PLR 200425014: Subsidiary may elect disregarded entity status late

Plain-English summary

An entity wholly owned by another company intended to elect treatment as a disregarded entity for U.S. federal tax purposes, but Form 8832 was not filed on time. The IRS found that the requirements for discretionary late election relief were met. It gave the subsidiary 60 days from the letter date to file Form 8832 electing disregarded entity status effective on the specified earlier date. The IRS did not rule on other tax consequences.

Ruling snapshot

• Question: May the subsidiary make a late election to be treated as a disregarded entity?
• Outcome: Approved: 60 days to file Form 8832 with a copy of the ruling.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200425014
Release Date: 6/18/04
Index Number: 9100.31-00

• Person To Contact:
  ------------------- ----------------------, ID No. -------------
  ------------------------------- Telephone Number:
  ----------------------------- ---------------------
  ------------------------------- Refer Reply To:
  CC:PSI:B02 – PLR-130092-03
  Date: February 10, 2004
  -
  -

X = -----------------------------------------------------
EIN: ----------------

Y = ---------------------------------------------------------

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

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

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

This letter responds to your letter dated March 4, 2003, and subsequent correspondence, submitted on behalf of X, requesting an extension of time pursuant to § 301.9100 of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be treated as a disregarded entity effective Date 1.

The information submitted states that X, a wholly owned subsidiary of Y, is an entity formed under the laws of State. Y intended that X would elect to be a disregarded entity effective Date 1. However, inadvertently Form 8832, Entity Classification Election, was not filed timely.

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 has a single owner and makes an election to be treated as a disregarded entity pursuant to the rules in § 301.7701-3(c).

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PLR-130092-03

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 § 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 Internal Revenue Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term “regulatory election” as including 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 an election. Section 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. Section 301.9100- 3(a).

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, X is granted an extension of time until 60 days from the date of this letter to file Form 8832 with the appropriate service center to be treated as a disregarded entity effective Date 1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the Internal Revenue Code provides that it may not be used or cited as precedent.

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PLR-130092-03

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X.

Sincerely,

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

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