PLR 200932041: Converted foreign company receives 60-day extension to elect corporate status

Plain-English summary

The IRS granted a foreign company 60 days to file Form 8832 and elect association status, which is treated as corporate status for federal tax purposes. The company was formed as a private limited company and later converted to a private unlimited company, changing its default federal classification to an entity disregarded from its owner. The company intended to remain classified as an association taxable as a corporation but inadvertently missed the filing deadline. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied and allowed the election to be effective on the conversion date.

Ruling snapshot

• Question: May the converted foreign company receive more time to elect association status?
• Outcome: Approved, a 60-day extension was granted.
• Key authorities: IRC § 7701; Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through 301.9100-3; Form 8832

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200932041
Third Party Communication: None
Release Date: 8/7/2009
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00
Person To Contact:
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Telephone Number:
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----------------------------------------- Refer Reply To:
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Date:
May 01, 2009

LEGEND

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

Country = ---------

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

Date 2 = ----------------------

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

This letter responds to a letter dated November 18, 2008, and subsequent correspondence, submitted on behalf of X by X’s authorized representative, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to file an election to treat X as an association taxable as a corporation for federal tax purposes under § 301.7701-3(c).

FACTS

According to the information submitted, X was formed under the laws of Country on or about Date 1 as a private limited company, the default classification of which is an association taxable as a corporation for federal tax purposes. On Date 2, X converted to a Country private unlimited company, the default classification of which is an entity disregarded from its owner. X intended to continue to be classified as an association taxable as a corporation for federal tax purposes as of Date 2. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election.

LAW AND ANALYSIS
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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 as provided in § 301.7701-3. An eligible entity with a single owner can elect to be classified as an association (and thus a corporation under § 301.7701-2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i) provides that, unless it 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 made 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 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 has discretion to 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 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 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 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.

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
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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 information submitted, 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 Form 8832 with the appropriate service center and to elect to be classified as an association taxable as a corporation for federal tax purposes effective Date 2. 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 requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

Sincerely,

/s/

Curtis G. Wilson
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2):

A copy of this letter
A copy for § 6110 purposes