Consolidated group received extra time for closing-of-the-books election

Plain-English summary

A consolidated group experienced an ownership change that limited the use of its pre-change losses under IRC § 382. It did not timely elect to close its books on the change date when allocating income and losses between the pre-change and post-change periods. The IRS found that the group acted reasonably and in good faith and that relief would not prejudice the government. It granted 75 days to make the election by amending the group's return and attaching the required statement. Relief is conditioned on the group's aggregate tax liability not being lower than it would have been with a timely election, and the ruling does not decide whether the group substantively qualifies to elect.

Ruling snapshot

• Question: May the consolidated group make a late closing-of-the-books election for its section 382 ownership change?
• Outcome: Approved, with 75 days to file the election
• Key authorities: IRC § 382; Treas. Reg. §§ 1.382-6(b), 1.382-11, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202518015 Third Party Communication: None
Release Date: 5/2/2025 Date of Communication: Not Applicable
Index Number: 9100.22-00, 382.02-05
Person To Contact:
-------------------------- --------------------, ID No. -----------------
----------------------------------------- Telephone Number:
------------------------------------------------- ---------------------
Refer Reply To:
CC:CORP:BO2
PLR-119781-24
Date:
February 06, 2025

LEGEND

Parent = -----------------------------------------
-----------------------

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

Year 1 = -------

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

Tax Professionals = ----------------------------
------------------

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

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

This letter responds to a letter dated October 29, 2024, submitted on behalf of Parent,
requesting an extension of time under §§301.9100-1 through 301.9100-3 of the
Procedure and Administration Regulations to file an election. Parent is requesting an
extension of time for the consolidated group of which Parent is the common parent to
make 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 material information provided is
summarized below.
PLR-119781-24 2

Parent is the common parent of a consolidated group (the “Parent Group”). On Date 1,
Parent Group 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 by pre-change losses.

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 Parent Group’s tax return for the Year
1 taxable year but, for various reasons, Parent did not make the Election.
Subsequently, Parent 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. Parent 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)(1) 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.

Section 1.382-6(b)(2)(i) provides that a loss corporation makes the closing-of-the-books
election by including the following statement on the information statement required by
§1.382-11(a) for the change year: “THE CLOSING-OF-THE-BOOKS ELECTION
UNDER §1.382-6(b) IS HEREBY MADE WITH RESPECT TO THE OWNERSHIP
CHANGE OCCURRING ON [INSERT DATE].” The election must be made on or before
the due date (including extensions) of the loss corporation’s income tax return for the
change year.

Section 1.382-6(b)(3)(i) provides that if an election under §1.382-6(b) is made with
respect to an ownership change occurring in a consolidated return year, all allocations
under this section with respect to that ownership change must be consistent with the
election.

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
Code except subtitles E, G, H, and I.
PLR-119781-24 3

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)(i)). Therefore, the Commissioner has discretionary authority under §301.9100-3
to grant an extension of time for Parent to file the Election, provided that Parent
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 Parent, Company Official, and
Tax Professionals explain the circumstances that resulted in the failure to timely file the
Election. The information establishes that the request for relief was filed before the
failure to make the Election was discovered by the Internal Revenue Service. See
§301.9100-3(b)(1)(i).

Based on the facts and information submitted, including the affidavits submitted and
representations made, we conclude that Parent 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 Parent to file the Election.

The above extension of time is conditioned on the Parent Group’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 Parent
Group’s tax liability for the years involved. A determination thereof will be made by the
applicable Director’s office upon audit of the federal income tax returns involved.

Parent should file the election in accordance with §1.382-6(b)(2). The Parent Group’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 Parent Group files its amended return electronically, Parent Group may
satisfy this latter requirement by attaching to the return a statement that provides the
date on, and control number (PLR-119781-24) of, this letter ruling.

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 particular, we express no opinion with respect to whether Parent qualifies
substantively to make the Election. 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
PLR-119781-24 4

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 Parent, Company Official, and Tax Professionals. 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.

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
                                                Senior Technician Reviewer, Branch 4
                                                Office of Associate Chief Counsel (Corporate)

cc: ---------------
-----------------------
------------------------------------------------
--------------------------------

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

  ---------