Trust may make a late 65-day distribution election

Plain-English summary

A calendar-year trust made a distribution during the first 65 days of the next year and intended to treat it as paid on the last day of the prior year under section 663(b). The trustee inadvertently failed to make the election on time. The IRS concluded that the trust acted reasonably and in good faith and that relief would not prejudice the government. It granted 120 days to amend the prior-year income tax return, include the election, and attach the ruling. The IRS did not decide whether the distribution was otherwise properly paid, credited, or calculated.

Ruling snapshot

• Question: Could the trust make a late section 663(b) election for a distribution paid during the first 65 days of the following year?
• Outcome: approved, with a 120-day extension
• Key authorities: IRC § 663(b); Treas. Reg. §§ 1.663(b)-2 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201709010 Third Party Communication: None
Release Date: 3/3/2017 Date of Communication: Not Applicable
Index Number: 9100.31-00, 663.04-00
Person To Contact:
------------------------------------------------------------ ----------------------, ID No. ------------------
------------------- Telephone Number:
------------------------------------------------------------ ----------------------
----------------------------------- Refer Reply To:
-------------------------------- CC:PSI:B03
PLR-119993-16
Date:
November 28, 2016

LEGEND

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

x = -------------------

Year1 = -------

Year2 = ------------

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

   This responds to the letter dated June 21, 2016, and related correspondence,

submitted on behalf of Trust, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an election under § 663(b) of the
Internal Revenue Code.

FACTS

   Trust files its federal income tax return on a calendar year basis. The trustee of

Trust made a distribution in the amount of $x (Distribution) within the first sixty-five days
of Year2 and intended to have the Distribution considered to be paid or credited on the
last day of Year1 as permitted under § 663(b). However, due to inadvertence, the
trustee of Trust did not timely make an election under § 663(b).

LAW AND ANALYSIS
PLR-119993-16 2

Section 663(b)(1) provides that in general, if within the first 65 days of any taxable year
of an estate or a trust, an amount is properly paid or credited, such amount shall be
considered paid or credited on the last day of the preceding taxable year. Section
663(b)(2) provides that § 663(b)(1) shall apply with respect to any taxable year of an
estate or a trust only if the executor of such estate or the fiduciary of such trust (as the
case may be) elects, in such manner and at such time as the Secretary prescribes by
regulations, to have § 663(b)(1) apply for such taxable year.

Section 1.663(b)-2(a)(1) of the Income Tax Regulations provides that if a trust return is
required to be filed for the taxable year of the trust for which the election is made, the
election shall be made in the appropriate place on such return. The election under
§ 1.663(b)-2(a)(1) shall be made not later than the time prescribed by law for filing such
return (including extensions thereof). Such election shall become irrevocable after the
last day prescribed for making it.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time under the rules in §§ 301.9100-2 and 301.9100-3 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 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.

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 the
evidence (including affidavits described in § 301.9100-3(e)) to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of relief will not prejudice the interests of the Government.

CONCLUSION

Based solely on the information submitted and the representations made, we conclude
that Trust has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result,
Trust is granted an extension of time of 120 days from the date of this letter to file an
election under § 663(b). The election should be made by filing an income tax return for
Year1, amended to include the election, with the appropriate service center. A copy of
this letter should be attached to the amended return.
PLR-119993-16 3

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. In addition, § 301.9100-1(a) provides that the granting of an extension of time for
making an election is not a determination that the taxpayer is otherwise eligible to make
the election. Finally, we express or imply no opinion concerning whether the
distributions were property paid or credited and in the proper amounts.

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.

Pursuant to a power of attorney on file with this office, we are sending a copy of this
letter to Trust's authorized representatives.

The ruling contained in this letter is based upon information and representations
submitted by the taxpayer 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 ruling request, it is subject to verification on examination.

                               Sincerely,




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

Enclosures (2)

   Copy of this letter
   Copy of this letter for section 6110 purposes

cc: