PLR 200243044: Foreign company gets an extension for disregarded entity election

Plain-English summary

A foreign private limited company intended to elect treatment as a disregarded entity for U.S. tax purposes but inadvertently failed to file Form 8832 on time. The IRS found that the requirements for discretionary extension relief were satisfied. It gave the company 60 days from the letter date to submit a properly executed election effective from its founding date. The decision was based solely on the facts and representations the company submitted.

Ruling snapshot

• Question: Could the company make a late Form 8832 election for disregarded entity status effective from its founding date?
• Outcome: Approved: a 60-day extension from the letter date.
• 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: 200243044
Washington, DC 20224
Release Date: 10/25/2002
Index Number: 7701.00-00, 9100.00-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-107505-02
Date:
July 30, 2002

LEGEND

X
=

Country =

d1
=

Dear
:

This letter responds to a letter, dated March 14, 2002, and subsequent correspondence by your authorized representative on behalf of X, requesting an extension of time for X to elect to be treated as a disregarded entity under § 301.7701-3 of the Procedure and Administration regulations.

FACTS

According to the information submitted, X was founded as a Country private limited company on d1. X intended to elect to be classified as a disregarded entity under § 301.7701-3. However, X inadvertently failed to timely file its Form 8832, Entity Classification Election.

LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, 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 more than one owner can elect to be classified as an association or as a partnership.

Section 301.7701-3(b)(2)(i)(A) provides that unless it elects otherwise, a foreign eligible entity is an association if all members have limited liability.

Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to

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be classified other than as provided under § 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the applicable service center. To be valid, an election must generally be signed by each member of the electing entity, or any officer, manager, or member of the electing entity who is authorized (under local law or the entity's organizational documents) to make the election and who represents to having such authorization under penalties of perjury. See § 301.7701-3(c)(2)(i).

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under § 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 § 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, if the taxpayer demonstrates to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting the relief will not prejudice the government. Section 301.9100-1(b) defines a regulatory election as an election with a due date 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 an election. Section 301.9100-1(a). Section 301.9100-2 provides automatic extension(s) of time for making certain elections but does not apply to elections under § 301.9100-3. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 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).

CONCLUSIONS

Based solely on the facts submitted and the representations made, we find that the requirements of §§ 301.9100-1 and 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 make an election to be treated as a disregarded entity for federal tax purposes effective d1. X should make the election by filing a properly executed Form 8832 and attaching a copy of this letter to the election. A copy is enclosed for that purpose.

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

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

Sincerely yours,

/s/

William P. O’Shea
Acting Associate Chief Counsel
(Passthroughs and Special Industries)

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