication: Not Applicable
Index Number: 851.02-00, 7805.00-00
                                                               Person To Contact:
----------------                                               ----------------------, ID No. ------------------
---------------------------                                    Telephone Number:
----------------------------------                             ----------------------
-------------------------------------                          Refer Reply To:
-----------------------------                                  CC:FIP:B1
-------------------------------------                          PLR-132700-16
                                                               Date:
                                                               January 12, 2017




Legend

Fund 1                     =         -----------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 2                     =         --------------------------------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 3                     =         -------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 4                     =         ----------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 5                     =         ------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 6                     =         ------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------
PLR-132700-16                                                2

----------------------------------------------------------

Fund 7                     =         -------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 8                     =         -------------------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 9                     =         -------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 10                    =         ---------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 11                    =         ----------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 12                    =         ----------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 13                    =         ----------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 14                    =         --------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 15                    =         ---------------------------------------------------
------------------------------------------------------------
PLR-132700-16                                             3

-----------------------------------------------------------------------------------
----------------------------------------------------------------

Fund 16                    =         ------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 17                    =         ----------------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

Fund 18                    =         ------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------------------
----------------------------------------------------------

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

This letter revokes PLR 200831019 (PLR-147222-071) issued to Funds 1 through 18
(the “Funds”) on April 18, 2008, and, in response to a request dated December 9, 2016,
limits the retroactive effect of such revocation pursuant to section 7805(b) of the Internal
Revenue Code.

In PLR 200831019, the Internal Revenue Service (the “Service”) issued a ruling that
income and gain from certain commodity-linked notes constitute qualifying income
under section 851(b)(2) (the “CLN Ruling”). In a letter dated September 29, 2016, the
Service notified the Funds that it was considering revoking the CLN Ruling. On
December 9, 2016, the Funds requested that the Service exercise its discretionary
authority under section 7805(b) to limit the retroactive effect of any revocation.

Since issuing PLR 200831019, the Service has determined that having provided a
private letter ruling on the issue in the CLN Ruling is not in accord with the current views
of the Service. See Rev. Proc. 2016-50, 2016-43 I.R.B. 522, superseded by Rev. Proc.
2017-3, 2017-1 I.R.B.130, 140 (section 4.01(44)); see also REG-123600-16, 81 Fed.
Reg. 66576-77 (Sept. 28, 2016). Section 11.04 of Rev. Proc. 2017-1, 2017-1 I.R.B. 1,
61, provides, in part, that unless it was part of a closing agreement, a letter ruling found
to be in error or not in accordance with the current views of the Service may be revoked
or modified. Accordingly, PLR 200831019 is revoked.

1
  PLR-147222-07 is the controlling PLR number for a multi-filer private letter ruling. Each of Funds 1
through 18 was assigned a separate PLR number. This letter refers to the controlling PLR number, but
applies equally to the rulings issued to all of the Funds under their respective, separately assigned PLR
numbers.
PLR-132700-16                                4


Section 11.04 of Rev. Proc. 2017-1 also provides that, if a letter ruling is revoked, the
revocation applies to all years open under the statute of limitations on assessment
unless the Service uses its discretionary authority under section 7805(b) to limit the
retroactive effect of the revocation. In accordance with the Funds’ request, the Service
has decided to grant relief under section 7805(b). The revocation of PLR 200831019
will apply prospectively only to commodity-linked notes acquired by the Funds after
June 30, 2017.

We are sending a copy of this letter to the appropriate operating division.

                                                 Sincerely,



                                                 -------------------------------------------
                                                 Julanne Allen
                                                 Assistant to the Branch Chief, Branch 3
                                                 Office of Associate Chief Counsel
                                                 (Financial Institutions and Products)




cc:

Get today's answer for your situation

You just read what the IRS ruled for one taxpayer in 2017, and it can't be cited as precedent. Ezel checks the current Internal Revenue Code and IRS guidance and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.