PLR 200844009: Foreign entity received extra time for partnership election

Plain-English summary

A foreign eligible entity intended to be classified as a partnership for federal tax purposes from its formation date but inadvertently failed to file Form 8832 on time. An eligible entity with at least two members can elect partnership classification under the entity-classification regulations. Late regulatory-election relief requires the taxpayer to act reasonably and in good faith without prejudicing the government’s interests. Based solely on the submitted facts and representations, the IRS found those standards satisfied. It granted the entity 60 days from the ruling date to file Form 8832 with the requested effective date and attach a copy of the ruling. The IRS did not decide whether the entity was otherwise eligible for the election.

Ruling snapshot

• Question: Could the foreign eligible entity make a late partnership-classification 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

Number: 200844009 Third Party Communication: None
Release Date: 10/31/2008 Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 9100.31-00
Person To Contact:
--------------------------- ----------------------, ID No. -------------
--------------------------------------------- Telephone Number:
------------------- ---------------------
------------------------------------------------- Refer Reply To:
CC:PSI:B03
PLR-120774-08
Date: July 22, 2008

                                                 Legend

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

A = ------------------
----------------------

B = -----------------------------
----------------------

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

D1 = -----------------------

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

   This letter responds to your letter dated April 23, 2008, 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 classified as a partnership for federal
tax purposes.

                                                  Facts

   The information submitted states that X was formed in Country on D1. X

represents that it is a foreign entity eligible to be classified as a partnership for federal
tax purposes. However, X inadvertently failed to timely file a Form 8832, Entity
Classification Election, electing to treat X as a partnership effective D1.

                                           Law and Analysis

    Section 301.7701-3(a) provides, in part, 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
PLR-120774-08 2

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.

    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(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)(i) provides, in part, 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 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 such 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. If an
election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was 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 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 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 standards the Commissioner will use to

determine whether to grant an automatic extension 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 § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the
PLR-120774-08 3

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 §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, X
is granted an extension of sixty (60) days from the date of this letter to elect to be
classified as a partnership for federal tax purposes effective D1. 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 for the specific ruling above, no opinion is expressed or implied

concerning the federal tax consequences of the facts of this case under any other
provision of the Code. Specifically, no opinion is expressed or implied regarding
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, a copy of this letter

is being sent to your authorized representatives.

                                   Sincerely,

                                     /s/

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

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