PLR 200345015: Foreign entity receives more time to elect disregarded status

Plain-English summary

A foreign investment company with one domestic owner missed the deadline to elect treatment as an entity disregarded from its owner for federal tax purposes. Its accountants had prepared the same election for other entities, but the company did not file one on time. The IRS found that the requirements for discretionary filing relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were met. It gave the company 60 days from the letter's date to file Form 8832 requesting the treatment effective on the redacted date stated in the ruling.

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200345015
Washington, DC 20224
Release Date: 11/07/2003
Index Numbers: 7701.00-00
Person to Contact:
9100.31-00
Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-158614-02
Date:
August 7, 2003

Legend

W:

X:

Y:

Z:

Country:

State 1:

D1:

Dear
:
This letter responds to your representative’s letter dated October 11, 2002, requesting that the Service grant W an extension of time pursuant to § 301.9100 of the Procedure and Administration Regulations to file a Form 8832, Entity Classification Election, to be treated as a disregarded entity effective D1.

The information submitted states that W is an investment company formed under the laws of Country. W is wholly owned by X, a domestic limited liability company formed under the laws of State, that is controlled by Y, also a domestic limited liability company formed under the laws of State. All three entities are managed under agreement by Z, a State S corporation. Y requested that Z ask their accounting firm to form W under the laws of Country.

Previously, Y’s accountants, had advised Y in forming other entities under the laws of Country and Y’s accountants had prepared a Form 8832 to elect to disregard 2 PLR-158614-02

each new entity as an entity separate from its owner under § 301.7701-3(c), which the accountants had forwarded to Z for filing. However, W inadvertently failed to timely elect to be treated as a disregarded entity.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign entity for federal income tax purposes. Generally, a foreign eligible entity is treated as an association taxable as a corporation if all members have limited liability, unless the entity makes an election to be treated otherwise. If a foreign eligible entity has only one owner, it may elect to be treated as a disregarded entity pursuant to the rules in § 301.7701-3(c).

Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 and can be effective up to seventy-five (75) days prior to the date the form is filed or up to twelve (12) months after the date on which the form is filed.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term “regulatory election” as 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.

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 the election.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the information submitted and the representations made, we conclude that the requirements of § 301.9100-1 and § 301.9100-3 have been satisfied. As a result, W is granted an extension of time until 60 days from the date of this letter to file a Form 8832 to treat W as a disregarded entity effective D1, with the appropriate service center. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code. 3 PLR-158614-02

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

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

Sincerely,

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

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