PLR 200418004: More time to elect corporate status after foreign entity change

Plain-English summary

A foreign entity changed its legal form and represented that, from that date, it was eligible to elect classification as a corporation for U.S. federal tax purposes. It inadvertently missed the Form 8832 filing deadline. The IRS found that the requirements for late election relief were met and gave the entity 60 days from the ruling date to file Form 8832 with the intended effective date. The letter does not decide other federal income tax consequences of the change.

Ruling snapshot

• Question: May the entity file a late election to be taxed as a corporation from its change in legal form?
• Outcome: Approved: 60 days to file Form 8832 with the intended effective date.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200418004
Release Date: 04/30/2004
Index Number: 9100.00-00

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Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:B01 – PLR-125863-03
Date:
January 12, 2004
In Re:

X = -----------------------------
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Foreign Entity 1 = ----------------------------------

Foreign Entity 2 = -------------------------------------------

Date 1 = -----------------------

Date 2 = ------------------

Dear -------------------

This letter responds to a letter, dated March 20, 2003, written on behalf of X, requesting a ruling that X be granted an extension of time under section 301.9100-3 of the Procedure and Administration Regulations to file an election under section 301.7701-3(c) to be treated as an association for federal tax purposes.

FACTS

According to the information submitted, X was a Foreign Entity 1 formed Date 1.
Effective Date 2, X was transformed from a Foreign Entity 1 to a Foreign Entity 2. X represents that, as of Date 2, X was eligible to elect under section 301.7701-3(c) to be treated as an association taxable as a corporation for federal income tax purposes.
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However, the Form 8832, Entity Classification Election, inadvertently was not timely filed.

LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, that a business entity that is not classified as a corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes as provided in section 301.7701-3.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Unless it elects otherwise, a foreign eligible entity is treated as a partnership if it has two or more members and at least one member does not have limited liability. Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 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 section 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 "regulatory election" as including an election whose deadline is 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. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extension of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of section 301.9100-2.

Requests for relief under section 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).

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that the requirements of section 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 file Form 8832 with 3

the appropriate service center and elect to be treated as an association taxable as a corporation for federal tax purposes, effective Date 2. A copy of this letter should be attached to the election.

Except as specifically set forth above, no opinion is expressed or implied as to the federal income tax consequences of the transactions described above under any other provision of the Internal Revenue Code.

This ruling is directed only to the taxpayer on whose behalf it was requested.
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, a copy of this letter is being sent to the taxpayer and the second listed authorized representative.

Sincerely,

/s/ Heather C Maloy

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

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