PLR 200205014: Foreign company gets more time to elect partnership classification

Plain-English summary

A foreign company with members who all had limited liability intended to be classified as a partnership for U.S. federal tax purposes. It did not file the required Form 8832 on time. The IRS found that it met the regulatory requirements for an extension and gave it 60 days from the ruling date to file the form with its intended effective date. The ruling rested on the company's submitted facts and representations, which the IRS had not independently verified.

Ruling snapshot

• Question: May the company file a late election to be treated as a partnership?
• Outcome: Approved: 60 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: 200205014
Washington, DC 20224
Release Date: 2/1/2002
Index Numbers: 9100.00-00, 7701.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-124049-01
Date:
October 26, 2001

Legend

X
=

Country 1 =

Date 1 =

Date 2 =

Dear
:

This is in reply to a letter dated April 27, 2001, and subsequent correspondence, submitted on behalf of X, requesting a ruling that X be given an extension of time to elect to be classified as a partnership for federal tax purposes.

The information submitted states that X, a Country 1 Exempted Company, was incorporated on Date 1. All of X’s members have limited liability. X intended to elect to be treated as a partnership for federal tax purposes, effective Date 2. However, the election was not timely filed.

Section 301.7701-3(a) of the Procedure and Administration Regulations 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. An eligible entity with at least two members can elect to be classified as a partnership.

Section 301.7701-3(b) provides default classifications for eligible entities that do not timely make 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 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 2
PLR-124049-01

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 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).

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of time of 60 days from the date of this letter to file Form 8832, effective on Date 2, with the appropriate service center. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as specifically ruled above, we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the Internal Revenue Code. The ruling set forth in this letter is conditioned upon the facts and representations submitted by X 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 request for a ruling. 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) of the Internal Revenue Code the 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 letter is being sent to X’s authorized representatives.

Sincerely,
PAUL F. KUGLER
Associate Chief Counsel
(Passthroughs and Special Industries)

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