Request for Extension to File Election to be Treated as a Taxable REIT Subsidiary

IRS Private Letter Ruling 201210021

This is in reply to a letter dated September 26, 2011, requesting on behalf of Company and Sub an extension of time under section 301.9100-1 of the Procedure and Administration Regulations to file an election for Sub to be treated as a taxable real estate investment trust subsidiary (“TRS”) of Company under section 856(l) of the Internal Revenue Code.

FACTS
Company is a State 1 corporation.   It is a commercial real estate specialty finance company that invests in a combination of commercial real estate assets and other commercial finance assets.  Company timely elected under section 856 of the Code to be treated as a REIT for its taxable year ending Date 1.

Company’s wholly owned subsidiary Sub is a State 2 corporation.  It was incorporated on Date 2.  It was formed to hold and manage collateralized loan obligation contracts that are not real estate assets.  From the time of Sub’s formation Company and Sub intended to file Form 8875, Taxable REIT Subsidiary Election, to make a TRS election that would be effective beginning with Date 2, when Sub was formed.

Manager’s internal tax department was responsible for filing Form 8875.

Because of that department’s limited size and the extent of its reporting responsibilities, which include Securities Exchange Commission filings, tax return filings, and extensions for filings that were due on Date 3 (one month after Date 2), Form 8875 was inadvertently not filed.

On Date 4, while Manager was handling other tax matters for Company, the tax department discovered that Form 8875 had not been filed.  Less than a month later, on Date 5, Form 8875 was filed for Company and Sub.  Because the instructions for Form 8875 provide that the effective date of a TRS election cannot be more than 75 days prior to the date of filing Form 8875, the effective date on the form is Date 6.  Date 6 is
more than two months after Date 2, which is the effective date that Company and Sub intended.

After filing Form 8875, Manager’s tax department learned of the relief available under section 301.9100-1 of the regulations.  On Date 7 such relief was requested.  Company has submitted the affidavit of the person initially responsible for preparing the Form 8875 in support of the requested extension.

The following representations are made in connection with the request for the relief of an extension of time:

  1. The request for relief was made before the failure to make the regulatory election was discovered by the Internal Revenue Service.
  2. Granting the relief requested will not result in Company or Sub having a lower tax liability in the aggregate for all years to which the election applies than the taxpayers would have had if the election had been timely made (taking into account the time value of money).  
  3. Company and Sub 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 the taxpayers 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, Company and Sub did not choose to not file the election.

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