IRS grants late Form 5471 accounting-period election

Plain-English summary

A taxpayer missed the deadline to file Form 5471 electing under section 898(c)(2) a controlled foreign corporation tax year beginning one month before the majority U.S. shareholder year. The taxpayer had engaged a qualified tax professional and sought relief promptly. The IRS found reasonable, good-faith conduct and no prejudice to the Government, so it treated the filing as timely under the section 301.9100 regulations, conditioned on compliance with section 898(c).

Ruling snapshot

• Question: Should the taxpayer receive section 301.9100-3 relief for a late Form 5471 making the section 898(c)(2) one-month deferral election?
• Outcome: approved
• Key authorities: IRC § 898(c); Prop. Treas. Reg. § 1.898-3(a)(5)(iii); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

```
Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202013013 Third Party Communication: None
Release Date: 3/27/2020 Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
----------------- ----------------------, ID No. ------------
----------------------------- Telephone Number:
---------------------------- --------------------
------------------ Refer Reply To:
------------------------- CC:ITA:BO5

                                             PLR-121388-19

EIN: ----------------
Date:
November 13, 2019

In Re: ---------------------------------------
EIN: --------
Year 1: --------

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

This ruling is in reference to the taxpayer’s request that a certain Form 5471,
Information Return of U.S. Persons With Respect to Certain Foreign Corporations,
be considered timely filed under the authority in § 301.9100-3 of the Procedures and
Administration Regulations.

Taxpayer’s Form 5471 electing under § 898(c)(2) of the Internal Revenue Code a
taxable year beginning 1 month earlier than the majority U.S. shareholder year under
the testing date of Prop. Reg. § 1.898-3(a)(5)(iii) was due on May 15, 2019, but was not
filed by that date. Taxpayer had engaged a qualified tax professional in order to assure
a proper filing. The error was not due to any lack of due diligence or prompt action on
the part of the taxpayer. Although the Form 5471 was not filed by the due date,
taxpayer requested an extension of time to file Form 5471 under § 301.9100-3 soon
thereafter.

Section 898(c)(3)(B) provides that the testing days shall be the first day of the
corporation’s taxable year or the days during such representative period as the
Secretary may prescribe. Prop. Regs. § 1.898-3(a)(5)(iii) provides, that a specified
foreign corporation must determine its majority U.S. shareholder year on each day,
since the most recent testing day on which a substantial change occurs in the United
States ownership of the stock of the specified foreign corporation. To comply with the
requirements, Form 5471 must be filed by the CFC’s U.S. shareholder(s) with the
shareholder(s) federal income tax return for the CFC’s taxable year that ends with or
PLR-121388-19 2

within the taxable year of the U.S. shareholder. The CFC’s controlling domestic
shareholder must indicate the change in taxable year on the Form 5471.

Section 301.9100-1 set forth rules respecting the granting of extensions of time for
making certain elections. Under these rules, the Commissioner in his discretion may
grant a reasonable extension of time to make a regulatory election under subtitle A,
provided the taxpayer acted reasonably and in good faith, and that the granting of relief
will not prejudice the interest of the government.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory
election that do not meet the requirements of § 301.9100-2 (automatic extensions),
such as the instant case, must be made under the rules of § 301.9100-3. The
standards applied are whether the taxpayer acted reasonably and in good faith in the
matter, and whether the granting of relief will prejudice the interest of the government.
Generally, the request for relief under § 301.9100-3 will be granted when the taxpayer
provides evidence to establish that the taxpayer acted reasonably and in good faith,
and that the granting of relief will not prejudice the interest of the government.

The information submitted and representations furnished by Taxpayer and its tax
professionals establish that Taxpayer acted reasonably and in good faith in respect of
this matter. Furthermore, we have determined that the granting of relief in this case
will not prejudice the interest of the government within the intendment of § 301-9100-
3(c)(1). Accordingly, the requirements of § 301.9100-3 for the granting of relief have
been satisfied.

A copy of this letter and Taxpayer’s Form 5471 filed in connection with this ruling
request must be forwarded to the service center where the taxpayer files its income tax
returns, so as to affect a taxable year ending December 31, effective for taxpayer’s
taxable year ending ------------------, Year 1.

This ruling is based upon facts and representations submitted by the taxpayer and
accompanied by a penalty of perjury statement executed by an appropriate party.
This ruling is also conditioned on Taxpayer complying with § 898(c) which provides
the rules in the determination of a required year of a CFC.

Except for the specific request above, which is restricted to the filing of Form 5471,
making a one month deferral election under § 898(c)(2) using the testing date
provisions in Prop. Regs. § 1.898-3(a)(5)(iii) we express or imply no opinion concerning
the federal income tax consequences of the facts of this case under any other provision
of the Code or regulations that may be applicable thereto.

In accordance with the provisions of a power of attorney currently on file with this office,
a copy of this letter ruling is being sent to the Taxpayer’s authorized representative.
PLR-121388-19 3

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Internal Revenue Code provides that it may not be used or cited as precedent.
Enclosed is a copy of the letter ruling showing the deletions proposed to be made when
it is disclosed under § 6110.

                                     Sincerely,



                                     William A. Jackson
                                     Branch Chief, Branch 5
                                     (Income Tax & Accounting)
                                     Office of Chief Counsel

cc:
```