PLR 200434018: Foreign company gets more time for partnership election

Plain-English summary

A foreign limited liability company intended to be treated as a partnership for U.S. federal tax purposes but inadvertently missed the deadline to file Form 8832. The IRS found that the requirements for discretionary extension relief under Treasury Regulations sections 301.9100-1 and 301.9100-3 were met. It granted the company 60 days from the ruling letter to file the election for the requested effective date. The ruling addressed only the filing extension and did not decide other federal income tax consequences.

Ruling snapshot

• Question: Can the company file a late entity classification election for partnership treatment?
• Outcome: Approved, with Form 8832 due within 60 days of the letter.
• 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: 200434018
Release Date: 8/20/04
Index Number: 7701.02-00; 9100.00-00

Person To Contact:
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Refer Reply To:
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CC:PSI:B03 – PLR-171459-03
Date:
April 28, 2004
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Legend

Taxpayer = -----------------------------------------------------------------------
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Members = --------------------------------------
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Foreign Country = ----------

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

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

This letter responds to a letter dated October 24, 2003, and supplemental correspondence, requesting a ruling under § 301.9100-3(a) of the Procedure and Administration Regulations that Taxpayer be granted an extension of time to make an election to be treated as a partnership for federal income tax purposes.

Facts

According to the representations submitted, Taxpayer was formed as a Foreign Country limited liability company. Taxpayer intended to be treated as a partnership for federal tax purposes effective Date 1, but inadvertently failed to file a timely Form 8832, Entity Classification Election.

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PLR-171459-03

Law and Application

Section 301.7701-2(a) generally provides that a business entity is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code. Section 301.7701-3(a) further provides that an eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(a) provides that so long as a business entity is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8), it may elect its classification for federal tax purposes. Section 301.7701-3(b)(2)(i) provides that, unless the entity elects otherwise, a foreign eligible entity is (A) a partnership if it has two or more members and at least one member does not have limited liability, (B) an association if all members have limited liability, or (C) disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

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 a Form 8832 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 on the election form. The date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed.

Under § 301.9100-1(c), the Commissioner has discretion to 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.

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 301.9100-2 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.

Section 301.9100-3(a) provides that requests for relief will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government.

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PLR-171459-03

Conclusion

Based on the facts represented, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, Taxpayer is granted an extension of time to file a Form 8832 electing partnership treatment effective Date 1. The Form 8832 must be filed with the Philadelphia Service Center within 60 days of the date of this letter and a copy of this letter should be attached to Form 8832. A copy is enclosed for this purpose.

Except for the specific ruling above, no opinion is expressed or implied concerning the federal income tax consequences of the facts of this case 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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to the requested tax representative.

Sincerely,

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

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