PLR 200647023: Foreign entity may file late disregarded entity election

Plain-English summary

A foreign entity's indirect owner intended the entity to be disregarded for federal tax purposes, but the entity missed the deadline to file Form 8832. The IRS accepted the entity's representation that it was eligible for that classification and found that the requirements for a filing extension were met. It granted 60 days from the letter date to submit Form 8832 with the requested effective date and a copy of the ruling. The letter did not address other tax consequences of the transactions.

Ruling snapshot

• Question: Could the entity file a late election to be classified as a disregarded entity?
• Outcome: Approved; Form 8832 was due within 60 days of the ruling letter.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200647023
Third Party Communication: None
Release Date: 11/24/2006
Date of Communication: Not Applicable

Index Number: 9100.31-00, 7701.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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PLR-145672-05
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Date:
June 22, 2006
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X = ---------------------------------------------------------------------------------------------------
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Y = ---------------------------------------------------------------------------------------------------
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Country = --------

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

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

This responds to a letter dated August 15, 2005, and subsequent correspondence, submitted on behalf of X by its authorized representative, requesting that the Service grant X an extension of time pursuant to ' 301.9100-3 of the Procedure and Administration Regulations for X to file an election to be classified as a disregarded entity for federal tax purposes.

The information submitted states that X was formed under the laws of Country.
X represents that it is eligible to be treated as a disregarded entity for federal tax purposes. Y, the indirect owner of X, intended for X to be treated as a disregarded entity, effective D1. However, X did not timely file a Form 8832, Entity Classification Election.

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 only

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one owner, it may elect to be treated as a disregarded entity pursuant to the rules in
§ 301.7701-3(c).

Section 301.7701-3(c)(1)(i) provides that to elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated service center. Section 301.7701-3(c) provides that an entity classification election must be file 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.

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 Code, except 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, 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 an 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.

Based solely on the information submitted, 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 a Form 8832 with the appropriate service center to and elect to be treated as a disregarded entity effective D1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as specifically ruled above, we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the Code.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

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Pursuant to a power of attorney on file, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

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

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes