PLR 200636097: Foreign entity gets more time to elect disregarded status

Plain-English summary

A foreign entity came under one owner's control and intended to be treated as disregarded for federal tax purposes from the acquisition date. It missed the deadline to file Form 8832 for that classification. The IRS concluded that the entity met the standards for a discretionary extension under Treasury Regulation § 301.9100-3. It gave the entity 60 days from the letter to file the election with the requested effective date and directed it to attach the ruling letter to the form.

Ruling snapshot

• Question: May the foreign entity file a late Form 8832 electing disregarded status from the acquisition date?
• Outcome: Approved; file within 60 days of the letter.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Number: 200636097
Release Date: 9/8/2006
Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Index Numbers: 9100.31-00

• Person To Contact:
  -----------------------------------------------------
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  Telephone Number:
  ---------------------------------------- ---------------------
  ---------------------------------------- Refer Reply To:
  ------------------------- CC:PSI:2 – PLR-100362-06
  ------------------------ Date:
  --------------------- May 9, 2006

Legend:

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

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

Dear --------------------

This letter responds to a letter, dated December 27, 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.

According to the information submitted, all of the interest in X, an entity formed under the laws of Country, was acquired by a single owner with limited liability on D1. X intended to be treated as a disregarded entity for federal tax purposes, effective D1. However, X did not 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)(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 treated as a disregarded entity for federal tax purposes effective D1. A copy of this letter should be attached to the Form 8832.
3

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