PLR 200523014: Foreign company gets time to elect disregarded entity status

Plain-English summary

Investors acquired foreign subsidiaries and intended one company to be disregarded as separate from its owner for U.S. tax purposes from the acquisition date. The company inadvertently failed to file Form 8832 to make that classification election. The IRS found that it met the regulatory requirements for late election relief and granted 60 days from the ruling letter to file the form with the intended effective date. The IRS did not decide whether the company was otherwise eligible for the classification.

Ruling snapshot

• Question: Could the foreign company make a late entity classification election effective on the acquisition date?
• Outcome: Approved; it received 60 days from the letter to file Form 8832.
• 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: 200523014
Third Party Communication: None
Release Date: 6/10/2005
Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:3
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PLR-158360-04
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Date:
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March 07, 2005

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Company: -----------------------------------------------------------------------
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Investors: ---------------------------------------------------
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a: ---------------------------

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

This letter responds to a letter from your authorized representative dated November 3, 2004, submitted on behalf of Company, requesting an extension of time for Company to elect under ' 301.7701-3(c) of the Procedure and Administration Regulations to be treated as a disregarded entity. Company represents the following facts.

On a, Investors directly and indirectly acquired shares of certain U.S. and foreign subsidiaries of a foreign company. It was intended that the foreign subsidiaries, including Company, be disregarded as entities separate from their owners as of the date of acquisition. However, due to inadvertence, Company did not file Form 8832, Entity Classification Election.

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under ' 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) may elect its classification for federal tax purposes as provided in this section. An eligible entity with a single owner may elect to be classified as an association (and thus a

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corporation under ' 301.7701-2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i)(B) provides in general that, unless it elects otherwise, a foreign eligible entity is an association if all members have limited liability.

Section 301.7701-3(c)(1)(i) provides in general that an eligible entity may elect to be classified other than as provided under ' 301.7701-3(b) by filing Form 8832 with the applicable service center.

Section 301.7701-3(c)(1)(iii) provides that an election made under ' 301.7701- 3(c)(1)(i) 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 effective date specified on Form 8832 can not 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 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.

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 a regulatory 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 on the facts and representations submitted, Company has established that the requirements of '' 301.9100-1 and 301.9100-3 are satisfied. Consequently, Company is granted an extension of 60 days from the date of this letter for electing under ' 301.7701-3 to be disregarded as an entity separate from its owner effective a. Company must file Form 8832 within the extension period with the appropriate service center, with a copy of this letter attached.

Except for the specific ruling above, we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the Code. Section 301.9100-1(a) provides that the granting of an extension of time for

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making an election is not a determination that the taxpayer is otherwise eligible to make the election.

In accordance with the power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

This ruling is directed only to the taxpayer on whose behalf it was requested.
According to ' 6110(k)(3) of the Internal Revenue Code, this ruling may not be used or cited as precedent.

Sincerely,

HEATHER C. MALOY
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: Copy of this letter
Copy for ' 6110 purposes

cc: