PLR 200650004: Foreign entity receives 60 days to elect partnership treatment

Plain-English summary

A foreign entity eligible for partnership classification inadvertently failed to file Form 8832 on time. The IRS found the regulatory election relief requirements satisfied and granted 60 days from the letter to file the election with a copy of the ruling attached. The facts describe the requested effective date as D2, but the conclusion grants partnership treatment effective D1, the formation date. The released letter does not explain that difference, and both dates remain redacted. Relief addresses the filing extension and does not decide other tax consequences.

Ruling snapshot

• Question: May the foreign entity file a late election for partnership classification?
• Outcome: Approved: 60-day Form 8832 extension; the conclusion specifies D1 despite the facts' requested D2 effective date.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200650004
Third Party Communication: None
Release Date: 12/15/2006
Date of Communication: Not Applicable

Index Number: 7701.00-00, 9100.00-00
Person To Contact:
---------------------------, ID No. -------------
----------------------
Telephone Number:
---------------------------------------------------------- --------------------
------------------
Refer Reply To:
------------------------------------------------ CC:PSI:B01
------------------------------------------------------------ PLR-123321-06
---------
Date:
September 12, 2006
-

Legend

X = ----------------------------------------------------------
-------------------------

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

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

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

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

This responds to a letter dated April 25, 2006, submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election to be treated as a partnership under § 301.7701-3(c).

FACTS

The information submitted states that X was formed under the laws of Country on D1. X represents that X is a foreign entity eligible to elect to be treated as a partnership. However, X inadvertently failed to file a timely Form 8832, Entity Classification Election, electing to treat X as a partnership effective D2.

PLR-123321-06
2

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)(1)(i) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b) by filing a Form 8832 with the appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified on the election form. The 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 301.7701-3(c)(1)(iv) provides in relevant part that, if an eligible entity makes an election under § 301.7701-3(c)(1)(i) to change its classification, the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election. However, an election by a newly formed eligible entity that is effective on the date of formation is not considered a change for purposes of this paragraph.

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 subtitles E, G, H, and I. Section 301.9100-1(b) defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the Federal Register.

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 301.9100-2 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. Section 301.9100-3(a).

CONCLUSION

PLR-123321-06
3

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an extension of sixty (60) days from the date of this letter to elect to be treated as a partnership, effective D1. The election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the election.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the Internal Revenue Code 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 will be sent to X's authorized representatives.

Sincerely,

Heather Maloy
Associate Chief Counsel
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc-: