PLR 200824020: Foreign entity gets more time to elect disregarded status

Plain-English summary

A foreign entity owned by one company missed the deadline to file Form 8832 to be treated as a disregarded entity for U.S. tax purposes. It wanted the election to take effect on a specified earlier date during its owner's restructuring. The IRS found that the requirements for late election relief under Treasury Regulations §§ 301.9100-1 and 301.9100-3 were met. It granted the entity 60 days from the letter date to file Form 8832 with a copy of the ruling attached. The election could then take effect on the requested date.

Ruling snapshot

• Question: Could the entity file a late Form 8832 election effective on the requested date?
• Outcome: Yes. The IRS granted a 60 day extension to file.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200824020
Release Date: 6/13/2008
Index Number: 9100.31-00, 7701.00-00

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Refer Reply To:
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Date:
February 06, 2008

Legend

X: -------------------------------------------------------
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Country: -----------------

Date 1: ----------------------

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

This responds to a letter dated August 8, 2007, and additional correspondence submitted on behalf of X, requesting that the Service grant X an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an election to be treated as a disregarded entity.

The information submitted states that X was formed under the laws of Country and was treated as a corporation for U.S. tax purposes wholly-owned by Y. As part of a restructuring by Y, X intended to elect to be treated as a disregarded entity for federal tax purposes, effective Date 1. However, X did not timely file a Form 8832, Entity Classification Election effective Date 1.

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 as provided in § 301.7701-3.

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Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Under § 301.7701-3(b)(2)(i)(C), except as provided in § 301.7701-3(b)(3), unless it elects otherwise, a foreign eligible entity is disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

Section 301.7701-3(b)(2)(ii) provides that for purposes of § 301.7701-3(b)(2)(i), a member of a foreign eligible entity has limited liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member.

Section 301.7701-3(c)(1)(iii) provides that an election under § 301.7701-3(c)(1)(i) will be effective on the date specified on Form 8832 or on the date filed if no such date is specified on the form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date the form is filed and cannot be more than 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) defines the term “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 the Commissioner will use to determine whether to grant an extension of time to make the election.

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 the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.

Based solely upon 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 sixty (60) days following the date of this letter to file Form 8832 and to elect to be treated as a disregarded entity for federal tax purposes effective Date 1. A copy of this letter should be attached to the Form 8832.

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Except as specifically set forth above, we express no opinion concerning the federal income tax consequences of the transactions described above under any other provision of the Code.

This ruling is directed only to the taxpayer(s) 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 representative.

Sincerely,

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

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