PLR 200649018: Three-member foreign entity may elect partnership status late

Plain-English summary

Three members with limited liability formed a foreign entity and intended partnership treatment from formation. The entity inadvertently failed to file Form 8832 within the normal deadline. The IRS found the discretionary relief requirements satisfied and granted 60 days from the ruling date to elect partnership classification effective at formation. The applicable rules otherwise classify a foreign eligible entity whose members all have limited liability as an association unless it elects another classification. A copy of the ruling must accompany Form 8832, and the IRS expressed no opinion on other federal tax consequences.

Ruling snapshot

• Question: Could the three-member foreign entity elect partnership treatment effective at formation despite its late filing?
• Outcome: Approved; 60 days to file Form 8832 effective at formation.
• Key authorities: Treas. Reg. §§ 301.7701-3(a), (b)(2)(i), (c)(1), 301.9100-1, 301.9100-3(a).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200649018
[Third Party Communication:
Release Date: 12/8/2006
Date of Communication: Month DD, YYYY]
Index Number: 9100.31-00, 7701.02-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B03
PLR-125709-06
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Date:
August 23, 2006

X = ---------------------------------------------------
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P = ---------

Members = -----------------------------
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Country = ------------

d1 = ----------------------

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

This letter responds to the letter dated May 2, 2006, and subsequent correspondence, submitted on behalf of X, requesting a ruling under §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations that X be granted an extension of time to file an election to be classified as a partnership under § 301.7701-3 effective d1.

FACTS

According to the information submitted, X was formed on d1 as a P under the laws of Country. X was formed by three Members, each having limited liability as members of X under the laws of Country. The Members of X intended that X be treated as a partnership for federal tax purposes effective d1. However, due to inadvertence, X failed to file a timely Form 8832, Entity Classification Election.

PLR-125709-06
2

LAW AND ANALYSIS

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)(i) provides that, unless it elects otherwise, a foreign eligible entity is (A) a partnership if it has two or more members and at least one member does not have limited liability; (B) an association if all members have limited liability; or (C) disregarded as an entity separate from its owner if it has a single owner that does not 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 § 301.7701-3(b), or to change its classification, by filing Form 8832 with the service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701- 3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the date filed, if no date is specified on the election form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date on which 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 §§ 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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides evidence (including affidavits described in § 301.9100-3(e)) 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.

PLR-125709-06
3

CONCLUSION

Based on the facts submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 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 with the appropriate service center and to elect to be classified as a partnership for federal tax purposes effective d1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as expressly set forth above, no opinion is expressed or implied concerning the federal tax consequences of the facts discussed 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.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

Sincerely,

/s/

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

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

cc: