PLR 200903045: Foreign subsidiary received 60 days to elect disregarded status

Plain-English summary

A foreign corporation acquired another foreign corporation whose wholly owned subsidiary was also foreign. The parties intended the subsidiary to become disregarded for U.S. federal tax purposes after the acquisition but inadvertently failed to file Form 8832 on time. The subsidiary represented that it was an eligible entity and sought discretionary deadline relief. The IRS found the section 9100 standards satisfied and granted 60 days to file Form 8832 effective from the intended date. The ruling addressed no other federal tax consequences of the transaction.

Ruling snapshot

• Question: Could the foreign subsidiary make a late election to be disregarded from its owner?
• Outcome: Approved. It received 60 days to file Form 8832
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200903045 Third Party Communication: None
Release Date: 1/16/2009 Date of Communication: Not Applicable Person To Contact: Index Number: 7701.01-00, 9100.00-00, ----------------------, ID No. ------------- Telephone Number: 9100.31-00
---------------------
Refer Reply To:
---------------- CC:PSI:B03
-------------------------------------- PLR-112144-08
------------------------------------------- Date:
-------------------------- September 09, 2008

Legend

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

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

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

C = ------------------------------
----------------------

Country #1 = ----------------------

Country # 2 = ---------

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

D2 = ---------------------

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

This letter responds to a letter dated March 11, 2008, and subsequent correspondence, written on behalf of X, requesting a ruling under §301.9100-3 of the Procedure and Administration Regulations.

Facts

X was formed under the laws of Country #1. X represents that it is a foreign entity eligible to elect to be classified as a disregarded entity for federal tax purposes. X was a wholly-owned subsidiary of A, a Country #2 corporation. B, a Country #2 corporation, acquired A, through a subsidiary entity, C, on D1. Upon B’s acquisition of A, it was intended that X would be treated as a disregarded entity effective D2. However, due to inadvertence, a Form 8832, Entity Classification Election, to treat X as a disregarded entity effective D2, was not timely filed.

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 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, and an eligible entity with a single owner can elect to be classified as an entity separate from its owner.

Section 301.7701-3(b)(2)(i) provides, in part, 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(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, Entity Classification Election, with the service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides that an election under §301.7701-3(c)(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 not 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 301.9100-2 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 guidelines for granting extensions of time for making 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 evidence (including affidavits described in §301.9100-3(e)) to establish to the satisfaction of the Commissioner that the 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 the representations made, we conclude that X has satisfied the requirements of §301.91001-1 and §301.9100-3. As a result, X is granted an extension of sixty (60) days from the date of this letter to file a properly executed Form 8832 with the appropriate service center, to elect to be classified as a disregarded entity, effective D2. A copy of this letter should be attached to the Form 8832.

Except as specifically set forth above, we express no opinion concerning the federal tax consequences of the above described facts under any other provision of the Internal Revenue Code.

In accordance with a power of attorney on file with this office, a copy of this letter is being sent to your authorized representative.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Sincerely,

/s/

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

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

cc: