Can you make an appropriate economic unit grouping election on an amended return in the following circumstance?
A taxpayer materially participates in an S Corporation. In 2015 the business partners acquire property held in a separate LLC and file an initial partnership return for the self-rental activity. The taxpayer fails to make an election to group the two activities as an appropriate economic unit as required by Rev Proc 2010-13 and Treas Reg 1.469-4(c). However, he treats both activities as non-passive. In 2016 he mistakenly treated both entities as passive.
Per Section 4.07 of Rev Proc 2010-13, if the taxpayer fails to report the grouping a timely disclosure shall be deemed made when the taxpayer filed all affected income tax returns consistent with the claimed grouping of activities and makes the required disclosure in the year the failure is first discovered.
Could the taxpayer file an amended 1040 for 2016 to report the activities as non-passive and file a grouping election? The taxpayer lives in a state where hurricane relief extended the 2016 tax filing deadline to January 31, 2018.