PLR 200326006: Foreign entity receives time to elect corporate tax classification

Plain-English summary

A foreign entity intended to be taxed as a corporation from its formation, but its advisers failed to file Form 8832 on time. It discovered the omission before the IRS contacted it. The IRS found that the requirements for discretionary late election relief were met and gave the entity 60 days from the letter date to file a new Form 8832 effective as of its formation date. The ruling does not decide other federal tax consequences of the entity's facts.

Ruling snapshot

• Question: May the entity make a late election to be classified as a corporation from its formation?
• Outcome: Approved, with 60 days to file Form 8832.
• 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: 200326006
Washington, DC 20224
Release Date: 6/27/2003
Index Number: 7701.00-00; 9100.00-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B1-PLR-155493-02
Date:
March 5 2003

Legend:

X
=

Country A =

Y
=

State =

D1 =

Dear
:

This letter responds to the letter dated October 4, 2002 and related correspondence, written on behalf of X, requesting an extension of time under §301.9100-1 and §301.9100-3 of the Procedure and Administration Regulations to file an election to be treated as an association taxable as a corporation for federal tax purposes under §301.7701-3(c).
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PLR-155493-02

FACTS

The information submitted discloses that X was organized under the laws of Country A on D1. Y, a limited partnership, organized under the laws of the State, is deemed to own 100 percent of X through a chain of domestic partnerships and limited liability companies that are disregarded for federal income purposes.

Following its formation, X intended that it be treated as an association taxable as a corporation for federal tax purposes. However, X’s legal and tax representatives inadvertently failed to timely file the required Form 8832, Entity Classification Election. X became aware of the failure to file the Form 8832 prior to any contact by the IRS.

LAW AND ANALYSIS

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. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification.

Section 301.7701-3(b)(1)(ii) provides that unless a domestic eligible entity elects otherwise, the entity is disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(i) provides 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 appropriate service center. Under §301.7701- 3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified. The date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed.

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 mean an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

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).
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CONCLUSION

Based solely on the facts submitted and representations made, we conclude that X has satisfied the requirements of §§301.9100-1 and 301.9100-3. Accordingly, X is granted an extension of time of sixty (60) days from the date of this letter to file a new Form 8832, effective 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 specifically set forth above, we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue 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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being mailed to your authorized representative.

Sincerely,

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

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