Private Letter Ruling
201717035
Released April 28, 2017
Mixed outcome
Commodity-linked-note ruling is revoked prospectively
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This page covers one taxpayer's ruling from 2017, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)
Plain-English summary
A prior multi-filer ruling had told 96 funds that income and gain from certain commodity-linked notes counted as qualifying income under section 851(b)(2). It also ruled that specified subpart F income or qualified electing fund inclusions attributable to one fund were qualifying income. The IRS said the commodity-linked-note portion no longer matched its current views and revoked that portion of the earlier ruling. It left the separate subsidiary-income ruling in effect. Using its section 7805(b) authority, the IRS limited the revocation to commodity-linked notes acquired after June 30, 2017, protecting the ruling's effect for notes acquired by the cutoff date.
Ruling snapshot
- Question: Would the IRS revoke its prior qualifying-income ruling, and would any revocation apply retroactively?
- Outcome: mixed, the commodity-linked-note ruling was revoked prospectively, while the subsidiary ruling remained in effect
- Key authorities: IRC §§ 851(b)(2), 7805(b); Rev. Proc. 2017-1; Rev. Proc. 2017-3
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201717035 Third Party Communication: None
Release Date: 4/28/2017 Date of Communication: Not Applicable
Index Number: 851.02-00, 7805.00-00
Person To Contact:
--------------------------- ------------------------, ID No. ------------------
-------------- ----------------------------------------------------
------------------------------------------- Telephone Number:
--------------------------------- ----------------------
--------------------------- Refer Reply To:
CC:FIP:B2
PLR-133185-16
Date:
January 18, 2017
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Dear --------------------:
This letter revokes a part of PLR 200946036 (PLR-151736-081) issued to Funds
1 through 96 (the “Funds”) on July 8, 2009, and, in response to a request from your
authorized representative dated November 28, 2016, limits the retroactive effect of such
revocation pursuant to section 7805(b) of the Internal Revenue Code.
In PLR 200946036, the Internal Revenue Service (the “Service”) issued rulings
that (i) income and gain from certain commodity-linked notes constitute qualifying
income to the Funds under section 851(b)(2) (the “CLN Ruling”), and (ii) subpart F
income or QEF inclusions of the Subsidiary attributable to Fund 1 is other income
derived from Fund 1’s business of investing in stock, securities, or currencies and,
therefore, constitutes qualifying income under section 851(b)(2) (the “Subsidiary
Ruling”). In a letter dated September 29, 2016, the Service notified the Funds that it
was considering revoking the CLN Ruling. On November 28, 2016, the Funds
requested that the Service exercise its discretionary authority under section 7805(b) to
limit the retroactive effect of any revocation.
Since issuing PLR 200946036, the Service has determined that having provided
a private letter ruling on the issue in the CLN Ruling is not in accord with the current
views of the Service. See Rev. Proc. 2016-50, 2016-43 I.R.B. 522, superseded by Rev.
Proc. 2017-3, 2017-1 I.R.B.130, 140 (section 4.01(44)); see also REG-123600-16, 81
Fed. Reg. 66576-77 (Sept. 28, 2016). Section 11.04 of Rev. Proc. 2017-1, 2017-1
I.R.B. 1, 61, provides, in part, that unless it was part of a closing agreement, a letter
ruling found to be in error or not in accordance with the current views of the Service may
be revoked or modified. Accordingly, the CLN Ruling in PLR 200946036 is revoked.
The Subsidiary Ruling is not revoked and that portion of PLR 200946036 remains in
effect at this time.
1
PLR-151736-08 is the controlling PLR number for a multi-filer private letter ruling. Each of Funds 1
through 96 were assigned a separate PLR number. This letter refers to the controlling PLR number, but
applies equally to the rulings issued to all of the Funds under their respective, separately assigned PLR
numbers.
PLR-133185-16 13
Section 11.04 of Rev. Proc. 2017-1 also provides that, if a letter ruling is revoked,
the revocation applies to all years open under the statute of limitations on assessment
unless the Service uses its discretionary authority under section 7805(b) to limit the
retroactive effect of the revocation. In accordance with the Funds’ request, the Service
has decided to grant relief under section 7805(b). The revocation of the CLN Ruling in
PLR 200946036 will apply prospectively only to commodity-linked notes acquired by the
Funds after June 30, 2017.
In accordance with the power of attorney on file with this office, we are sending a
copy of this letter to the Funds’ authorized representatives. We are also sending a copy
of this letter to the appropriate operating division.
Sincerely,
Andrea M. Hoffenson
Andrea M. Hoffenson
Branch Chief, Branch 2
Office of Associate Chief Counsel
(Financial Institutions and Products)
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