PLR 200843022: Foreign entity received extra time for partnership election

Plain-English summary

A foreign eligible entity with more than one owner intended partnership classification from a specified effective date but did not timely file Form 8832. The entity-classification regulations allow an eligible entity to choose a classification different from its default treatment. Late-election relief requires reasonable and good-faith conduct and no prejudice to the government. Based solely on the submitted facts and representations, the IRS found those requirements satisfied. It granted the entity 60 days from the ruling date to file Form 8832 with the intended effective date and attach the ruling.

Ruling snapshot

• Question: Could the foreign entity make a late partnership-classification election effective from the intended date?
• 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: 200843022 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:B01
---------------------------------------- PLR-117786-08
------------------------------------------ Date:
------------------ July 21, 2008

Legend:

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

Country = ------

D = -------------------

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

    This letter responds to the letter dated April 8, 2008, and related

correspondence, written on behalf of X, requesting an extension of time under
§ 301.9100-1 and § 301.9100-3 of the Procedure and Administration Regulations to file
an entity classification election.

                                                  FACTS

    The information submitted states that X was an eligible entity formed under the

laws of Country. X has more than one owner. X intended to elect to be treated as a
partnership for federal tax purposes, effective D. However, Form 8832, Entity
Classification Election, was not timely filed.

                                        LAW AND ANALYSIS

PLR-117786-08 2

    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. Elections are necessary only when an
eligible entity does not want to be classified under the default classification or when an
eligible entity chooses to change its classification.

    Section 301.7701-3(b)(2)(i) provides that, except for certain existing entities

described in § 301.7701-3(b)(3), unless a foreign eligible entity elects otherwise, the
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 member 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) by filing Form 8832 with the
appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective
on the date specified by the entity on Form 8832 or on the date filed if no such date is
specified. The date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election 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 Code, except
E, G, H, and I. Section 301.9100-1(b) defines the term "regulatory election" as including
an election whose deadline is prescribed by a regulation published in the Federal
Register.

   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 an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for making 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 representations made, we conclude that

X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3 and, therefore, it is
granted an extension of time of sixty (60) days from the date of this letter to file a Form
8832 to elect to be treated as a partnership for federal tax purposes, effective D. A
copy of this letter should be attached to the election. A copy is enclosed for that
purpose.
PLR-117786-08 3

   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) of

the 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 is being mailed to your authorized representative.

                                     Sincerely,

                                     William P. O’Shea

                                     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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