PLR 200901021: Extra 60 days to file a late Form 8832 for a foreign single-member entity

Plain-English summary

A domestic owner formed a foreign entity and meant for it to be disregarded from the day it came into existence. That takes an affirmative election. A foreign eligible entity whose members all have limited liability defaults to an association taxable as a corporation, and the only way out is a Form 8832 filed under section 301.7701-3(c), effective no more than 75 days before it is filed. The owner never filed the form on time.

Because the 75-day window had run, the entity asked for a discretionary extension under section 301.9100-3. That relief is available for a regulatory election when the taxpayer shows it acted reasonably and in good faith and that granting relief will not prejudice the government.

The IRS concluded the standards of sections 301.9100-1 and 301.9100-3 were met and gave 60 days from the date of the letter to file Form 8832 electing disregarded treatment retroactive to the entity's formation date, with a copy of the ruling letter attached to the form.

Nothing else was decided. The letter expresses no opinion on any other aspect of any transaction it touches.

Ruling snapshot

• Question: May a foreign single-member eligible entity that missed the Form
  8832 deadline get an extension to elect disregarded status back to its formation date?
• Outcome: Approved. A 60-day extension from the date of the letter.
• Key authorities: Treas. Reg. §§ 301.7701-2(b), 301.7701-3(a), (b)(2) and (c),
  301.9100-1, 301.9100-2, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200901021 Third Party Communication: None
Release Date: 1/2/2009 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:B1
------------------------- PLR-124213-08
----------------------------- Date:
------------------------------ October 07, 2008

Legend

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

Y = -----------------------------------------
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Country = ------------

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

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

This is in response to a letter dated April 15, 2008, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to file an election to treat X as a disregarded entity for federal tax purposes under § 301.7701- 3(c).

Facts

The information submitted states that on Date 1, Y formed X pursuant to the laws of Country. X represents that pursuant to § 301.7701-3(a), X is a foreign eligible entity that is not required to be classified as a corporation for federal tax purposes. X has a single member that has limited liability as defined in § 301.7701-3(b)(2)(C)(ii). X intended to elect to be treated as a disregarded entity for federal tax purposes effective Date 1. However, X inadvertently failed to timely file Form 8832, Entity Classification Election.

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. An eligible entity with a single owner can elect either to be classified as an association (and thus a corporation under section 301.7701-2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Generally, unless the entity makes an election to be treated otherwise, a foreign eligible entity is treated as an association taxable as a corporation if all members have limited liability. If a 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). If a foreign eligible entity has more than one owner, it may elect to be treated as a partnership pursuant to the rules in § 301.7701-3(c).

Section 301.7701-3(c) further provides that an entity classification election must be filed on Form 8832, Entity Classification Election, and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date on which the form 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 subtitles E, G, H, and I. Section 301.9100-1(b) defines the term regulatory election as including an election with a deadline 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. Section 301.9100-3(a).

Conclusion

Based solely upon the information submitted, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a result, an extension of 60 days from the date of this letter is granted to elect to treat X as a disregarded entity for federal tax purposes, effective Date 1. The entity classification election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer(s) 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 the power of attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

Sincerely,

William P. O’Shea

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

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

cc: