Estate receives extra time for two prior-year charitable deduction elections

Plain-English summary

An estate made charitable contributions in each of two years but failed to elect under IRC § 642(c)(1) to treat each payment as made in the preceding taxable year. The IRS concluded that the estate satisfied the discretionary-relief requirements and granted 120 days for both elections. The estate must amend all three affected returns, claiming the first contribution in the first year and the second contribution in the next year, with the elections and a copy of the ruling attached. The IRS did not decide whether the estate otherwise qualified for either charitable deduction.

Ruling snapshot

• Question: May the estate make late elections to treat charitable contributions paid in two successive years as paid in the preceding years?
• Outcome: Approved with conditions. The estate received 120 days to file both elections and amend all three affected returns.
• Key authorities: IRC §§ 170(c), 642(c)(1); Treas. Reg. §§ 1.642(c)-1(b), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201720003
Third Party Communication: None
Release Date: 5/19/2017
Date of Communication: Not Applicable
Index Numbers: 9100.00-00, 9100.26-00
Person To Contact:
--------------------, ID No. ------------------ -------------------------------------------------- Telephone Number:
----------------------------------------------- -------- --------------
-----------------------------------
Refer Reply To:
--------------------------------
CC:PSI:03
PLR-126593-16
Date:
February 06, 2017

Estate = -------------------------------------------------------
-------------------------------------------------
Year 1 = ----------------------------------------------
Year 2 = ----------------------------------------------
Year 3 = ----------------------------------------------

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

This letter responds to your letter dated August 15, 2016, submitted on behalf of Estate by Estate’s representative, requesting extensions of time under § 301.9100-3 of the Procedure and Administration Regulations to make elections under § 642(c)(1) of the Internal Revenue Code (Code) for Year 1 and for Year 2.

FACTS

The information submitted states that Estate could have made elections under § 642(c)(1) to treat a charitable contribution made in Year 2 as having been paid in Year 1 and to treat a charitable contribution made in Year 3 as having been paid in Year 2. However, Estate failed to make the elections.

LAW

Section 642(c)(1) provides that in the case of an estate or trust (other than a trust meeting the specifications of subpart B of part I of subchapter J of Chapter 1 of the Code), there shall be allowed as a deduction in computing its taxable income (in lieu of the deduction allowed by § 170(a), relating to deduction for charitable, etc., contributions and gifts) any amount of the gross income, without limitation, which
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pursuant to the terms of the governing instrument is, during the taxable year, paid for a purpose specified in § 170(c) (determined without regard to § 170(c)(2)(A)). If a charitable contribution is paid after the close of such taxable year and on or before the last day of the year following the close of such taxable year, then the trustee or administrator may elect to treat such contribution as paid during such taxable year. The election shall be made at such time and in such manner as the Secretary prescribes by regulations.

Section 1.642(c)-1(b)(1) provides that for purposes of determining the deduction allowed under § 1.642(c)-1(a), the fiduciary (as defined in § 7701(a)(6)) of an estate or trust may elect under § 642(c)(1) to treat as paid during the taxable year (whether or not such year begins before January 1, 1970) any amount of gross income received during such taxable year or any preceding taxable year which is otherwise deductible under § 642(c)(1) and which is paid after the close of such taxable year but on or before the last day of the next succeeding taxable year of the estate or trust. The preceding sentence applies only in the case of payments actually made in a taxable year which is a taxable year beginning after December 31, 1969. No election shall be made, however, in respect of any amount which was deducted for any previous taxable year or which is deducted for the taxable year in which such amount is paid.

Section 1.642(c)-1(b)(2) provides that the election under § 1.642(c)-1 (b)(1) shall be made not later than the time, including extensions thereof, prescribed by law for filing the income tax return for the succeeding taxable year.

Section 1.642(c)-1(b)(3) provides that the election shall be made by filing with the income tax return (or an amended return) for the taxable year in which the contribution is treated as paid a statement which (i) states the name and address of the fiduciary, (ii) identifies the estate or trust for which the fiduciary is acting, (iii) indicates that the fiduciary is making an election under § 642(c)(1) in respect of contributions treated as paid during such taxable year, (iv) gives the name and address of each organization to which any such contribution is paid, and (v) states the amount of each contribution and date of actual payment or, if applicable, the total amount of contributions paid to each organization during the succeeding taxable year, to be treated as paid in the preceding taxable year.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time 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 Internal Revenue 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.

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 the
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election. 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 evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

Conclusion

Based on the information submitted and representations made, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, Estate is granted an extension of time of 120 days from the date of this letter to file an election under § 642(c)(1) to claim a deduction in the Year 1 taxable year for charitable contributions made in Year 2. Further, Estate is granted an extension of time of 120 days from the date of this letter to file an election under § 642(c) to claim a deduction in the Year 2 taxable year for charitable contributions made in Year 3. This ruling is conditioned on the Estate filing amended returns for Year 1, Year 2, and Year 3 on which the Estate must: (1) make the election under § 642(c)(1) to claim a deduction on the Year 1 amended return for the distributions made by the close of Year 2 and (2) make the election under § 642(c)(1) to claim a deduction on the Year 2 amended return for the distributions made by the close of Year 3. The amended returns must be filed within the 120-day period following the date of this letter with the service center where the Estate files its returns. 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. Specifically, we express or imply no opinion concerning whether the Estate is entitled to a deduction under § 642(c) .

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.
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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,

Associate Chief Counsel
(Passthroughs and Special Industries)

By: ______
Bradford R. Poston
Senior Counsel, Branch 3
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2):
Copy of this letter
Copy for § 6110 purposes