Group received 75 days to apportion its section 382 limitation

Plain-English summary

Subsidiaries left a consolidated group while the group had a consolidated IRC § 382 limitation. The parent and departing subsidiaries failed to timely elect to apportion all or part of that limitation—and potentially net unrealized built-in gain—to the former members. They sought relief before the IRS discovered the omission. The IRS found that they acted reasonably and in good faith and granted 75 days to amend their returns and attach matching election statements under the consolidated-return regulations. Relief is conditioned on aggregate tax liability not being lower than if the election had been timely made. The ruling does not address other tax consequences, and otherwise applicable penalties and interest remain in effect.

Ruling snapshot

• Question: May the parent and former subsidiaries receive additional time to apportion the consolidated section 382 limitation?
• Outcome: Approved, with 75 days to amend returns and file the election
• Key authorities: IRC § 382; Treas. Reg. §§ 1.1502-95(c), 1.1502-95(f), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202509012 Third Party Communication: None
Release Date: 2/28/2025 Date of Communication: Not Applicable
Index Numbers: 9100.22-00, 1502.98-05
Person To Contact:
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CC:CORP:1
PLR-114325-24
Date:
December 04, 2024

Legend

Parent = ----------------------------------
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Subsidiaries = -------------------------
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Date 1 = -----------------------

Company Official = -------------------------
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Tax Professionals = ---------------------------------
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Dear --------------:

This letter responds to a letter dated August 9, 2024, submitted on behalf of Parent and
Subsidiaries, requesting an extension of time under §301.9100-3 of the Procedure and
Administration Regulations to file an election. Parent and Subsidiaries are requesting
an extension of time to file an election under §1.1502-95(c) of the Income Tax
Regulations to apportion all or any part of a consolidated section 382 limitation to
PLR-114325-24 2

Subsidiaries (the “Election”). The material information submitted for consideration is
summarized below.

Parent was the common parent of a consolidated group that included Subsidiaries (“the
Parent Group”). As a result of a transaction on Date 1, Subsidiaries ceased to be
members of the Parent Group. At that time, the Parent Group had a consolidated
section 382 limitation.

Under §1.1502-95(c), the common parent of a consolidated group may elect to
apportion all or any part of a consolidated section 382 limitation to a former member (or
loss subgroup) as well as all or any part of the loss group’s net unrealized built-in gain
to a former member (or loss subgroup). The election is made pursuant to §1.1502-
95(f). Section 1.1502-95(f)(3) provides, in general, that the election statement under
§1.1502-95(f)(1)(i) must be filed by the common parent on or with its income tax return
for the taxable year in which the former member (or new loss subgroup) ceases to be a
member, and an identical statement must be included on or with the first return of the
former member (or the first return in which the former member, or the members of a
new loss subgroup, join) that is filed after the close of the consolidated return year of the
group of which the former member (or the members of a new loss subgroup) ceases to
be a member.

For various reasons, Parent and Subsidiaries failed to make the Election in a timely
manner. Parent and Subsidiaries have represented that they are not seeking to alter a
return position for which an accuracy-related penalty has been or could have been
imposed under section 6662.

Under §301.9100-1(c), the Commissioner has discretion to grant a reasonable
extension of time to make a regulatory election, or a statutory election (but no more than
six months except in the case of a taxpayer who is abroad), under all subtitles of the
Code except subtitles E, G, H, and I.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will
use to determine whether to grant an extension of time to make a regulatory election.
Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for
making certain elections. Requests for relief under §301.9100-3 will be granted when
the taxpayer provides evidence to establish to the satisfaction of the Commissioner that
the taxpayer acted reasonably and in good faith, and that granting relief will not
prejudice the interests of the government. Section 301.9100-3(a).

In this case, the time for filing the Election is fixed by regulations (i.e., §1.1502-95(f)(3)).
Therefore, the Commissioner has discretionary authority under §301.9100-3 to grant an
extension of time for Parent and Subsidiaries to file the Election, provided they show
that their actions were reasonable and in good faith, the requirements of §§301.9100-1
and 301.9100-3 are satisfied, and that granting relief will not prejudice the interests of
the government.
PLR-114325-24 3

Information, affidavits, and representations submitted by Parent, Subsidiaries, Company
Official, and Tax Professionals explain the circumstances that resulted in the failure to
timely file the Election. The submission establishes that the request for relief was filed
before the failure to make the Election was discovered by the Internal Revenue Service.
See §301.9100-3(b)(1)(i).

Based on the facts and information submitted, including the representations made, we
conclude that Parent and Subsidiaries have shown they acted reasonably and in good
faith, the requirements of §§301.9100-1 and 301.9100-3 are satisfied, and granting
relief will not prejudice the interests of the government. Accordingly, an extension of
time is granted under §301.9100-3, until 75 days from the date on this letter, for Parent
and Subsidiaries to file the Election. Parent and Subsidiaries should amend their
returns to attach the Election, following the requirements of §1.1502-95(f). A copy of
this letter must be attached to the returns. Alternatively, Parent and Subsidiaries may
satisfy the requirement of attaching a copy of this letter by attaching a statement to their
returns that provides the date on, and control number (PLR-114325-24) of, this letter
ruling.

The above extension of time is conditioned on the taxpayers’ tax liability (if any) not
being lower, in the aggregate, for all years to which the Election applies, than it would
have been if the Election had been timely made (taking into account the time value of
money). No opinion is expressed as to the taxpayers’ tax liability for the years involved.
A determination thereof will be made upon audit of the federal income tax returns
involved.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. In addition, we express no opinion as to the tax effects or consequences of
filing the Election late under the provisions of any other section of the Code or
regulations, or as to the tax treatment of any conditions existing at the time of, or effects
resulting from, filing the Election late that are not specifically set forth in the above
ruling.

For purposes of granting relief under §301.9100-3, we relied on certain statements and
representations made by Parent, Subsidiaries, Company Official, and Tax Professionals
under penalties of perjury. However, the Director should verify all essential facts. In
addition, notwithstanding that an extension is granted under §301.9100-3 to file the
Election, penalties and interest that would otherwise be applicable, if any, continue to
apply.

This ruling is directed only to the taxpayers requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.
PLR-114325-24 4

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

                                              Sincerely,


                                              ___________________
                                              Thomas I. Russell
                                              Chief, Branch 1
                                              Office of Associate Chief Counsel (Corporate)

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