PLR 200142010: Foreign entity receives 60 days for late partnership election

Plain-English summary

A foreign entity whose owners all had limited liability intended to elect partnership treatment for U.S. federal tax purposes. It did not file the entity classification election on time. Based on the submitted information and representations, the IRS found that the entity met the requirements for discretionary filing relief. It gave the entity 60 days from the letter date to file Form 8832 with the intended effective date. The IRS did not address other tax consequences.

Ruling snapshot

• Question: Could the entity file a late Form 8832 to elect partnership classification?
• Outcome: Approved, with a 60 day filing period.
• 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: 200142010
Washington, DC 20224
Release Date: 10/19/2001
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-116477-01
Date:
July 18, 2001

Legend

X =

Country =

D1 =

D2 =

Dear
:

This letter responds to your representative’s letter dated February 21, 2001, together with subsequent correspondence, submitted on behalf of X, requesting a ruling that X be given an extension of time to elect to be treated as a partnership for federal tax purposes.

The information submitted states that X was organized on D1. No owner of an interest in X has unlimited liability as defined under § 301.7701-3(b)(2)(ii) of the Procedure and Administration Regulations. X intended to elect partnership tax treatment for federal tax purposes effective D2. However, X failed to file the election timely.

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. A “business entity” is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code. Section 301.7701-2(a). An eligible entity with at least two members may elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(b)(2)(i) provides that unless a foreign eligible entity elects otherwise, the entity is: (A) a partnership if it has two or more members and at least one member does not have limited liability; (B) an association if all members have limited liability; or (C) disregarded as an entity separate from its owners if it has a single owner that does not have limited liability. 2 PLR-116477-01

Section 301.7701-3(b)(2)(ii) provides that for purposes of § 301.7701-3(b)(2)(i), a member of a foreign eligible entity has limited liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member.

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 will be effective on the date specified on the Form 8832 or on the date filed if no such date is specified. The 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) of the Procedure and Administration Regulations provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue 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 announcement published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make the election. Section 301.9100-1(a).

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the information submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of time until 60 days from the date of this letter to make an election to treat X as a partnership effective D2, by filing the Form 8832 Entity Classification Election with the appropriate service center. A copy of this letter should be attached to the Form 8832.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code. 3 PLR-116477-01

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

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

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

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes