PLR 200133018: Foreign company gets more time to elect disregarded status

Plain-English summary

A foreign company with one owner intended to elect treatment as an entity disregarded from its owner for federal tax purposes, effective when it was formed. It failed to file the entity classification election through inadvertence. The IRS found that the requirements for discretionary filing relief were satisfied and gave the company 60 days from the letter date to file Form 8832. The ruling relied on the company's submitted facts and representations and did not address other tax consequences.

Ruling snapshot

• Question: Could the company file a late election to be disregarded from its owner, effective on its formation date?
• Outcome: Approved: a 60-day extension was granted.
• 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: 200133018
Washington, DC 20224
Release Date: 8/17/2001
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-104486-01
Date:
May 17, 2001

LEGEND

X
=

Y
=

Country =

State =

d1 =

Dear

This letter responds to a letter dated January 16, 2001, and subsequent correspondence submitted by your authorized representative on behalf of Y, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election to be a disregarded entity for federal tax purposes under § 301.7701-3(c), effective d1.

FACTS

According to the information submitted, Y is a private limited company formed under the laws of Country on d1. The sole owner of Y is X, a State limited liability company. X and Y had intended for Y to elect to be disregarded as an entity separate from its owner under § 301.7701-3(c) effective d1. However, due to inadvertence, Y did not make the election.

X and Y make the following representations: 1) there have not been any dispositions of ownership interests in Y since its inception, and there is no current intention to dispose of any interests; 2) Y is not a passive foreign investment company as defined in § 1297(a) of the Internal Revenue Code; and 3) X has no personal liability for the debts of or claims against Y.

LAW AND ANALYSIS
PLR-104486-01
-2-

Section 301.7701-3(a) provides, in part, 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. An eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i)(B) provides that, unless the entity elects otherwise, a foreign eligible entity is an association if all members have limited liability.

Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the applicable service center. To be valid, an election must generally be signed by each member of the electing entity, or any officer, manager, or member of the electing entity who is authorized (under local law or the entity's organizational documents) to make the election and who represents to having such authorization under penalties of perjury. See § 301.7701-3(c)(2)(i).

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under § 301.7701-3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed.

Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term "regulatory election," as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or an announcement published in the Internal Revenue Bulletin.

Sections 301.9100-1 and 301-9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

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).

CONCLUSIONS
PLR-104486-01
-3-

Based solely on the facts and representations submitted, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, Y is granted an extension of time to make the election to be disregarded as an entity separate from its owner for federal tax purposes, effective d1, until 60 days following the date of this letter. The election should be made by following the procedures set forth in Form 8832 and a copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

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

Under a power of attorney on file with this office, we are sending a copy of this letter to your authorized representatives.

Sincerely yours,
Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes