In certain instances the IRS will make advance rulings for taxpayers with regard to how certain transactions are to be taxed. The private letter ruling request is one avenue for getting the IRS to make this type of advance ruling.
Private letter rulings or PLRs can address all sorts of tax matters, such as whether a non-profit corporation is entitled to non-profit status, whether an IRA retirement contribution or account qualifies for tax deferral, whether a trust is exempt from generation skipping transfer tax, and whether a taxpayer is entitled to deduct certain business expenses or entitled to claim certain tax credits.
Once issued, the IRS is bound by the private letter ruling (or PLR) with regard to the specific taxpayer and the specific transaction covered in the letter. The IRS is not bound by a private letter ruling if the facts or circumstances are not adequately represented in the ruling request.
An experienced tax attorney can help submit these ruling requests and ensure that the request is submitted in a way that will bind the IRS by the ruling.
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