PLR 200741012: Foreign entity received more time to elect partnership treatment

Plain-English summary

A foreign entity wanted to be treated as a partnership for U.S. federal tax purposes from the date it began operations, but inadvertently missed the Form 8832 filing deadline. The IRS found that the entity met the standards for late election relief and gave it 60 days to file the form with the requested effective date. The ruling did not decide whether the entity was otherwise eligible for the election or whether it was in fact a partnership for federal tax purposes.

Ruling snapshot

• Question: Could the foreign entity file a late election for partnership classification?
• Outcome: Yes, with 60 days from the letter to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200741012
Third Party Communication: None
Release Date: 10/12/2007
Date of Communication: Not Applicable
Index Number: 7701.02-00, 9100.00-00,
9100.31-00
Person To Contact:
------------------------, ID No. ------------- ----------------------------------------- Telephone Number:
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Refer Reply To:
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CC:PSI:B02
PLR-158856-06
Date:
July 09, 2007

Legend

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

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

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

Date 2 = --------------------------

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

This responds to a letter dated December 21, 2006, and subsequent correspondence submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to elect to be treated as a partnership for federal tax purposes under § 301.7701-3(c).

The information submitted states that X was formed under the laws of Country on Date 1 and commenced operations on Date 2. X represents that X is a foreign entity eligible to elect to be treated as a partnership. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election, electing to treat X as a partnership effective Date 2.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal 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
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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) provides that an entity classification election must be filed 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.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-1(b) provides that the term “regulatory election” includes an election whose due date is prescribed by a regulation published in the Federal Register.

Sections 310.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make the election. Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. Section 301.9100-3 provides 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. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence 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.

Based solely on the information 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 a Form 8832 with the appropriate service center and elect to be treated as a partnership effective Date 2. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue Code and the regulations thereunder, including whether X was or is a partnership for purposes of the Code. Section 301.9100-1(a) provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
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In accordance with the power of attorney on file with this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

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

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