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May 8, 2015


Can you pin the IRS down in advance? Part 1: private letter rulings

If you have a complicated transaction coming up for your business, there may be tax consequences that you would like to get more clarity on before moving forward. Or, you may have a tax question from your past that you’d like to resolve.

In such cases, is it possible to get some sort of preliminary ruling from the IRS? In this two-part post, we will address that question.

For prospective transactions, the simple answer is yes, in some circumstances. The procedure for doing this is called a private letter ruling (PLR). A PLR is a way to get guidance from the IRS in a written statement that your deal is likely to be considered in compliance with the tax code.

To be sure, a PLR will not always be available. And there is a very specific process for requesting one. But the IRS has an established list of issues and circumstances where PLRs may be requested.

When seeking a PLR, it makes sense to get the counsel of a skilled tax lawyer. Our firm is very familiar with the possibilities and procedural requirements for requesting a private letter ruling.

In addition to the procedural hoops, the IRS also charges fees for issuing a PLR. For businesses considering a substantial transaction, however, pursuing a PLR may well be worth the costs involved.

In short, a private letter ruling can shed important light on your tax position and help you make decisions for your business accordingly.

In part two of this post, we will distinguish a private letter ruling from a different procedure called a closing agreement.

Tax Controversy