PLR 200237008: Foreign entity gets time to elect corporate tax classification

Plain-English summary

A foreign entity was classified by default as a partnership but intended to elect corporate tax classification from the date it was formed. Its Form 8832 was not filed on time. The IRS found that the requirements for discretionary extension relief were met and gave the entity 60 days from the letter date to file Form 8832 with the intended effective date. It also required the ruling to be attached to the election and gave no opinion on other tax consequences.

Ruling snapshot

• Question: May the foreign entity file a late election to be taxed as an association from its formation date?
• Outcome: Approved, if Form 8832 is filed within 60 days
• 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: 200237008
Washington, DC 20224
Release Date: 9/13/2002
Index Number: 9100.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:PLR-167279-01
Date:
June 4 2002

Legend:

X
=

D1
=

Country
=

Dear

This responds to a letter dated December 4, 2001, together with subsequent correspondence, submitted on behalf of X, requesting relief under § 301.9100-3 of the Procedure and Administration Regulations.

FACTS

According to the information submitted, X was formed under the laws of Country on D1. X is a foreign eligible entity classified as a partnership under § 301.7701-3(b)(2)(i)(A). X intended to file an election, Form 8832, Entity Classification Election, to change its classification to an association, effective D1. However, the Form 8832 was not timely filed.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under section 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 more than one owner can elect to be classified as an association or as partnership.

Section 301.7701-3(b) provides a default classification for an eligible entity that does not make an election. Section 301.7701-3(b)(2)(i) provides that, unless the entity elects otherwise, a foreign eligible entity is (A) a partnership if it has two 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 owner if it has a single owner that does not 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 section 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the applicable service center.

PLR-167279-01
2

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under section 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 section 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.
Sections 301.9100-2 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 section 301.9100-2. Requests for relief under section 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.

CONCLUSIONS

Based solely on the facts and representations submitted, we conclude that the requirements of sections 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, X is granted an extension of time of 60 days from the date of this letter to file Form 8832, effective on D1, with the appropriate service center. 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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to the taxpayer.

Sincerely,
William P. O’Shea
Acting Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2)
Copy of this letter; Copy for § 6110 purposes