PLR 200532026: Foreign entity may file late partnership classification election

Plain-English summary

A foreign entity intended to elect partnership treatment for U.S. federal tax purposes but did not file Form 8832 by the deadline. It asked for more time to make the election effective on its intended date. The IRS concluded that the requirements for late election relief were satisfied and granted a 60-day extension. To use the relief, the entity had to file Form 8832 with the appropriate service center and attach a copy of the ruling. The IRS expressed no opinion on other tax consequences of the entity's arrangements.

Ruling snapshot

• Question: May the foreign entity file a late election to be classified as a partnership?
• Outcome: Approved; Form 8832 and the ruling copy must be filed within 60 days.
• 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: 200532026
Third Party Communication: None
Release Date: 8/12/2005
Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:1
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March 30, 2005

Legend

X = -------------------------------------
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D1 = ----------------------

D2 = -----------------------

Country = ----------

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

This responds to a letter dated October 13, 2004, submitted on behalf of X, requesting an extension of time under section 301.9100-3 of the Procedure and Administration Regulations for X to file an election to be classified as a partnership for federal tax purposes, effective D2.

FACTS

According to the information submitted, X was formed under the laws of Country on D1. X intended to elect to be treated as partnership, effective D2. However, due to inadvertence, X’s Form 8832, Entity Classification Election, was not filed timely.

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. It further provides
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that an eligible entity with more than one owner can elect to be classified as an association or as a partnership.
Section 301.7701-3(b)(2) provides guidance on the default classification of a foreign eligible entity for federal tax purposes. Section 301.7701-3(b)(2)(B) provides 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 that an eligible entity may elect to be classified other than as provided in section 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the service center designated on Form 8832. Section 301.7701-3(c)(1)(iii) provides that an election under section 301.7701- 3(c)(1)(i) will be effective on the date specified 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 cannot be more than 75 days prior to the date the election is filed and cannot be more than 12 months after the date on which the election is filed.
Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in section 301.9100-2 and 301.9100-3, 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 a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register. Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. Section 301.9100-3 sets forth 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 section 301.9100-2. Under section 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) that granting relief will not prejudice the interests of the Government.

CONCLUSION
Based solely on the facts submitted and 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 a Form 8832 with the appropriate service center and elect under section 301.7701-3(c) to be classified as a partnership for federal tax purposes effective for D2. A copy of this letter should be attached to the Form 8832. A copy is included 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.
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This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your 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 ' 6110 purposes