REIT gets more time for a taxable subsidiary election missed after a scheduling conflict

Plain-English summary

A real estate investment trust acquired a senior living facility through a newly formed subsidiary and intended to elect taxable REIT subsidiary status as of the acquisition date. The accounting firm that normally handled those elections missed the quarterly meeting following the acquisition because of scheduling conflicts. By the time the REIT informed the firm about the subsidiary and facility, more than 75 days had passed and the Form 8875 deadline for the intended effective date had expired. The subsidiary obtained corporate classification relief under Revenue Procedure 2009-41, and the REIT and subsidiary separately requested more time for the taxable REIT subsidiary election. They represented that they sought relief before IRS discovery, would not receive a lower aggregate tax liability, and were not using hindsight. The IRS granted 90 days to file Form 8875 effective as of the acquisition date, without deciding their substantive REIT or taxable-subsidiary qualifications.

Ruling snapshot

• Question: May the REIT and subsidiary receive an extension to make their IRC § 856(l) election effective as of the facility acquisition date?
• Outcome: Approved
• Key authorities: IRC § 856(l); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Announcement 2001-17; Rev. Proc. 2009-41

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202632019 Third Party Communication: None
Release Date: 8/7/2026 Date of Communication: Not Applicable
Index Number: 856.00-00, 9100.00-00
Person To Contact:
----------------- ----------------, ID No. ------------
----------------------- Telephone Number:
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------------------------- Refer Reply To:
CC:FIP:2
PLR-119898-25
Date:
May 11, 2026

Legend

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

Subsidiary = ---------------------------------------------------------

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

Date 2 = ----------------------

Date 3 = ------------------------

Date 4 = ------------------

Date 5 = ----------------------

Year 1 = -------

Year 2 = -------

State 1 = ------------

State 2 = -------------

Facility = ---------------

Accounting Firm = ------------------

PLR-119898-25 2

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

    This ruling responds to a letter dated October 14, 2025, submitted on behalf of

Taxpayer and Subsidiary. Taxpayer and Subsidiary request an extension of time under
sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations
to jointly make an election under section 856(l) of the Internal Revenue Code (“Code”)
to treat Subsidiary as a taxable REIT subsidiary (“TRS”) of Taxpayer effective as of
Date 3.

                                     FACTS

   Taxpayer is a domestic trust organized in State 1 in Year 1. Taxpayer elected to

be treated as a real estate investment trust (“REIT”) under sections 856 through 859 of
the Code, beginning with its taxable year ended Date 1. Taxpayer is engaged primarily
in the business of acquiring, developing, managing and leasing income producing real
estate projects involving senior living facilities.

   Taxpayer engaged Accounting Firm to prepare tax returns for itself and its

subsidiaries. Taxpayer routinely meets with Accounting Firm to discuss business
events that are relevant to the preparation of its tax returns. Taxpayer and Accounting
firm hold calls on a quarterly basis.

   On Date 2, Subsidiary was organized as a State 2 limited liability company wholly

owned by Taxpayer that is disregarded from Taxpayer for federal income tax purposes.
On Date 3 Taxpayer acquired Facility through Subsidiary. Prior to that time, Subsidiary
had no activity. Facility was then leased to an operating entity that provides services to
the tenants of Facility. Typically, when Taxpayer acquired a property, Accounting Firm
would ensure that a TRS was formed and that elections were made for the TRS to be
treated as a corporation and to be a TRS. Taxpayer represents that it intended to make
those elections for Subsidiary effective on Date 3.

     Early in Year 2, due to scheduling conflicts, Accounting Firm was unable to

attend the normally scheduled quarterly meeting that followed the purchase of Facility.
On Date 4, a date that is more than 75 days past Date 3, Taxpayer informed Accounting
Firm about the formation of Subsidiary and the purchase of Facility. At that point,
Accounting Firm realized that it had failed to file Form 8832 and Form 8875 for
Subsidiary. The failure to file Form 8832 and Form 8875 was not discovered until after
the filing deadline in order to be effective on Date 3.

   On Date 5, Subsidiary filed Form 8832, electing to be treated as an association

taxable as a corporation for federal income tax purposes effective Date 3, pursuant to
Rev. Proc. 2009-41.

PLR-119898-25 3

                              REPRESENTATIONS

  Taxpayer and Subsidiary make the following additional representations in

connection with this request for an extension of time:

   1. Taxpayer and Subsidiary have filed this request for relief before the failure to
   timely make the regulatory election on Form 8875 was discovered by the
   Service.

   2. Granting the relief requested will not result in Taxpayer or Subsidiary having a
   lower U.S. federal tax liability in the aggregate for all years to which the
   regulatory election applies than they would have had if the election had been
   timely made (taking into account the time value of money).

   3. Taxpayer and Subsidiary do not seek to alter a return position for which an
   accuracy-related penalty has been or could have been imposed under section
   6662 at the time they requested relief, and the new position requires or permits a
   regulatory election for which relief is requested.

   4. Being fully informed of the required regulatory election and related tax
   consequences, Taxpayer and Subsidiary did not choose to not file the election.

   5. Taxpayer and Subsidiary are not using hindsight in requesting relief. No
   specific facts have changed since the due date for making the election that make
   the election more advantageous to Taxpayer or Subsidiary.

   6. The period of limitations on assessment under section 6501(a) has not expired
   for Taxpayer or Subsidiary for the taxable year in which the election should have
   been filed, nor for any taxable year(s) that would have been affected by the
   election had it been timely filed.

  In addition, affidavits on behalf of Taxpayer and Subsidiary have been provided

as required by sections 301.9100-3(e)(2) and (3).

                              LAW AND ANALYSIS

    Section 856(l) provides that a REIT and a corporation (other than a REIT) may

jointly elect to treat such corporation as a TRS. To be eligible for treatment as a TRS,
section 856(l)(1) provides that the REIT must directly or indirectly own stock in such
corporation, and the REIT and such corporation must jointly elect such treatment. The
election is irrevocable once made, unless both the REIT and the corporation consent to
its revocation. In addition, section 856(l) specifically provides that the election, and any
revocation thereof, may be made without the consent of the Secretary.

PLR-119898-25 4

     In Announcement 2001-17 2001-1 C.B. 716, the Service announced the

availability of new Form 8875, Taxable REIT Subsidiary Election. According to the
Announcement, this form is to be used for taxable years beginning after 2000 for eligible
entities to elect treatment as a TRS. The instructions to Form 8875 provide that the
subsidiary and the REIT can make the election at any time during the taxable year.
However, the effective date of the election depends on when the Form 8875 is filed.
The instructions further provide that the effective date cannot be more than 2 months
and 15 days prior to the date of filing the election, or more than 12 months after the date
of filing the election. If no date is specified on the form, the election is effective on the
date the form is filed with the Service.

    Section 301.9100-1(c) provides that the Commissioner has discretion to 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 Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines a
regulatory election as an election whose due date is prescribed by a regulation or by a
revenue ruling, revenue procedure, notice, or announcement published in the Internal
Revenue Bulletin.

    Section 301.9100-3(a) through (c)(1) sets forth rules that the Service generally

will use to determine whether, under the particular facts and circumstances of each
situation, the Commissioner will grant an extension of time for regulatory elections that
do not meet the requirements of section 301.9100-2. Section 301.9100-3(a) provides
that requests for relief subject to section 301.9100-3 will be granted when the taxpayer
provides the evidence (including affidavits described in section 301.9100-3(e)) to
establish to the satisfaction of the Commissioner that the taxpayer acted reasonably
and in good faith, and the grant of relief will not prejudice the interests of the
Government.

    Section 301.9100-3(b) provides that a taxpayer generally is deemed to have

acted reasonably and in good faith if the taxpayer (i) requests relief under section
301.9100-3 before the failure to make the regulatory election is discovered by the
Service; (ii) failed to make the election because of intervening events beyond the
taxpayer’s control; (iii) failed to make the election because, after exercising reasonable
diligence (taking into account the taxpayer’s experience and the complexity of the return
or issue), the taxpayer was unaware of the necessity for the election; (iv) reasonably
relied on the written advice of the Service; or (v) 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. A taxpayer
will be deemed to have not acted reasonably and in good faith, however, if the taxpayer
(i) seeks to alter a return position for which an accuracy-related penalty has been or
could be imposed under section 6662 at the time the taxpayer requests relief and the
new position requires or permits a regulatory election for which relief is requested; (ii)
was informed in all material respects of the required election and related tax
consequences but chose not to file the election; or (iii) uses hindsight in requesting

PLR-119898-25 5

relief. If specific facts have changed since the due date for making the election that
make the election more advantageous to the taxpayer, the Service will not ordinarily
grant relief. In such case the Service will grant relief only when the taxpayer provides
strong proof that the taxpayer’s decision to seek relief did not involve hindsight.

    Section 301.9100-3(c)(1) provides that a reasonable extension of time to make a

regulatory election will be granted only when the interests of the Government will not be
prejudiced by the granting of relief. Section 301-9100-3(c)(1)(i) provides that the
interests of the Government are prejudiced if granting relief would result in the taxpayer
having a lower tax liability in the aggregate for all taxable years affected by the election
than the taxpayer would have had if the election had been timely made, (taking into
account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the
interests of the Government are ordinarily prejudiced if the taxable year in which the
regulatory election should have been made or any taxable years that would have been
affected by the election had it been timely made are closed by the period of limitations
on assessment under section 6501(a) before the taxpayer’s receipt of a ruling granting
relief under section 301.9100-3.

                                   CONCLUSION

    Based on the information submitted and the representations made, we conclude

that Taxpayer and Subsidiary have satisfied the requirements for granting a reasonable
extension of time to elect under section 856(l) to treat Subsidiary as a TRS of Taxpayer,
effective Date 3. Accordingly, Taxpayer and Subsidiary have 90 calendar days from the
date of this letter to make the intended election to treat Subsidiary as a TRS of
Taxpayer, effective Date 3.

    This ruling is limited to the timeliness of the filing of Form 8875. This ruling’s

application is limited to the facts, representations, Code sections, and regulation
sections cited herein. Except as 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. No opinion is expressed as to whether Taxpayer otherwise
qualifies as a REIT or whether Subsidiary otherwise qualifies as a TRS of Taxpayer
under subchapter M of chapter 1 of the Code. Additionally, no opinion is expressed as
to any tax liability of Subsidiary.

    The ruling contained in this letter is based upon information submitted and

representations made by Taxpayer and Subsidiary and accompanied by penalties of
perjury statements executed by the appropriate parties. While this office has not
verified any of the material submitted in support of the request for a ruling, it is subject
to verification on examination.

PLR-119898-25 6

  This ruling is directed only to the taxpayers who requested it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

    In accordance with the terms of a power of attorney on file in this office, a copy of

this letter is being sent to your authorized representatives.

                                            Sincerely,


                                            ___________________________
                                            Matthew P. Howard
                                            Senior Counsel, Branch 2
                                            Office of Associate Chief Counsel
                                            (Financial Institutions & Products)

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