PLR 200534019: Foreign company gets more time to elect partnership status

Plain-English summary

A foreign limited liability company with two owners missed the deadline to file Form 8832 to be treated as a partnership from its formation date. Because both owners had limited liability, the default federal classification was an association taxable as a corporation. The IRS found that the requirements for late election relief were met and gave the company 60 days from the letter date to file Form 8832. The election could take effect on the company's formation date, a redacted date in the release.

Ruling snapshot

• Question: Could the company make a late election to be taxed as a partnership from its formation date?
• Outcome: Approved: Form 8832 could be filed within 60 days, effective on the stated date.
• Key authorities: Treas. Reg. §§ 301.7701-3(b)(2), 301.7701-3(c), 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200534019
Third Party Communication: None
Release Date: 8/26/2005
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:
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CC:PSI:B02
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PLR-165166-04
Date:
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May 6, 2005

Legend

V: ---------------------------------
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W: ---------------------------------------------

X: ------------------------------------
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Y: ------------
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Z: -------------------------------------------
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State 1: -------------

State 2: ----------

Country 1: -----------------

Date 1: ----------------

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

This responds to a letter dated December 15, 2004, submitted on behalf of V, requesting an extension of time under § 301.9100-3 of the Procedure and

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PLR-165166-04

Administration Regulations to elect to be treated as a partnership under § 301.7701-3(c) effective Date 1.

Facts

The information submitted states that V is a limited liability company formed under the laws of Country 1 on Date 1. V is owned by W and X, two entities with limited liability. W is an investment company formed under the laws of Country 1. X, a disregarded entity, is a State 1 limited liability company owned by Y, a State 1 corporation. Y is a wholly-owned subsidiary of Z, a State 2 corporation. Due to inadvertence, V failed to file a timely Form 8832, Entity Classification Election, to be treated as a partnership, effective Date 1.

Law and Analysis

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 more than 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.

Conclusion

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Based solely on the information submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, V 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 be treated as a partnership, effective Date 1. 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.

Sincerely,

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

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