PLR 200224013: Foreign subsidiary receives more time for entity classification election

Plain-English summary

A U.S. corporation wholly owned a foreign subsidiary that intended to elect treatment as a disregarded entity for federal tax purposes. The subsidiary inadvertently missed the filing deadline for Form 8832. It sought relief under Treas. Reg. § 301.9100-3, which permits an extension when its requirements are met. Based on the submitted facts and representations, the IRS found those requirements satisfied and granted 60 days from the letter date to file a properly executed election effective on the requested date. The letter did not decide other tax consequences of the arrangement.

Ruling snapshot

• Question: May the foreign subsidiary file a late election to be treated as a disregarded entity?
• Outcome: Approved; Form 8832 must be filed within 60 days of the letter.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200224013
Washington, DC 20224
Release Date: 6/14/2002
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:1-PLR-160948-01
Date:
March 14, 2002

Legend

X
=

Y
=

Country =
State =
Date 1 =
Date 2 =

:

This letter responds to a letter dated October 17, 2001, submitted on behalf of X and Y, requesting a ruling that Y be granted an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be treated as a disregarded entity for federal tax purposes.

Facts

According to the information submitted, Y was incorporated on Date 1 under the law of Country. X, a corporation formed under the law of State, owns 100 percent of the stock of Y. Y intended to elect to be treated as a disregarded entity for federal tax purposes effective Date 2. However, Y inadvertently failed to timely file the proper election.

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Law and Analysis

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as an association if all members have limited liability, unless the entity makes an election to be treated otherwise. A foreign eligible entity with a single owner having limited liability may elect to be treated as a disregarded entity pursuant to the rules under § 301.7701-3(c). Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date on which the form 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 including an election whose deadline is prescribed by a regulation published in the Internal Revenue Bulletin.

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

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 section 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).

Conclusion

Based solely on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, Y is granted an extension of time of sixty (60) days from the date of this letter to make an election to be treated as a disregarded entity for federal tax purposes effective Date 2. Y should make the election by filing a properly executed Form 8832 with the appropriate service center. A copy of this letter should be attached to the form.

Except as specifically provided herein, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other

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provision of the Code.

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.

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

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

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