PLR 200122010: Foreign entity gets time to elect disregarded status

Plain-English summary

A foreign entity with one owner intended to elect treatment as an entity disregarded from its owner for U.S. federal tax purposes, effective from its formation date. It inadvertently missed the filing deadline for Form 8832. The IRS found that the entity met the standards for an extension under Treas. Reg. § 301.9100-3 and allowed the election to take effect on the intended date. The entity had 60 days from the ruling date to file Form 8832 with the designated service center. The ruling addresses the filing extension, not the tax effects of any other transaction.

Ruling snapshot

• Question: Can the entity file a late classification election effective from its formation date?
• Outcome: Approved: 60 additional days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200122010
Washington, DC 20224
Release Date: 6/1/2001
Index Number: 9100.00-00; 7701.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B01 PLR-125491-00
Date:
February 16, 2001

Legend

X
=
Country =
D1
=
D2
=

This responds to the letter dated November 7, 2000, and subsequent correspondence, submitted on behalf of X, requesting an extension of time pursuant to § 301.9100-3(a) of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be disregarded as an entity separate from its owner for federal tax purposes.

FACTS

According to the information submitted, X was formed under Country law on D1.
For federal tax purposes, X has a single owner that has limited liability, as defined in § 301.7701-3(b)(2)(ii). X intended to file an election to be classified as a disregarded entity, effective D1. However, X inadvertently failed to timely file the election.

It is represented that X had no items of income, gain, loss, deduction or credit that would have been reflected on a corporate return (1120F) for the D2 taxable year.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes as provided in this section. Section 301.7701-3(a) further provides that an eligible entity with a single owner can elect to be disregarded as an entity separate from its owner.

Section 301.7701-3(b) provides default classifications for eligible entities that do not file an election. To elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election, with the designated service center. Section 301.7701-3(c)(1)(i). An election can be effective on the date specified on the Form 8832 or on the date filed if no such date is specified. The 2 CC:PSI:B01 PLR-125491-00

effective date specified on the Form 8832 cannot be more than 75 days prior to the date the election is filed. Section 301.7701-3(c)(2)(iii).

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in § 301.9100-3 to make a regulatory election. Section 301.9100-1(b) defines a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government. Section 301.9100-3(a).
CONCLUSION

Based solely on the facts submitted and representations made, we conclude that X has satisfied the requirements of § 301.9100-3. As a result, X is granted an extension of time to elect to be disregarded as an entity separate from its owner for federal tax purposes, effective D1. X has 60 days from the date of this letter to file Form 8832 with the designated service center.

Except as specifically set forth above, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue Code. The ruling contained in this letter is predicated upon the facts and representations submitted by taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party. This office has not verified any of the materials submitted in support of the ruling request. Verification of the information, representations, and other data may be required as part of the audit process.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office, a copy of this ruling is being sent to taxpayer’s authorized representative.

Sincerely,
/s/Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2)
Copy of this letter
Copy for § 6110 purposes