PLR 200725006: Foreign entity given more time to elect disregarded status

Plain-English summary

A foreign entity intended to elect treatment as an entity disregarded from its single owner but did not file Form 8832 on time because of an oversight. The IRS found that the requirements for an extension under the regulatory election relief rules were satisfied. It granted 60 days from the letter to file Form 8832 for the intended effective date. The ruling gives filing relief and expresses no opinion on other tax consequences.

Ruling snapshot

• Question: Could the entity file a late election to be disregarded for federal tax purposes?
• Outcome: Yes, by filing Form 8832 within 60 days of the letter.
• 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: 200725006
Third Party Communication: None
Release Date: 6/22/2007
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
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Refer Reply To:
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CC:PSI:B1
PLR-104933-07
Date:
March 14, 2007

Legend

X = --------------------
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Country = ----------------------

Date 1 = ------------------------

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

This is in response to a letter dated January 25, 2007 requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to file an election to treat X as an entity disregarded as separate from its owner for federal tax purposes under § 301.7701-3(c).

Facts

According to the information submitted, X is an entity organized under the laws of Country. X intended to make an election to be treated as a disregarded entity effective Date 1. However, due to an oversight, Form 8832, Entity Classification Election, was not timely filed.

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. An eligible entity with a single owner can elect either to be classified as an association (and thus a corporation under section 301.7701-2(b)(2)) or to be disregarded as an entity separate from its owner.

PLR-104933-07
2

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Generally, unless the entity makes an election to be treated otherwise, a foreign eligible entity is treated as an association taxable as a corporation if all members have limited liability. If a foreign eligible entity has only one owner, it may elect to be treated as a disregarded entity pursuant to the rules in § 301.7701-3(c). If a 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) further provides that an entity classification election must be filed on Form 8832, Entity Classification Election, and can be effective up to 75 days prior to the date the form is filed or up to 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 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 upon the information submitted, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a result, an extension of 60 days from the date of this letter is granted to elect to treat X as a disregarded entity for federal tax purposes, effective Date 1. The entity classification election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

PLR-104933-07
3

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 is being sent to your authorized representatives.

Sincerely,

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

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