PLR 200844001: Foreign entity received extra time for disregarded status election

Plain-English summary

A foreign eligible entity intended to elect disregarded-entity status from its formation date but did not file the entity-classification election on time. The classification regulations permit eligible entities to choose a classification different from their default status. Late regulatory-election relief requires reasonable and good-faith conduct and no prejudice to the government’s interests. Based solely on the submitted information and representations, the IRS found those requirements satisfied. It gave the entity 60 days from the ruling date to file Form 8832 using the intended effective date and attach a copy of the ruling.

Ruling snapshot

• Question: Could the foreign eligible entity make a late disregarded-entity election effective from its formation 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

                                               Third Party Communication: None

Number: 200844001 Date of Communication: Not Applicable
Release Date: 10/31/2008
Person To Contact:
------------------------, ID No. ------------
Index Number: 7701.00-00, 9100.00-00, Telephone Number:
9100.31-00 ---------------------
Refer Reply To:

---------------------------------- CC:PSI:B02
-------------------------------- PLR-104683-08
Date:
--------------------- July 30, 2008

Legend

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

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

Date = ----------------------

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

    This responds to a letter dated January 29, 2008, and subsequent

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

  The information submitted states that X was formed under the laws of Country on

Date. X represents that X is a foreign entity eligible to elect to be treated as a
disregarded entity for federal tax purposes. X intended to elect to be treated as a
disregarded entity for federal tax purposes, effective on Date. The election, however,
was not timely filed.

    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.
PLR-104683-08 2

    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.

   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) 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 the

Commissioner will use to determine whether to grant an extension of time to make the
election. 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. 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 (1) the taxpayer acted reasonably and in good
faith, and (2) granting relief will not prejudice the interests of the government.

    Based solely on 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 60 days from the date of this letter to
file a Form 8832 with the appropriate service center and elect to be treated as a
disregarded entity for federal tax purposes, effective Date. 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, no opinion is expressed concerning the

federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code and the regulations thereunder.
PLR-104683-08 3

  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 sent to your authorized representative.

                                       Sincerely,



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

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