PLR 200614012: Foreign company gets time for election after ownership change

Plain-English summary

A foreign private limited company came under a single owner with limited liability and intended to elect treatment as a disregarded entity from the date that owner acquired all its interests. The company inadvertently missed the deadline to file Form 8832. The IRS found that it met the requirements for discretionary late election relief under Treasury Regulation section 301.9100-3. It gave the company 60 days from the ruling date to file Form 8832 electing disregarded entity treatment effective on the ownership change date. The ruling did not decide other federal tax consequences.

Ruling snapshot

• Question: Could the company make a late disregarded entity election effective on the date one owner acquired it?
• Outcome: Approved a 60 day extension to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200614012
Release Date: 4/7/2006
Index Numbers: 9100.22-00

• Person To Contact:
  ---------------------------------- -----------------------------------------------------
  --------------------------------------------- ---------
  ---------------------- Telephone Number:
  -------------------------- ---------------------
  --------------------- Refer Reply To:
  CC:PSI:2 – PLR-143520-05
  Date:
  December 07, 2005

X = ---------------------------------------------
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Country = ---------------------

D1 = -------------------------

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

Dear -----------------
This letter responds to a letter, dated July 13, 2005, and subsequent correspondence, submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to file an election to be treated as a disregarded entity for federal tax purposes.

The information submitted states that X, a private limited company, was formed on D1, pursuant to the laws of Country. X has a single owner that has limited liability as defined in § 301.7701-3(b)(2)(ii) that aquired all of the interest in X on D2. X intended to elect to be a disregarded entity for federal tax purposes effective D2. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election. 2

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) can elect its classification for Federal tax purposes as provided in § 301.7701-3.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Under § 301.7701-3(b)(2)(i)(B), except as provided in § 301.7701(b)(3), unless it elects otherwise, a foreign eligible entity is classified as an association if all members have limited liability.

Section 301.7701-3(b)(2)(ii) provides that for purposes of § 301.7701-3(b)(2)(i), a member of a foreign eligible entity has limited liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member.

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

Section 301.7701-3(c)(1)(iii) provides that an election under § 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 form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date the form is filed and cannot be more than 12 months after the date on which the form 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 §§ 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 § 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.

Based on the facts submitted and representations made, we conclude that the requirements of § 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 Form 8832 and elect to be 3

treated as a disregarded entity for federal tax purposes 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 or implied as to the federal tax consequences of the transaction described above under any other provision of the Code.

This ruling is directed only to the taxpayer on whose behalf it was requested.
Section 6110(k)(3) 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 X’s authorized representative.

Sincerely,

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

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