Loss corporation receives 75 days for a late closing-of-the-books election

Plain-English summary

A loss corporation experienced a Section 382 ownership change but missed the deadline to elect to close its books on the change date. Without that election, the regulations generally allocate change-year income and loss ratably between the pre-change and post-change periods. The corporation's assessment periods remained open, it was not trying to change a position exposed to an accuracy-related penalty, and affidavits showed reasonable reliance on a qualified tax professional who failed to make or recommend the election. The IRS found reasonable conduct, good faith, and no prejudice to the government. It granted 75 days to amend the return and attach the required closing-of-the-books election statement. Relief was conditioned on aggregate tax liability for the election year and later years not being lower than with a timely election.

Ruling snapshot

• Question: Could the loss corporation make a late election to close its books on its Section 382 ownership-change date?
• Outcome: Approved, with 75 days to amend the return and file the election
• Key authorities: IRC § 382; Treas. Reg. §§ 1.382-6(b), 1.382-11, 301.9100-1, and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202140007                                             Third Party Communication: None
 Release Date: 10/8/2021                                       Date of Communication: Not Applicable
 Index Numbers: 9100.22-00, 382.00-00
                                                               Person To Contact:
 -----------------------------------                           ------------------, ID No. -----------------
 --------------------------------------------                  Telephone Number:
 ---------------------------------------                       ---------------------
 ------------------------------                                Refer Reply To:
                                                               CC:CORP:1
                                                               PLR-102969-21
                                                               Date:
                                                               July 14, 2021




Legend

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

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

Year 1                    =        -------

Company Official          =        -----------------------------------
                                   --------------------------------------------

Tax Professional          =        -----------------------------------------
                                   ----------------------


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

This letter responds to a letter dated February 2, 2021, submitted on behalf of
Taxpayer, requesting an extension of time under §§301.9100-1 through 301.9100-3 of
the Procedure and Administration Regulations to file an election. The extension is
being requested for Taxpayer to file a closing-of-the-books election under §1.382-6(b) of
the Income Tax Regulations (the “Election”) with respect to an ownership change within
the meaning of section 382 of the Internal Revenue Code (the “Code”). The information
provided is summarized below.

On Date 1, Taxpayer experienced an ownership change as defined in section 382(g)
(the “ownership change”) and, consequently, section 382(a) limited its ability to offset
post-change taxable income and liabilities by pre-change losses.
PLR-102969-21                                 2


An election under §1.382-6(b) to close its books with respect to the ownership change
was due by the due date (including extensions) of Taxpayer’s tax return for the Year 1
taxable year but, for various reasons, Taxpayer did not make the Election.
Subsequently, Taxpayer submitted this request, under §301.9100-3, for an extension of
time to file the Election. The period of limitations on assessment under section 6501(a)
has not expired for the taxable year for which the election should have been made or
any subsequent taxable year. Taxpayer has represented that it is not seeking to alter a
return position for which an accuracy related penalty has been or could be imposed
under section 6662.

Section 1.382-6(a) provides that except as provided in §1.382-6(b) and (d), a loss
corporation must allocate its net operating loss or taxable income, and its net capital
loss or modified capital gain net income, for the change year between the pre-change
period and the post-change period by ratably allocating an equal portion to each day in
the year.

Section 1.382-6(b)(1) allows a loss corporation to elect to allocate its net operating loss
or taxable income and its net capital loss or modified capital gain net income for the
change year between the pre-change period and the post-change period as if the loss
corporation’s books were closed on the change date.

Under §301.9100-1(c), the Commissioner has discretion to grant a reasonable
extension of time to make a regulatory election, or a statutory election (but no more than
six 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.

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 a regulatory election.
Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for
making certain elections. Requests for relief under §301.9100-3 will be granted when
the taxpayer provides evidence that it acted reasonably and in good faith, and that
granting relief will not prejudice the interests of the government. Section 301.9100-3(a).

In this case, the time for filing the Election is fixed by the regulations (i.e., §1.382-
6(b)(2)). Therefore, the Commissioner has discretionary authority under §301.9100-3 to
grant an extension of time for Taxpayer to file the Election, provided that Taxpayer
establishes to the satisfaction of the Commissioner that it acted reasonably and
in good faith, and that granting relief will not prejudice the interests of the government.

Information, affidavits, and representations submitted by Taxpayer, Company Official
and Tax Professional explain the circumstances that resulted in the failure to timely file
the Election. The information establishes that Taxpayer reasonably relied on a qualified
tax professional who failed to make, or advise Taxpayer to make, the Election. See
§301.9100-3(b)(1)(v).
PLR-102969-21                                  3


Based on the facts and information submitted, including the affidavits submitted and
representations made, we conclude that Taxpayer has shown it acted reasonably and in
good faith, the requirements of §§301.9100-1 and 301.9100-3 are satisfied, and
granting relief will not prejudice the interests of the government. Accordingly, we
grant an extension of time under §301.9100-3, until 75 days from the date of this letter,
for Taxpayer to file the Election.

The above extension of time is conditioned on the Taxpayer’s tax liability (if any) being
not lower, in the aggregate, for the year to which the Election applies, and all
subsequent years, than it would have been if the Election had been timely made (taking
into account the time value of money). No opinion is expressed as to the amount of the
Taxpayer’s tax liability for the year involved. A determination thereof will be made by
the applicable Director’s office upon audit of the Federal income tax return involved.

Taxpayer should file the election in accordance with §1.382-6(b)(2). Taxpayer’s return
must be amended to attach the election statement required by §§1.382-6(b)(2) and
1.382-11. A copy of this letter should be attached to the election statement.
Alternatively, if Taxpayer files its amended return electronically, Taxpayer may satisfy
this latter requirement by attaching to the return a statement that provides the date on,
and control number (PLR-102969-21) of, this ruling letter.

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. In addition, we express no opinion as to the tax effects or any other tax
consequences of filing the Election late under the provisions of any other section of the
Code and regulations, or as to the tax treatment of any conditions existing at the time of,
or effects resulting from, filing the Election late that are not specifically set forth in the
above ruling.

For purposes of granting relief under §301.9100-3, we relied on certain statements and
representations made by Taxpayer, Company Official and Tax Professional. However,
the Director should verify all essential facts. In addition, notwithstanding that an
extension is granted under §301.9100-3 to file the Election, penalties and interest that
would otherwise be applicable, if any, continue to apply.

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.
PLR-102969-21                                 4


In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

                                       Sincerely,



                                       Thomas I. Russell
                                       Chief, Branch 1
                                       Office of Associate Chief Counsel (Corporate)




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