Academic journal article Journal of Accountancy

Applying for a Private Letter Ruling

Academic journal article Journal of Accountancy

Applying for a Private Letter Ruling

Article excerpt

When a transaction requires greater certainty or when relief is sought for a difficult tax situation, applying to the IRS for a private letter ruling (PLR) can provide interpretation and application of law and regulation with respect to that taxpayer the Service will follow, within certain conditions and limitations. Here's how to apply for a PLR:

* Confirm there is a need. The IRS ordinarily will not issue "comfort" letter rulings on matters that are already squarely addressed by statute, regulation, court decision, revenue ruling, revenue procedure or notice.

* Get the most recent IRS guidance far making a ruling request. Follow the IRS requirements and instructions for applying for a ruling. This information generally is contained in the first revenue procedure the IRS publishes each year; for 2009 it was Revenue Procedure 2009-1 (tinyurl.com/yfuwqx4). A sample letter ruling request is included in the appendix. Check for updates and revisions published during the year.

* Is there an easier way to obtain a ruling? See if your ruling request falls under an automatic or simplified method. Many of these are listed in an appendix of the revenue procedure. Sometimes such relief is adequate. For example, an LLC received assets from a corporation. The transaction was intended to qualify as a tax-free reorganization but failed because that treatment is not permitted in an asset distribution to a partnership. The initial LLC partnership return has already been filed. Relief may be available under Revenue Procedure 2007-62 requesting permission for a late S corporation or corporation classification election, retroactively making the transaction a distribution between two corporations. …

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