Couple granted late foreign earned income elections

Plain-English summary

A married couple filed joint returns while one spouse worked for an employer in a foreign country. They did not timely file Form 2555 or Form 2555-EZ to elect the section 911 foreign earned income exclusion for two tax years. The IRS concluded that the regulatory relief standards were satisfied. It granted 60 days to make the elections for both years and instructed the couple to attach the ruling to the relevant returns.

Ruling snapshot

• Question: May the taxpayers make late section 911 elections for two years of foreign employment?
• Outcome: approved
• Key authorities: IRC §§ 911, 6511(a); Treas. Reg. §§ 1.911-7, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201650006 [Third Party Communication:
Release Date: 12/9/2016 Date of Communication: Month DD, YYYY]
Index Number: 911.11-00, 911.11-01,
9100.00-00, 9100.17-00 Person To Contact:
------------------, ID No. --------------------
----------------------------------------------------- Telephone Number:
--------------------- ----------------------
------------------------------------ Refer Reply To:
CC:INTL:B02
PLR-106989-16
Date:
August 30, 2016

                 TY: -------

Legend
Taxpayers = -------------------
---------------------------

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

Employer = -----------------------------------------
Country A = ---------

Year 1 = -------
Year 2 = -------

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

   This is in response to a letter received by our office on March 3, 2016, requesting

an extension of time under Treas. Reg. § 301.9100-3 to elect the provisions of section
911 of the Internal Revenue Code (Code) for Years 1 through 2.

  The rulings contained in this letter are based upon information and

representations submitted by Taxpayers and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of the
material submitted in support of the request for rulings, it is subject to verification on
examination.

     Taxpayers, husband and wife, are married and filed their income tax return

jointly. Wife was an employee of Employer in Country A from Year 1 to Year 2.
Taxpayers failed to file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign
Earned Income Exclusion, to claim the section 911 foreign earned income exclusion
PLR-106989-16 2

and did not make a section 911 election within the time prescribed by Treas. Reg.
§ 1.911-7(a)(2)(i) for those years.

   Section 911(a) of the Code allows qualified citizens and residents of the United

States living abroad to elect to exclude from gross income the foreign earned income
and housing cost amounts of such individuals. Treas. Reg. § 1.911-7(a) sets forth the
procedural rules for making a valid section 911 election. The election must be made on
Form 2555 or on a comparable form, and must be filed with the income tax return or
with an amended return. With respect to the timing of the election, Treas. Reg. § 1.911-
7(a)(2)(i) provides that a valid section 911 election must be made:

  (A) With an income tax return that is timely filed (including any extensions of time
  to file);

  (B) With a later return filed within the period prescribed in section 6511(a)
  amending a timely filed income tax return;

  (C) With an original return filed within one year after the due date of the return
  (determined without regard to any extension of time to file); or

  (D) With an income tax return filed after the period described in paragraphs
  (a)(2)(i)(A), (B), or (C) of this section provided -

         (1) The taxpayer owes no federal income tax after taking into account the
         exclusion and files Form 1040 with Form 2555 or a comparable form
         attached either before or after the Internal Revenue Service discovers that
         the taxpayer failed to elect the exclusion; or

         (2) The taxpayer owes federal income tax after taking into account the
         exclusion and files Form 1040 with Form 2555 or a comparable form
         attached before the Internal Revenue Service discovers that the taxpayer
         failed to elect the exclusion.

    Treas. Reg. § 301.9100-1(c) provides that the Commissioner has discretion to

grant a taxpayer a reasonable extension of time, under the rules set forth in Treas. Reg.
§ 301.9100-3, to make a regulatory election under all subtitles of the Code, except
subtitles E, G, H, and I.

     Treas. Reg. § 301.9100-1(b) provides that an election includes an application for

relief in respect of tax, and defines a regulatory election as an election whose due date
is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or
announcement.
PLR-106989-16 3

   Treas. Reg. § 301.9100-3(a) provides that requests for relief will be granted

when the taxpayer provides the evidence (including affidavits described in Treas. Reg.
§ 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.

    Treas. Reg. § 301.9100-3(b) (1) provides that, except as provided in paragraph

(b)(3)(i) through (iii), 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 Internal Revenue 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 IRS; 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.

    In this case, Treas. Reg. § 1.911-7(a) fixes the time to make the election under

section 911. Therefore, the Commissioner has discretionary authority under Treas.
Reg. § 301.9100-1(c) to grant Taxpayer an extension of time provided, that Taxpayers
satisfy the standards set forth under Treas. Reg. § 301.9100-3(a).

   Based solely on the information and representations set forth above, we

conclude that Taxpayers satisfy Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayers
are granted an extension of time until 60 days from the date of this ruling letter to elect
the foreign earned income exclusion for Years 1 through 2.

   Taxpayers should attach a copy of this letter ruling to their federal income tax

return for the relevant year.

  This ruling is directed only to Taxpayers who requested it. I.R.C. section

6110(k)(3) provides that it may not be used or cited as precedent.
PLR-106989-16 4

   Pursuant to a power of attorney on file in this office, a copy of this ruling letter is

being furnished to your authorized representative.

                                    Sincerely,




                                    Kristine Crabtree
                                    Assistant to the Branch Chief, Branch 2
                                    (International)

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