Extension of Time for Making Certain Elections

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202414004
Release Date: 4/5/2024
Index Number: 856.00-00, 856.07-00,
9100.00-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:FIP:B01
PLR-118259-23
Date:
January 05, 2024
Dear --- :
This ruling responds to a letter dated September 22, 2023, and submitted on behalf of Taxpayer and Subsidiary. Taxpayer and Subsidiary request an extension of time under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to jointly make an election under section 856(l) of the Internal Revenue Code (“Code”) to treat Subsidiary as a taxable REIT subsidiary (“TRS”) of Taxpayer effective on Date 1.
Taxpayer = ---
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Subsidiary = ---
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Trustee = ---
Acquisition
Corporation
= ---
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Holding Partnership = ---
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Compliance Team = ---
Law Firm = ---
Accounting Firm = ---
Month 1 = ---
State = ---
Investment Property = ---
Date 1 = ---
Date 2 = ---
Date 3 = ---
Date 4 = ---
Year 1 = ---
PLR-118259-23 2

# FACTS

Trustee is the trustee and manager of various investment funds that indirectly own the common shares of Taxpayer. Taxpayer was formed in Year 1 as a limited liability company under the laws of State. Taxpayer was formed for the purpose of investing in real estate investment property being developed for mixed use, including residential and retail space. Taxpayer has elected to be treated as a real estate investment trust (“REIT”) under sections 856 through 859 of the Code for federal income tax purposes beginning with Taxpayer’s taxable year commencing on Date 2.
Taxpayer is the sole member of Acquisition Corporation. Acquisition Corporation was formed as a limited liability company under the laws of State. Acquisition Corporation previously elected to be classified as a corporation for federal income tax purposes and is a qualified REIT subsidiary of Taxpayer.
Acquisition Corporation owns a 99% interest in Holding Partnership. An unrelated third party owns the remaining 1% interest. Holding Partnership was formed under the laws of State as a limited liability company. Holding Partnership is classified as a partnership for federal income tax purposes. Holding Partnership owns the Investment Property through an entity that is disregarded for federal income tax purposes.
Holding Partnership is also the sole member of Subsidiary. Subsidiary is a limited liability company that was formed under the laws of State on Date 3 and began operations on Date 1. Subsidiary was formed for the purpose of being a service provider for the Investment Property. Taxpayer represents that it intended to make an election to treat Subsidiary as a TRS of Taxpayer effective on Date 1.
Compliance Team is a division that oversees the tax compliance obligations of Trustee’s investment funds and Taxpayer. Compliance Team engaged Law Firm to assist with the Investment Property. Law Firm was involved in discussions relating to the formation and intended operations of Subsidiary including the intended treatment of Subsidiary as a TRS of Taxpayer. Correspondence between Law Firm and Compliance Team routinely referred to Subsidiary as the “TRS Entity.” Law Firm prepared Subsidiary’s Certificate of Formation and LLC Agreement which were both filed with State. Law Firm also prepared Subsidiary’s (1) Form SS-4, Application for Employer Identification Number; (2) Form W-9, Request for Taxpayer Identification Number and Certification; and (3) Form 8832, Entity Classification Election, on which Subsidiary elected to be classified as an association taxable as a corporation, effective on Date 1. However, while Law Firm was aware of the intention to treat Subsidiary as a TRS, it failed to prepare the requisite Form 8875, Taxable REIT Subsidiary Election, with respect to Subsidiary.
PLR-118259-23 3
Based on prior engagements with legal professionals, Compliance Team expected Law Firm to file Form 8875 for Subsidiary. When Compliance Team received the documents relating to Subsidiary for execution it believed that Law Firm had also prepared and filed Form 8875.
In Month 1, during an internal records review, Compliance Team became aware that Form 8875 was not filed by Law Firm. Specifically, on Date 4, Compliance Team contacted Law Firm to request a copy of Form 8875 that was filed to make a TRS election for Subsidiary. Shortly thereafter, Taxpayer became aware that Law Firm failed to prepare and file Form 8875.
Compliance Team requested advice from Accounting Firm on how to remedy the failure to file Form 8875. Accounting Firm advised Taxpayer to submit a request for relief under Treas. Reg. § 301.9100-1 for an extension of time to file the election.
Taxpayer represents that it has consistently treated Subsidiary as a TRS of Taxpayer beginning on Date 1, because Taxpayer believed that Subsidiary’s Form 8875 was timely filed.
Taxpayer and Subsidiary make the following additional representations in connection with this request for an extension of time:
1) The request for relief was filed before the failure to make the regulatory election was discovered by the Internal Revenue Service (“Service”).
2) Granting the relief requested will not result in Taxpayer or Subsidiary having a lower U.S. federal tax liability in the aggregate for all years to which the election applies than they would have had if the election had been timely made (taking into account the time value of money).
3) Taxpayer and Subsidiary do not seek to alter a return position for which an accuracy-related penalty has been or could have been imposed under section 6662 of the Code at the time they requested relief, and the new position requires or permits a regulatory election for which relief is requested.
4) Being fully informed of the required regulatory election and related tax consequences, Taxpayer and Subsidiary did not choose to not file the election.
5) Taxpayer and Subsidiary are not using hindsight in requesting relief. No specific facts have changed since the due date for making the election that make the election more advantageous to Taxpayer or Subsidiary.
6) The period of limitations on assessment under section 6501(a) has not expired for Taxpayer and Subsidiary for the taxable year in which the election PLR-118259-23 4 should have been filed, nor for any taxable year(s) that would have been affected by the election had it been timely filed.
In addition, affidavits on behalf of Taxpayer and Subsidiary have been provided as required by section 301.9100-3(e)(2) and (3).

# LAW AND ANALYSIS

Section 856(l) of the Code provides that a REIT and a corporation (other than a
REIT) may jointly elect to treat such corporation as a TRS. To be eligible for treatment as a TRS, section 856(l)(1) provides that the REIT must directly or indirectly own stock in the corporation, and the REIT and the corporation must jointly elect such treatment.
The election is irrevocable once made, unless both the REIT and the subsidiary consent to its revocation. In addition, section 856(l) specifically provides that the election, and any revocation thereof, may be made without the consent of the Secretary.
In Announcement 2001-17, 2001-1 C.B. 716, the Service announced the availability of new Form 8875, Taxable REIT Subsidiary Election. According to the Announcement, this form is to be used for taxable years beginning after 2000 for eligible entities to elect treatment as a TRS. The instructions to Form 8875 provide that the subsidiary and the REIT can make the election at any time during the taxable year.
However, the effective date of the election depends on when the Form 8875 is filed.
The instructions further provide that the effective date cannot be more than 2 months and 15 days prior to the date of filing the election, or more than 12 months after the date of filing the election. If no date is specified on the form, the election is effective on the date the form is filed with the Service.
Section 301.9100-1(c) of the Procedure and Administration Regulations provides that the Commissioner has discretion to grant a reasonable extension of time 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 a regulatory election as an election whose due date is prescribed by regulations or by a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.
Section 301.9100-3(a) through (c)(1) sets forth rules that the Service generally will use to determine whether, under the particular facts and circumstances of each situation, the Commissioner will grant an extension of time for regulatory elections that do not meet the requirements of section 301.9100-2. Section 301.9100-3(a) provides that requests for relief subject to section 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in section 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.
PLR-118259-23 5
Section 301.9100-3(b) provides that a taxpayer generally is deemed to have acted reasonably and in good faith if the taxpayer (i) requests relief under section 301.9100-3 before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will be deemed to have not acted reasonably and in good faith, however, if the taxpayer

(i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested; (ii) was informed in all material respects of the required election and related tax consequences, but chose not to file the election; or (iii) uses hindsight in requesting relief.
Section 301.9100-3(c)(1) provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in the taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the Government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under section 301.9100-3.

# CONCLUSION

Based on the information submitted and the representations made, we conclude that Taxpayer and Subsidiary have satisfied the requirements for granting a reasonable extension of time to elect under section 856(l) to treat Subsidiary as a TRS of Taxpayer, effective as of Date 1. Accordingly, Taxpayer and Subsidiary have 90 calendar days from the date of this letter to make the intended election to treat Subsidiary as a TRS of Taxpayer, effective as of Date 1.
This ruling is limited to the timeliness of the filing of Form 8875. This ruling's application is limited to the facts, representations, Code sections and regulations sections cited herein. Except as 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. No opinion is expressed as to whether Taxpayer otherwise PLR-118259-23 6 qualifies as a REIT or whether Subsidiary otherwise qualifies as a TRS under subchapter M of chapter 1 of the Code.
The ruling contained in this letter is based upon information submitted and representations made by Taxpayer and Subsidiary and accompanied by penalties of perjury statements executed by the appropriate parties. While this office has not verified any of the material submitted in support of the request for a ruling, it is subject to verification on examination.
This ruling is directed only to the taxpayers that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
In accordance with the terms of a power of attorney on file in this office, a copy of this letter is being sent to your authorized representatives.
Sincerely,
____
Steven Harrison
Branch Chief, Branch 1
Office of Associate Chief Counsel
(Financial Institutions & Products) cc: ---
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