Estate gets 120 days to make 2010 carryover-basis election

Plain-English summary

A nonresident noncitizen died in 2010, and the decedent's U.S.-situs property passed to the surviving spouse. The spouse did not file Form 8939 by the January 17, 2012 deadline, so the estate did not elect the special section 1022 carryover-basis rules available for 2010 deaths. The estate later requested discretionary relief to make the election and allocate additional basis to eligible property. The IRS concluded that the section 301.9100-3 requirements were satisfied. It granted 120 days from the ruling date to file Form 8939 with a copy of the ruling attached.

Ruling snapshot

• Question: Could the estate receive more time to elect the section 1022 basis regime and allocate basis to eligible property?
• Outcome: approved, with 120 days to file Form 8939
• Key authorities: IRC § 1022; Treas. Reg. § 301.9100-3; Notices 2011-66 and 2011-76

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201749003                                              Third Party Communication: None
Release Date: 12/8/2017                                        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:04
         RE: -------------------------------                   PLR-108797-17
                                                               Date:
                                                               August 29, 2017




Legend

Decedent          =        -------------------------------------------
Spouse            =        ---------------------
Country           =        ----------



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

This letter responds to your personal representative’s letter of March 8, 2017,
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 and to allocate
basis provided by § 1022 of the Internal Revenue Code (Code) to eligible property
transferred as a result of Decedent’s death.

The facts and representations submitted are summarized as follows. Decedent, a non-
resident alien of the United States and a resident of Country, died in 2010. The United
States situs property in Decedent’s estate passed to Decedent’s spouse (Spouse).
Spouse failed to file a Form 8939 before the filing deadline of January 17, 2012.
Consequently, the executor of Decedent’s estate did not make an election under § 1022
for Decedent’s estate.

LAW AND ANALYSIS

Section 501(a) of subtitle A of title V of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA), P.L. 107-16 (115 Stat. 69), added § 2210 to the
Code, 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)
PLR-108797-17                                2

inapplicable to GSTs made in 2010. Section 542 of subtitle E of title V of EGTRRA, P.L.
107-16 (115 Stat. 76-81), added § 1022 to the Code, which provides rules for the
treatment of property acquired from a decedent dying after December 31, 2009.

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(b)(3) provides that in the case of a decedent nonresident not a citizen of
the United States, § 1022(b)(2)(B) shall be applied by substituting “$60,000” for
“$1,300,000”, and § 1022(b)(2)(C) shall not apply.

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-108797-17                                 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.

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
§ 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 (the § 1022
election).

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 § 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.

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, the executor of
PLR-108797-17                                    4

Decedent’s estate is granted an extension of time of 120 days from the date of this letter
to make the § 1022 election on Form 8939 and allocate additional basis to eligible
property as provided by § 1022. A copy of this letter should be attached to 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) of the Code
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,

                                          Associate Chief Counsel
                                          (Passthroughs & Special Industries)


                                          Karlene M. Lesho
                                    By:
                                          Karlene M. Lesho
                                          Senior Technician Reviewer, Branch 4
                                          Office of Associate Chief Counsel
                                          (Passthroughs & Special Industries)



Enclosures (2)
Copy of the letter
Copy for § 6110 purposes


cc: