PLR 200843014: Foreign company received extra time for partnership election

Plain-English summary

A foreign limited-liability company with two owners intended partnership classification from its formation date but did not timely file Form 8832. Because all members had limited liability, the entity otherwise defaulted to association status under the foreign entity-classification rules. Late-election relief requires reasonable and good-faith conduct and no prejudice to the government. Based on the submitted facts and representations, the IRS granted the company 60 days from the ruling date to file Form 8832 with the intended partnership effective date and attach the ruling. The IRS did not decide whether the company was otherwise eligible to make the election.

Ruling snapshot

• Question: Could the foreign limited-liability company make a late partnership-classification election effective from formation?
• Outcome: Approved, with 60 days to file Form 8832 and attach the ruling.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-2, 301.9100-3

Full text (IRS public release)

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Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200843014
Release Date: 10/24/2008
Index Number: 7701.00-00, 9100.00-00, Person To Contact:
9100.31-00 --------------------------, ID No. -------------
Telephone Number:
---------------------
---------------------------------------------- Refer Reply To:
------------------------- CC:PSI:3 – PLR-113334-08
------------------------------------------------ Date:
--------------------------- July 21, 2008

LEGEND

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

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

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

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

d1 = ----------------------

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

   This letter responds to a letter dated September 30, 2007, and subsequent

correspondence, submitted on behalf of X, requesting a ruling under §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations that X be granted an
extension of time to file an election to be classified as a partnership under § 301.7701-3.

FACTS

    X was formed on d1 as a company with limited liability under the laws of Country.

X is owned by Y and Z. X intended to elect to be treated as a partnership for federal tax
purposes effective d1. However, a Form 8832, Entity Classification Election, electing to
be treated as a partnership was not timely filed.
PLR-113334-08 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 as provided in ' 301.7701-3. Under
§ 301.7701-3(a), 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)(i)(B) provides that, unless an entity elects otherwise, a

foreign eligible entity is an association if all members have limited liability.

    Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be

classified other than as provided in § 301.7701-3(b), or to change its classification, by
filing a Form 8832 with the service center designated on the 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 cannot be more than 75 days prior to the date on which the
election is filed and cannot 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 extensions 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 (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
the interests of the Government.
PLR-113334-08 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. As a result, 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 and elect to be classified as a partnership for
federal tax purposes effective d1. A copy of this letter should be attached to the Form
8832.

   Except as specifically set forth above, no opinion is expressed or implied

concerning the federal tax consequences of the transaction described above under any
other provision of the Code. Specifically, no opinion is expressed or implied as to
whether X is otherwise eligible to make the election.

   This ruling is directed only to the taxpayer 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 a power of attorney on file with this office, we are sending a

copy of this letter to X=s authorized representatives.

                                         Sincerely,

                                             /s/

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

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

cc:
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