Late taxable REIT subsidiary election is treated as timely

Plain-English summary

A real estate investment trust indirectly owned a subsidiary used in a senior living project. The parties planned to elect taxable REIT subsidiary status when construction ended and the project became operational, but turnover at the investment manager and joint-venture partner led to poor communication about the completion date. When the tax return preparer discovered the missed deadline, the REIT and subsidiary filed Form 8875 with the earliest then-available effective date and sought relief for the intended earlier date. They represented that the IRS had not discovered the failure, the extension would not reduce their aggregate tax liability, and they were not using hindsight. The IRS found that the standards for regulatory-election relief were met. It treated the already-filed Form 8875 as timely with the requested earlier effective date, without deciding whether the entities otherwise qualify as a REIT and taxable REIT subsidiary.

Ruling snapshot

• Question: May the REIT and subsidiary treat their late IRC § 856(l) taxable REIT subsidiary election as timely filed with the intended earlier effective date?
• Outcome: Approved
• Key authorities: IRC § 856(l); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Announcement 2001-17

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202632020 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:
---------------------------------------------------- --------------------
------------------------------------------- Refer Reply To:
---------------------------- CC:FIP:B03
----------------------------- PLR-119994-25
Date:
May 06, 2026

LEGEND:

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

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

Limited Partnership = -----------------------------------------

Company = ------------------------------------------------

Entity = ----------------------------------------

Tax Return Preparer = -----------------------

State = -------------

Township = ---------------------------------------

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

PLR-119994-25 2

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

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

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

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

Date 6 = --------------------

Date 7 = ------------------

Date 8 = --------------------------

Date 9 = -------------------

Year 1 = -------

Year 2 = -------

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

   This ruling responds to a letter dated November 20, 2025, that was submitted on

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

                                         FACTS

    Taxpayer is a State limited liability company that elected to be treated as a real

estate investment trust (“REIT”) under §§ 856 through 859 of the Code beginning with
its taxable year that ended Date 2. Taxpayer is owned directly or indirectly by various
funds managed by Limited Partnership.

   Company is owned by Taxpayer and Entity, its joint venture partner. Subsidiary,

a State limited liability company, is wholly owned by Company. Thus, Taxpayer owns
an interest in Subsidiary through Company. Company is treated as a partnership for
federal tax purposes and owns real property within the meaning of § 1.856-10 of the
Regulations. Company uses Subsidiary to provide services to tenants, hold certain

PLR-119994-25 3

assets, and to receive income. Subsidiary commenced its operations and acquired
assets on Date 3.

    Company was formed to acquire, develop, construct, own, and operate a senior

living facility located in Township (the “Project”). The Project was intended to qualify as
a “qualified healthcare property” within the meaning of § 856(e)(6)(D). Taxpayer and
Subsidiary planned to file a Form 8875, Taxable REIT Subsidiary Election, with the
Internal Revenue Service (“Service”) and jointly make an election to treat Subsidiary as
a TRS of Taxpayer effective as of Date 1. To have made a timely election, a Form 8875
would have had to have been filed by Taxpayer and Subsidiary no later than Date 4.

   After discussions in Year 1 among Tax Return Preparer, employees in the

Limited Partnership’s tax, finance, and asset management department (the
“Department”), and a tax director at Entity, a decision was reached that although the
real estate was purchased in Year 1 and Taxpayer’s REIT election was made in Year 1,
making a TRS election for Subsidiary would not be undertaken until completing such an
action was actually necessary – after construction was completed and the Project
became operational.

   During the summer of Year 2, the tax director at Entity who had participated in

the discussions left Entity. Additionally, during Date 5, Limited Partnership experienced
some employee turnover, and the lead asset manager for Entity left. Entity was
responsible for informing members of the Department, legal counsel, and Tax Return
Preparer of the completion of construction of the Project, which would trigger the
necessity for Taxpayer and Subsidiary to jointly make a TRS election to treat Subsidiary
as a TRS of Taxpayer.

    During Date 6, construction on the Project was completed and the asset became

operational. However, because of employee turnover at both Limited Partnership and
Entity, and the ensuing poor communications, members of the Department and Tax
Return Preparer only became aware on Date 7 that construction on the Project had
been completed and that the asset had become operational. This information only
became known because Tax Return Preparer had requested an update on the status of
the Project.

   Upon discovery of the failure of Taxpayer and Subsidiary to timely make a TRS

election, Taxpayer and Subsidiary filed a Form 8875 on Date 8, reflecting the earliest
possible effective date, Date 9. Taxpayer and Subsidiary then filed this request for a
private letter ruling seeking an extension of time to elect to treat Subsidiary as a TRS of
Taxpayer on Date 1. Taxpayer and Subsidiary represent that since Date 1 the
accounting and tax reporting of Taxpayer, Subsidiary, and Company have clearly and
consistently reflected Taxpayer’s and Subsidiary’s intent to properly and timely elect to
make Subsidiary a TRS of Taxpayer effective as of Date 1. Taxpayer also represents

PLR-119994-25 4

that Subsidiary elected to be treated as a corporation for federal income tax purposes
by filing Form 8832, Entity Classification Election, effective as of Date 1.

   Taxpayer and Subsidiary make the following additional representations in

connection with their request for an extension of time to make the election under
§ 856(l):

1. The request for relief was filed before the failure to make the regulatory election was
   discovered by the Service.

2. Granting the relief requested will not result in Taxpayer or Subsidiary having a lower
   federal income tax liability in the aggregate for all years to which the 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 § 6662 of the Code 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 making the decision to seek the
   relief requested. No specific facts have changed since the due date for making the
   election that make the election advantageous to Taxpayer or Subsidiary.

6. The period of limitations on assessment under § 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.

   Affidavits on behalf of Taxpayer and Subsidiary were provided by knowledgeable
   individuals associated with Taxpayer, Subsidiary, and Tax Return Preparer, as required
   by § 301.9100-3(e)(2) and (3) of the Regulations.

                            LAW AND ANALYSIS
   

   Section 856(l) of the Code 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, § 856(l)(1) provides that the REIT must directly or indirectly own stock in the
   corporation, and the REIT and the corporation must jointly elect such treatment. The
   election is irrevocable once made, unless both the REIT and the subsidiary consent to

PLR-119994-25 5

its revocation. In addition, § 856(l) specifically provides that the election, and any
revocation thereof, may be made without the consent of the Secretary.

     In Announcement 2001-17, 2001-8 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 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
published in the Federal Register, 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

uses 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 § 301.9100-2. Section 301.9100-3(a) provides that
requests for relief subject to this section will be granted when the taxpayer provides the
evidence (including affidavits described in § 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 is deemed to have acted

reasonably and in good faith if the taxpayer (i) requests relief under this section 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 if the taxpayer (i) seeks to alter a return position
for which an accuracy-related penalty has been or could be imposed under § 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

PLR-119994-25 6

of the required election and related tax consequences, but chose not to file the election;
or (iii) uses hindsight in requesting 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 § 6501(a) before the taxpayer’s receipt of a ruling granting relief
under § 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 § 856(l) to treat Subsidiary as a TRS of Taxpayer
effective Date 1. Accordingly, the Form 8875 treating Subsidiary as a TRS of Taxpayer
that was filed on Date 8 will be considered as timely filed, with an effective date of
Date 1.

    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 part II of 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-119994-25 7

  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 terms of a power of attorney on file in this office, a copy of

this letter is being sent to your authorized representatives.

                                                 Sincerely,



                                                 ______________________________
                                                 Adam G. Province
                                                 Senior Technician Reviewer, Branch 3
                                                 Office of the Associate Chief Counsel
                                                 (Financial Institutions & Products)

Enclosures:
Copy of this letter
Copy for section 6110 purposes

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