PLR 200409014: Foreign subsidiary receives time for disregarded entity election

Plain-English summary

A U.S. corporation acquired a foreign entity that it wanted treated as disregarded for federal tax purposes. The foreign entity missed the deadline to file its classification election on Form 8832. The IRS found that the late-election relief standards were met and granted 60 days to file the form. The election would take effect from the redacted acquisition date. The letter does not decide other tax consequences of the acquisition or classification.

Ruling snapshot

• Question: May the foreign entity make a late election to be disregarded from its U.S. owner?
• Outcome: Approved: a 60-day extension was granted.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200409014
Release Date: 2/27/04
Index Number: 9100.00-00, 7701.00-00

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Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B1 – PLR-129170-03
Date:
Nov 17 2003

Legend

X = ------------------
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X1 = ----------------------------------------------------------------
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D1 = ------------------

Country = ------------

State = -------------

Dear -------------------:

This responds to your letter dated, April 28, 2003, submitted on behalf of X, requesting a ruling that it be granted an extension of time under ' 301.9100-3 of the Procedure and Administration Regulations to file an election under ' 301.7701-3(c) to treat X1 as a disregarded entity for federal tax purposes.

According to the facts submitted, X is as a State corporation. X1 is a Country entity. X acquired X1 on D1. X1 inadvertently failed to timely file an election to be disregarded as an entity separate from X for federal tax purposes. 2

Law and Analysis

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal 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 301.7701B3(c) provides that an entity classification election must be filed on Form 8832, Entity Classification Election, and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date on which the form 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 the term Aregulatory election@ as including an election with a deadline prescribed by a regulation 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. ' 301.9100-1(a).

Section 301.9100-2 provides automatic extensions 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.

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. ' 301.9100-3(a).

Conclusion

Based solely on the facts submitted and the representations made, the requirements of ' 301.9100-3 have been satisfied. As a result, X1 is granted an extension of time of sixty (60) days from the date of this letter to elect to be treated as a disregarded entity for federal tax purposes, effective as of D1. The election should be made by filing a properly executed Form 8832 with the appropriate service center. A copy of this letter should be attached to the election. 3

Except as expressly set forth above, no opinion is expressed or implied concerning the tax consequences of the transactions 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 Internal Revenue 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 sent to the taxpayer.

Sincerely,

/s/ Heather C. Maloy

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

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

cc:-