private letter ruling
A term to know.
A private letter ruling or "letter ruling" is a written determination issued to a taxpayer by an Associate office in response to the taxpayer's written inquiry, filed prior to the filing of returns or reports that are required by the tax laws, about its status for tax purposes or the tax effects of its acts or transactions. It interprets the tax laws and applies them to the taxpayer's specific set of facts.
IRS only issues a letter ruling when it is in the "interest of sound tax administration," as determined by IRS. Once issued, a letter ruling may be revoked or modified for a number of reasons. A letter ruling may be issued with a closing agreement, however, and a closing agreement is final unless fraud, malfeasance, or misrepresentation of a material fact can be shown.
A PLR cannot be relied upon by other taxpayers and applies only to the taxpayer to whom it was issued.