PLR 200304018: Foreign owner receives late disregarded entity election relief

Plain-English summary

A foreign company owned by a U.S. citizen held another foreign limited liability company. Both companies intended disregarded entity treatment when operations began but inadvertently missed their classification elections. This letter addresses the owner's request. The IRS found that the owner met the section 301.9100 relief requirements and gave it 60 days to file Form 8832 electing disregarded status effective on the original intended date. The separate subsidiary election is addressed in another ruling.

Ruling snapshot

• Question: May the foreign owner company make a late election to be disregarded from its U.S. owner?
• Outcome: Approved for the owner company, with 60 days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200304018
Washington, DC 20224
Release Date: 1/24/03
Index Number: 7701.00-00, 9100.31-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 / PLR-123954-02
Date:
October 21, 2002

LEGEND

X
=

Y
=

Z
=

d1 =

d2 =

d3 =

Country1 =

Country2 =

Dear
:

This letter responds to a letter dated March 21, 2002, and subsequent correspondence by your authorized representative, submitted on behalf of Y, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for Y to elect to be treated as a disregarded entity under § 301.7701-3.

PLR-123954-02
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FACTS

According to the information submitted, X was formed as a company with limited liability on d1 in Country1. Y, a Country2 company formed on d2, owns X. Z, an individual U.S. citizen owns Y. Operations for X and Y began on d3.

X and Y each intended to elect to be an entity disregarded from its owner for federal tax purposes effective d3. However, due to inadvertence, X and Y failed to make the necessary elections under § 301.7701-3(a).

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 a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i)(B) 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 be classified other than as provided under § 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the applicable service center.

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. 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.

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. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

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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 conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a result, Y 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 d3. Y 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 requesting it. Section 6110(k)(3) of the Internal Revenue Code provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

Sincerely yours,

/s/

Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries)

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