PLR 200811006: Foreign entity gets more time to elect disregarded status

Plain-English summary

A foreign entity became wholly owned through a change in its ownership chain and intended to elect treatment as disregarded from its single owner for U.S. federal tax purposes. It inadvertently missed the Form 8832 filing deadline. Based on the stated facts and representations, the IRS found that the requirements for discretionary filing relief were met. It gave the entity 60 days from the letter date to file the election with its intended effective date. The letter does not decide other tax consequences of the ownership change.

Ruling snapshot

• Question: May the foreign entity file a late election to be disregarded as separate from its owner?
• Outcome: Approved: a 60-day extension to file Form 8832 with the stated effective date.
• 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: 200811006
Third Party Communication: None
Release Date: 3/14/2008
Date of Communication: Not Applicable
Index Number: 9100.00-00, 7701.00-00
Person To Contact:
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Refer Reply To:
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CC:PSI:B03
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PLR-127056-07
Date:
December 06, 2007

Legend:

X = ----------------------------
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Y = ----------------------------------------
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Z = ----------------------------------
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Country = --------------------------

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

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

D3 = ---------------------------

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

This responds to a letter dated June 8, 2007, and subsequent correspondence submitted on behalf of X, requesting an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations for X to file an election under § 301.7701-3(c) to be treated as an entity disregarded as separate from its owner for federal tax purposes.
PLR-127056-07
2

Facts

X was formed under the laws of Country on D1. As of D2, X was wholly owned by Y. On D2, Z acquired 100% of Y, which owned 100% of X. X intended to elect under § 301.7701-3(c) to be classified as a disregarded entity for federal tax purposes as of D3. However, X inadvertently failed to timely file the proper election with the appropriate service center.

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 to be classified as an association or to be disregarded as an entity separate from its owner.

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 if all members have limited liability, unless the entity makes an election to be treated otherwise. A foreign eligible entity with a single owner having limited liability may elect to be treated as a disregarded entity 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) provides that the term "regulatory election" includes an election whose due date is prescribed by a regulation published in the Federal Register.

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 automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions 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.
PLR-127056-07
3

Conclusion

Based on the facts submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 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 a Form 8832 with the appropriate service center and to elect to be classified as a disregarded entity for federal tax purposes, effective D3. 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, we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue Code.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representatives.

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: