PLR 200444006: Foreign entity receives time to elect partnership treatment

Plain-English summary

A foreign entity with two owners said it was eligible to choose its U.S. federal tax classification, but had inadvertently missed the deadline to file Form 8832. It requested partnership treatment effective from its formation date. The IRS concluded that the requirements for a discretionary filing extension were met and granted 60 days to file the form. The letter addressed the filing extension and expressed no view on other tax consequences.

Ruling snapshot

• Question: Could the foreign entity file a late election to be treated as a partnership from its formation date?
• Outcome: Approved; a 60-day extension was granted to file Form 8832.
• 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: 200444006
Third Party Communication: None
Release Date: 10/29/04
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B02
PLR-112384-04
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Date:
July 1, 2004

Legend

X: ------------------------------------------
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Y: ------------------------------------
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A: ---------------------
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B: ------------------------
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Country 1: -------------

Country 2: ----------------------------------

d1: -------------------

d2: -------------------

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

This responds to your letter dated January 23, 2004, and subsequent correspondence submitted on behalf of Y, requesting that the Service grant Y an extension of time to elect to be treated as a partnership under § 301.7701-3(c) of the Procedure and Administration Regulations.

PLR-112384-04
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The information submitted states that X is corporation formed under the laws of Country 1 on d1. X is wholly owned by Y, a corporation formed under the laws of Country 2 on d2. Y is owned by A and B, husband and wife.

Y represents that pursuant to § 301.7701-3(a), Y is a foreign eligible entity that is not required to be classified as a corporation for federal tax purposes. Due to inadvertence, Y failed to file a timely election, Form 8832, Entity Classification Election, effective d2.

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 the foreign eligible entity has only one owner, it may elect to be treated as a partnership 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.

PLR-112384-04
3

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, Y is granted an extension of time of 60 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to treat Y as a partnership effective d2. 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.

This ruling is directed only to the taxpayer requesting 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 Y.

Sincerely,

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

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