Trust may make a late charitable-payment election

Plain-English summary

A trust made a charitable contribution in one tax year that could have been treated as paid in the preceding year under section 642(c)(1), but it failed to make the required election. The IRS found that the trust met the standards for regulatory-election relief. It granted 120 days to elect to claim the contribution in the earlier year. The relief required amended returns for both years within that period. The IRS did not decide whether the trust otherwise qualified for the charitable deduction.

Ruling snapshot

• Question: Could the trust make a late election to treat a charitable contribution paid in the following year as paid in the prior year?
• Outcome: Approved, conditioned on filing the required amended returns within 120 days.
• Key authorities: IRC §§ 170(c) and 642(c)(1); Treas. Reg. §§ 1.642(c)-1(b) and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 201636004                                                Third Party Communication: None
Release Date: 9/2/2016                                           Date of Communication: Not Applicable
Index Number: 9100.26-00
                                                                 Person To Contact:
------------------------------                                   -------------------------, ID No. -----------------
--------------------------------------------------               ----------------------------------------------------
------------------------------------------------------           Telephone Number:
----------------------------------------                         --------------------
 ----------------------------------                              Refer Reply To:
                                                                 CC:PSI:03
                                                                 PLR-104524-16
                                                                 Date:
                                                                 May 03, 2016




Trust         = --------------------------------------------------------------------------------------------------
                --------------------------------------

Year 1        = ------

Year 2        = ------


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

      This letter responds to your letter dated January 21, 2016, and subsequent
correspondence, submitted on behalf of Trust by Trust’s representative, requesting an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations
to make an election under § 642(c)(1) of the Internal Revenue Code (Code) for Year 1.

                                                         Facts

      The information submitted states that Trust could have made an election under
§ 642(c)(1) to treat a charitable contribution made in Year 2 as having been paid in Year

1. However, Trust failed to make the election.


                                              Law and Analysis

       Section 642(c)(1) provides that in the case of an estate or trust (other than a trust
meeting the specifications of subpart B of part I of subchapter J of Chapter 1 of the
Code), there shall be allowed as a deduction in computing its taxable income (in lieu of
the deduction allowed by § 170(a), relating to deduction for charitable, etc.,
contributions and gifts) any amount of the gross income, without limitation, which
PLR-104524-16                                    2

pursuant to the terms of the governing instrument is, during the taxable year, paid for a
purpose specified in § 170(c) (determined without regard to § 170(c)(2)(A)). If a
charitable contribution is paid after the close of such taxable year and on or before the
last day of the year following the close of such taxable year, then the trustee or
administrator may elect to treat such contribution as paid during such taxable year. The
election shall be made at such time and in such manner as the Secretary prescribes by
regulations.

       Section 1.642(c)-1 (b)(1) provides that for purposes of determining the deduction
allowed under § 1.642(c)-1 (a), the fiduciary (as defined in § 7701(a)(6)) of an estate or
trust may elect under § 642(c)(1) to treat as paid during the taxable year (whether or not
such year begins before January 1, 1970) any amount of gross income received during
such taxable year or any preceding taxable year which is otherwise deductible under
§ 642(c)(1) and which is paid after the close of such taxable year but on or before the
last day of the next succeeding taxable year of the estate or trust. The preceding
sentence applies only in the case of payments actually made in a taxable year which is
a taxable year beginning after December 31, 1969. No election shall be made, however,
in respect of any amount which was deducted for any previous taxable year or which is
deducted for the taxable year in which such amount is paid.

       Section 1.642(c)-1 (b)(2) provides that the election under § 1.642(c)-1 (b)(1) shall
be made not later than the time, including extensions thereof, prescribed by law for filing
the income tax return for the succeeding taxable year.

       Section 1.642(c)-1 (b)(3) provides that the election shall be made by filing with
the income tax return (or an amended return) for the taxable year in which the
contribution is treated as paid a statement which (i) states the name and address of the
fiduciary, (ii) identifies the estate or trust for which the fiduciary is acting, (iii) indicates
that the fiduciary is making an election under § 642(c)(1) in respect of contributions
treated as paid during such taxable year, (iv) gives the name and address of each
organization to which any such contribution is paid, and (v) states the amount of each
contribution and date of actual payment or, if applicable, the total amount of
contributions paid to each organization during the succeeding taxable year, to be
treated as paid in the preceding taxable year.

       Section 301.9100-1(c) provides that the Commissioner may 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
Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines
the term “regulatory election” as an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.
PLR-104524-16                                  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 the
election. Section 301.9100-2 provides the rules governing automatic extensions of time
for making certain elections. Section 301.9100-3 provides the standards the
Commissioner will use to determine whether to grant an extension of time for regulatory
elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a
request for relief will be granted when the taxpayer provides evidence to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) granting relief will not prejudice the interests of the government.

                                         Conclusion

       Based on the information submitted and representations made, we conclude that
the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
Trust is granted an extension of time of 120 days from the date of this letter to file an
election under § 642(c)(1) to claim a deduction in the Year 1 taxable year for charitable
contributions made in Year 2. This ruling is conditioned on the Trust filing amended
returns for Year 1 and Year 2 on which the Trust must: (1) make the election under
§ 642(c)(1) to claim a deduction on the Year 1 amended return for the distributions
made by the close of Year 2, and (2) claim a deduction for the Year 1 distributions
under § 642(c)(1). The amended returns must be filed within the 120-day period
following the date of this letter with the service center where the Trust files its returns. A
copy of this letter should be attached to the amended return.

        Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the Code. Specifically, we express or imply no opinion concerning whether the Trust is
entitled to a deduction under § 642(c).

      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-104524-16                                  4



         In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to your authorized representative.


                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



                                       By:___________________________________

                                       Bradford Poston
                                       Senior Counsel, Branch 3
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)




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