Trust gets extra time to make the 65-day election for a late-year distribution

Plain-English summary

A trust made a distribution to a beneficiary within the first 65 days of a
tax year and wanted to treat it, under IRC § 663(b), as if it had been paid on
the last day of the prior year. That election shifts which year the
distribution counts for and can change who pays tax on the trust's income.
The trustee intended to make the election but did not file it on time. The
trust asked the IRS for a late-election extension under Treas. Reg.
§ 301.9100-3. Finding that the trust acted reasonably and in good faith and
that relief would not prejudice the government, the IRS granted 120 days to
file the § 663(b) election by filing (or amending) the returns for the two
years involved.

Ruling snapshot

• Question: Should the trust get an extension of time to make a late IRC § 663(b) election for a distribution made in the first 65 days of the year?
• Outcome: approved (120-day extension granted under Treas. Reg. § 301.9100-3)
• Key authorities: IRC § 663(b); Treas. Reg. §§ 1.663(b)-2, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202007002 Third Party Communication: None
Release Date: 2/14/2020 Date of Communication: Not Applicable
Index Number: 9100.00-00, 663.00-00
Person To Contact:
----------------------------- -----------------------, ID No. --------------
--------------------------------------- Telephone Number:
------------------- ----------------------
-------------------------------- Refer Reply To:
CC:PSI:B01
PLR-106997-19
Date:
September 24, 2019

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

X = ------------------

Year 1 = -------

Year 2 = -------

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

This letter responds to a letter dated March 27, 2019, submitted on behalf of Trust by its
authorized representatives, requesting that the Service grant Trust an extension of time
pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an
election under § 663(b) of the Internal Revenue Code.

FACTS

Trust files its federal income tax return on a calendar year basis. Trustee of Trust made
a distribution in the amount of $X (the Distribution) within the first sixty-five days of
Year 2 and intended to have the Distribution considered to be paid or credited on the
last day of Year 1 as permitted under § 663(b). However, due to inadvertence, the
§ 663(b) election was not timely filed.

LAW AND ANALYSIS

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
PLR-106997-19 2

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 that 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 set forth in §§ 301.9100-2 and 301.9100-3 to make a
regulatory election, or a statutory election (but not 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 including an
election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides extensions of time for making elections that do not meet
the requirements of § 301.9100-2.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 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.

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that
Trust has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly,
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, with the appropriate
service center, income tax returns for Year 1 and Year 2, as necessary, to include the
election and properly report the tax consequences of the Distribution in a manner
consistent with the election having been made. A copy of this letter should be attached
to the returns.

Except for the specific ruling above, no opinion is expressed or implied concerning the
federal tax consequences of the facts described above under any other provision of the
Code.

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-106997-19 3

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter to Trust’s authorized representative.

                                  Sincerely,



                                  Faith Colson
                                  Faith Colson
                                  Senior Counsel, Branch 1
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes

cc: