PLR 200805020: Foreign partnership receives time to elect corporate tax classification

Plain-English summary

A limited partnership formed in a foreign country intended to elect treatment as a corporation for US federal tax purposes from its formation date. It missed the deadline to file Form 8832. The IRS found that the partnership met the requirements for an extension under the regulatory election relief rules. It gave the partnership 60 days from the ruling letter to file Form 8832 electing corporate classification effective from its formation date and to attach a copy of the ruling.

Ruling snapshot

• Question: Could the foreign partnership file its entity classification election after the deadline?
• Outcome: Approved; a 60 day extension was granted.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200805020
Third Party Communication: None
Release Date: 2/1/2008
Date of Communication: Not Applicable
Index Number: 9100.31-00; 7701.00-00
Person To Contact:
------------------------------------------------- -----------------------, ID No. -------------
-------------------------------------
Telephone Number:
--------------------------
---------------------
-----------------------------------
Refer Reply To:
-----------------------------------
CC:PSI:B03
PLR-151513-06
Date:
October 29, 2007

Legend:

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

Y = -----------------------------------------------------------
-----------------------

Z = -------------------------------------
-----------------------

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

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

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

This responds to a letter dated October 16, 2006, and subsequent correspondence, submitted on behalf of X, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations for X to file an election under § 301.7701-3(c) to be classified as an association taxable as a corporation.

Facts

X was formed on D1 as a limited partnership under the laws of Country. X has two partners, Y and Z. X intended to elect under § 301.7701-3(c) to be classified as an association taxable as a corporation for federal tax purposes as of D1, however the election was not timely filed with the appropriate service center.

PLR-151513-06
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. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Generally, unless the entity elects otherwise, a foreign eligible entity is a partnership if it has two or more members and at least one member does not have limited liability. A foreign eligible entity may elect to be classified other than as provided in § 301.7701-3(b), or may change its classification, pursuant to the rules of § 301.7701-3(c). Section 301.7701-3(c) 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 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 Internal Revenue Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make an 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.

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.

Conclusion

Based solely on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, 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 to elect to be classified as an association taxable as a corporation for federal tax purposes effective D1. The election should be made by

PLR-151513-06
3

following the procedures set forth in Form 8832, and a copy of this letter should be attached to the election. A copy is enclosed for that purpose.

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 requesting it. Section 6110(k)(3) 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 X’s authorized representative.

Sincerely,

/s/

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

Enclosures (2)
A copy of this letter
A copy for § 6110 purposes

cc: