PLR 200239024: Foreign entity receives extension to elect partnership classification

Plain-English summary

A two member foreign eligible entity intended to be classified as a partnership for U.S. federal tax purposes from the date it began business. It missed the deadline to file Form 8832. The IRS found that the regulatory extension standards were satisfied and gave the entity 60 days from the letter date to file the form for the intended effective year. The ruling addressed the filing extension, not other tax consequences of the entity's activities.

Ruling snapshot

• Question: Could the entity file a late election for partnership classification?
• Outcome: Approved: 60 days to file Form 8832 with the intended effective date.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200239024
Washington, DC 20224
Release Date: 9/27/2002
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B02 - PLR-112517-02
Date:
June 25, 2002

P
=

Country =

D1
=

Dear
:

This is in reply to your letter dated January 31, 2002, and subsequent correspondence submitted on behalf of P, by P’s authorized representative, requesting a ruling that P be given an extension of time to elect under § 301.7701-3(c) of the Procedure and Administration Regulations to be classified as a partnership for federal tax purposes.

The information submitted states that P is a Limitada formed in Country. P began doing business on D1. P is a foreign eligible entity with two members that is not required to be classified as a corporation for federal tax purposes. P intended to be classified as a partnership for federal tax purposes effective on D1. However, inadvertently a Form 8832, Entity Classification Election, was not filed for P by the due date for the election.

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).

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-112517-02

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) 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 due 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, P is granted an extension of time of 60 days from the date of this letter to file Form 8832 with the appropriate service center and elect under § 301.7701-3(c) to be classified as a partnership for federal tax purposes effective for the taxable year beginning on D1. A copy of this letter should be attached to the Form 8832.

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 Code.

This ruling is directed only to the taxpayers who requested it. Section 6110(k)(3) of the Internal Revenue 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 this letter is being sent to P‘s authorized representative.

Sincerely yours,
WILLIAM P. O’SHEA
Acting Associate Chief Counsel
(Passthroughs and Special Industries)

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