IRS provides a simplified method for late filing relief.

• Author: Watkins, Tracy

A common scenario faced by many taxpayers under the Foreign Investment in Real Property Tax Act, P.L. 96-499 (FIRPTA), relates to the failure to rebut the general presumption found in Sec. 897 that a domestic corporation is a U.S. real property holding company (USRPHC). For example, assume that a foreign parent sells the stock of a domestic corporation to a third party in a taxable transaction and that the domestic corporation has never held any U.S. real property interest (USRPI). If the detailed requirements of FIRPTA are not met in a timely manner, the presumption that the domestic corporation is a USRPHC applies, and Sec. 1445 generally imposes a withholding tax liability on the third party transferee, in addition to possible interest and penalties. Further, taxpayers often will transfer a USRPHC or USRPI in transfers that qualify for nonrecognition but fail to file the appropriate statements or notices required under Secs. 897 and 1445.

In Rev. Proc. 2008-27, the IRS has provided a simplified method to request relief for certain late filings under Secs. 897 and 1445. Prior to the effective date of the revenue procedure (i.e., requests for relief after June 26, 2008), a taxpayer seeking relief had to request a private letter ruling under Regs. Sec. 301.9100-3. The revenue procedure streamlines the relief process and eliminates the user fee.

Specifically, the revenue procedure provides a simplified method to request relief for failure to file the statements and/or notices required by Regs. Secs. 1.897-2(g)(1)(ii)(A) (statement from a corporation), 1.897-2(h) (notice requirements applicable to corporations), 1.1445-2(c)(3)(i) (non-USRPI statement provided)...