IRS grants a consolidated group more time to make a late Section 362(e)(2)(C) election on a built-in-loss property transfer to a foreign subsidiary

Plain-English summary

A member of a consolidated corporate group transferred property to a foreign
corporation in a Section 351 exchange, and the property's tax basis was higher
than its value (a built-in loss). Section 362(e)(2) stops the same built-in loss
from being counted twice: by default it caps the transferee's basis in the
property at fair market value. But the two parties can instead make a joint
Section 362(e)(2)(C) election to push the basis reduction onto the transferor's
stock rather than the property. Making that election takes two steps: a written
binding agreement between the parties and an election statement filed with the
transferor's timely return. Here the group and the foreign corporation missed
both steps. They asked the IRS for more time under the Section 301.9100-3
regulations, which allow relief for a late regulatory election when the taxpayer
acted reasonably and in good faith and the government is not prejudiced. The IRS
granted 75 days to sign the binding agreement and file the election statement
with an amended return. The relief is conditioned on the election not lowering
anyone's aggregate tax, and the IRS did not opine on whether the transfer really
qualifies under Section 351 or whether the parties are otherwise entitled to make
the election.

Ruling snapshot

• Question: Should a consolidated group and a foreign transferee get more time to make a late joint Section 362(e)(2)(C) election on a built-in-loss property transfer?
• Outcome: Approved. 75-day extension granted (conditioned on no aggregate tax reduction).
• Key authorities: IRC § 362(e)(2)(C); Treas. Reg. § 1.362-4(d); Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202551006
Release Date: 12/19/2025
Index Number: 9100.22-00, 362.00-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
----------------, ID No. -----------------
Telephone Number:

Refer Reply To:
CC:CORP:B04
PLR-108331-25
Date:
September 23, 2025

LEGEND

Taxpayer = -------------------------------------
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Member = ---------------------------------------------------------------------------------

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

Company Officials = -------------------------------------------------
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Tax Professional = ------------------------------
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Dear ----------------:

This letter responds to a letter dated April 15, 2025, submitted by your authorized
representative, requesting an extension of time under §§301.9100-1 and 301.9100-3 of
the Procedure and Administration Regulations to make an election. The extension is
being requested to allow Taxpayer, as common parent and agent of the consolidated
group, and ForeignCorp, to make an election under section 362(e)(2)(C) and §1.362-
4(d) regarding the transfer by Member of property to ForeignCorp on Date 1.
Specifically, Taxpayer and ForeignCorp are requesting an extension of time to enter into
a written, binding agreement to elect to apply section 362(e)(2)(C) (the “Binding
Agreement”), and for Taxpayer to file an election statement as described in §1.362-
4(d)(3)(i) (the “Section 362(e)(2)(C) Statement”). The material information submitted is
set forth below.

Taxpayer is a corporation that is the common parent of a consolidated group that
included Member at all times relevant herein. On Date 1, in a transaction that Taxpayer
represented was a transaction described under section 351, Member transferred certain
property to ForeignCorp (the “Transfer”). At the time of the Transfer, the aggregate
adjusted bases of the property transferred exceeded its fair market value.

Section 362(e)(2)(A) generally provides that if property is transferred to a corporation as
a capital contribution or in an exchange to which section 351 applies and the
transferee’s aggregate adjusted bases of the transferred property would, if not for the
provision, exceed its fair market value immediately after the transfer, then
(notwithstanding section 362(a)), the transferee’s aggregate adjusted bases in such
property will not exceed the fair market value of such property immediately after such
transaction.

However, under section 362(e)(2)(C), the transferor and the transferee may make a
joint election to reduce the transferor’s basis in the stock received in the exchange to its
fair market value, and no reduction of the transferee’s basis in the property received will
be required. Section 362(e)(2)(C) further provides that the joint election shall be made
at such time and in such form and manner as the Secretary may prescribe and, once
made, shall be irrevocable.

Section 1.362-4(d)(1) of the Income Tax Regulations provides that a section
362(e)(2)(C) election has two steps. The first step is the transferor and transferee
entering into a written, binding agreement to elect to apply section 362(e)(2)(C). The
second step is filing a Section 362(e)(2)(C) Statement in accordance with §1.362-
4(d)(3). Section 1.362-4(d)(3)(ii)(A) provides that if the transferor is required to file a
United States federal income tax return, the Section 362(e)(2)(C) Statement is filed by
the transferor with its timely filed (including extensions) original United States tax return
for the taxable year in which the transfer occurred.

In order to make a section 362(e)(2)(C) election, Taxpayer and ForeignCorp were
required to enter into the Binding Agreement prior to filing the Section 362(e)(2)(C)
Statement on or with Taxpayer’s timely filed (including extensions) income tax return for
the taxable year in which the Transfer occurred. For various reasons, however,
Taxpayer and ForeignCorp failed to enter into the Binding Agreement, and Taxpayer
failed to timely file the Section 362(e)(2)(C) Statement. Subsequently, this request was
submitted, under §§301.9100-1 and 301.9100-3, for an extension of time to enter into
the Binding Agreement and to file the Section 362(e)(2)(C) Statement in order to make
the section 362(e)(2)(C) election. Taxpayer and ForeignCorp represent that neither
party is seeking to alter a return position for which an accuracy-related penalty has been
or could be imposed under section 6662.

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 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(a).

The time for making the section 362(e)(2)(C) election is fixed by the regulations (i.e.,
§1.362-4(d)). Therefore, the Commissioner has discretionary authority under
§301.9100-3 to grant an extension of time for Taxpayer and ForeignCorp to enter into
the Binding Agreement, and for Taxpayer to file the Section 362(e)(2)(C) Statement,
provided Taxpayer and ForeignCorp 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.

Information, affidavits, and representations submitted by Taxpayer, ForeignCorp,
Company Officials, and Tax Professional explain the circumstances that resulted in the
failure to make the section 362(e)(2)(C) election. The information establishes that the
request for relief was filed before the failure to properly make the section 362(e)(2)(C)
election was discovered by the Internal Revenue Service. See §301.9100-3(b)(1)(i).

Based on the facts and information submitted, including the representations made, we
conclude that Taxpayer and ForeignCorp 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, an extension of time is granted
under §301.9100-3, until 75 days from the date on this letter, for Taxpayer and
ForeignCorp to enter into the Binding Agreement, and for Taxpayer to file the Section
362(e)(2)(C) Statement in the manner described by §1.362-4(d)(3). Taxpayer should
file the Section 362(e)(2)(C) Statement with an amended return for Taxpayer’s taxable
year in which the transfer occurred. A copy of this letter must be attached to any
income tax return to which it is relevant. Alternatively, taxpayers filing their returns
electronically may satisfy this requirement by attaching a statement to the return that
provides the date on, and control number (PLR-108331-25) of, this letter ruling.

This extension of time is conditioned on the federal tax liability (if any) of any relevant
party not being lower, in the aggregate, for all years to which the section 362(e)(2)(C)
election applies than it would have been if the section 362(e)(2)(C) election had been
timely made (taking into account the time value of money). No opinion is expressed as
to the tax liability for the years involved. A determination thereof will be made by the
Director’s office upon audit of the federal income tax returns involved.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction discussed in this letter. Specifically,
no opinion is expressed concerning the basis or fair market value of any asset, whether
the Transfer is described in section 351, and whether Taxpayer and ForeignCorp are
substantively entitled to make a section 362(e)(2)(C) election. In addition, we express
no opinion as to the tax effects or consequences of making the section 362(e)(2)(C)
election late under the provisions of any other section of the Code or regulations, or as
to the tax treatment of any conditions existing at the time of, or effects resulting from,
making the section 362(e)(2)(C) election late that are not specifically set forth in the
above ruling.

For purposes of granting relief under §301.9100-3, we have relied on certain statements
and representations made by Taxpayer, ForeignCorp, Company Officials, and Tax
Professional. However, the Director should verify all essential facts. Moreover,
notwithstanding that an extension is being granted under §301.9100-3 to make the
section 362(e)(2)(C) election, any penalties and interest that would otherwise be
applicable still apply.

This letter ruling is directed only to the taxpayers 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)

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