PLR 200844016: Foreign entity received extra time for disregarded status election

Plain-English summary

A foreign eligible entity intended to elect disregarded-entity status effective on a specified date but inadvertently failed to file Form 8832 on time. The entity represented that it had one owner and was eligible to choose a classification other than its default classification as an association taxable as a corporation. Treasury regulations allow late-election relief when the taxpayer acted reasonably and in good faith and relief would not prejudice the government. 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 with a copy of the ruling attached.

Ruling snapshot

• Question: Could the foreign eligible entity make a late election to be treated as a disregarded entity from the intended effective date?
• Outcome: Approved, with 60 days to file Form 8832 and attach the ruling.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.7701-4, 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: 200844016 Third Party Communication: None
Release Date: 10/31/2008 Date of Communication: Not Applicable
9100.31-00
Person To Contact:
---------------------------------------- -------------------, ID No. -------------
------------------------------------------------------------ Telephone Number:
-------------------------- ---------------------
-------------------------------------------------------- Refer Reply To:
--------------------------------- CC:PSI:02
------------------------------ PLR-100749-08
Date: July 1, 2008

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

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

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

  This responds to a letter dated December 20, 2007, submitted on behalf of X,

requesting that the Service grant X an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to make an entity classification election.

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

X represents that X is a foreign entity eligible to be treated as a disregarded entity and
that it was intended that an election would be make to elect to treat X as a disregarded
entity effective Date 1. However, due to inadvertence, no Form 8832, Entity
Classification Election, was timely filed to elect to treat X as a disregarded entity
effective Date 1.

   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. A "business entity" is any entity
recognized for federal tax purposes that is not properly classified as a trust under
§ 301.7701-4 or otherwise subject to special treatment under the Internal Revenue
Code.

    Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association taxable as a corporation if all members have limited liability, unless the
PLR-100749-08 2

entity makes an election to be treated otherwise. If the foreign eligible entity has only
one owner, it may elect to be treated as a disregarded entity pursuant to the rules in
§ 301.7701-3(c).

   Section 301.7701-3(c) provides that to elect to be classified other than as

provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated
service center and that an entity classification election must be filed on Form 8832 and
can be effective up to seventy-five (75) days prior to the date the form is filed or up to
twelve (12) months after the date on which the form 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) defines
the term "regulatory election" as an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

   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 representations made, we

conclude that the requirements of § 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
effective Date 1. 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
Code.
PLR-100749-08 3

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

   Pursuant to a power of attorney on file with this office, a copy of this letter is

being sent to X’s authorized representative.

                                               Sincerely,


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

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