PLR 200843005: Foreign entity received more time to elect disregarded status

Plain-English summary

A wholly owned foreign entity changed its legal form and intended to be treated as disregarded from the conversion date. It did not file Form 8832 on time. The entity represented that it had acted reasonably and in good faith, that relief would not prejudice the government, and that it was not using hindsight. Based on the submitted facts and representations, the IRS concluded that the regulatory relief requirements were met. It granted the entity 60 days from the ruling date to file Form 8832 and elect disregarded-entity treatment effective from the requested conversion date.

Ruling snapshot

• Question: Could the foreign entity make a late election to be disregarded as separate from its sole owner?
• Outcome: Approved. The IRS granted 60 days to file Form 8832 with the requested effective date.
• Key authorities: Treas. Reg. §§ 301.7701-2(b), 301.7701-3(a), 301.7701-3(b), 301.7701-3(c), 301.9100-1 through 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                          Department of the Treasury
                                                                   Washington, DC 20224

Number: 200843005                                             Third Party Communication: None
Release Date: 10/24/2008                                       Date of Communication: Not Applicable
                                                                   Person To Contact:
Index Number: 7701.00-00, 9100.00-00                               ---------------------------, ID No. -------------
                                                                   Telephone Number:
                                                                   ---------------------
----------------------                                             Refer Reply To:
-------------------------------------------                        CC:PSI:B1
------------------------------------------                         PLR-104012-08
-------------------------------------------------------            Date:
                                                                   July 23, 2008




 Legend

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

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

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

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


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

 This letter responds to a request, dated January 23, 2008, and subsequent
 correspondence, submitted on behalf of X, requesting an extension of time under
 § 301.9100-3 of the Procedure and Administration Regulations to file an election to be
 treated as a disregarded entity for federal tax purposes under § 301.7701-3(c).

                                                          FACTS

 Based on the information submitted and representations made within, the relevant facts
 are as follows. X is an entity organized under the laws of Country. Y is the 100 percent
 owner of X. On Date 1, the legal form of X was converted, under the laws of Country,
 from a Sociedad Anonima to a Limitada. X represents that as of Date 1, it is a foreign
 entity eligible to elect to be treated as a disregarded entity. X intended 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.
PLR-104012-08                                  2

X represents that it has acted reasonably and in good faith, that granting relief will not
prejudice the interests of the government, and that it is not using hindsight in making the
election.

                                   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 as provided in § 301.7701-3. 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, and 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)(i) provides that, except as provided in § 301.7701-3(b)(3),
unless the entity elects otherwise, a foreign eligible entity is (A) a partnership if it has
two or more members and at least one member does not have limited liability; (B) an
association if all members have limited liability; or (C) disregarded as an entity separate
from its owner if it has a single owner that does not have limited liability.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified
other than as provided under § 301.7701-3(b), or to change its classification, by filing
Form 8832 with the service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701-3(c)(1)(i)
will be effective on the date specified by the entity on Form 8832 or on the date filed if
no date is specified on the election form. The effective date specified on Form 8832 can
not be more than 75 days prior to the date on which the election is filed and can not be
more than 12 months after the date on which the election is filed.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 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 a regulatory election to include an election
whose due date is prescribed by a regulation published in the Federal Register.

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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be
granted when the taxpayer provides the evidence (including affidavits described in
PLR-104012-08                                  3

§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the Government.

                                       CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an
extension of time of sixty (60) days from the date of this letter to elect to be treated as a
disregarded entity for federal tax purposes effective Date 1. The election should be
made by filing Form 8832 with the appropriate service center. A copy of this letter
should be attached to the election.

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 will
be sent to your authorized representatives.


                                                   Sincerely,

                                                   William P. O’Shea

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



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


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