PLR 200722008: Late election for disregarded entity treatment allowed

Plain-English summary

An entity formed under foreign law intended to elect treatment as an entity disregarded from its owner for federal income tax purposes. Its Form 8832 was not filed on time because of inadvertence. The IRS found that the entity met the requirements for an extension under Treasury Regulation § 301.9100-3. It granted 60 days from the date of the letter to file the election with the requested effective date. The IRS did not rule on other tax consequences.

Ruling snapshot

• Question: May the entity file a late election for disregarded entity treatment?
• Outcome: Yes, with a 60 day extension from the date of the 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: 200722008
Third Party Communication: None
Release Date: 6/1/2007
Date of Communication: Not Applicable
Index Number: 9100.00-00, 7701.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-127759-06
Date: February 26, 2007

Legend

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

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

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

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

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

This responds to a letter dated April 7, 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 classified as an entity disregarded as separate from its owner for federal income tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country on D1. It was intended that a Form 8832, Entity Classification Election, electing to be classified as an entity disregarded as separate from its owner would be filed on behalf of X effective D2, but due to inadvertence, the Form 8832 was not timely filed.

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

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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.

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

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 an entity disregarded as separate from its owner, effective D2. 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.

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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 representative.

Sincerely,

William P. O’Shea
Associate Chief Counsel
(Passthroughs and Special Industries)

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