PLR 200942005: Foreign entity granted late disregarded-entity election relief

Plain-English summary

A foreign entity asked for more time to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes, effective on a specified date. The entity intended that classification but inadvertently failed to make the election on time. The IRS concluded that the requirements for relief were satisfied and granted 60 additional days from the ruling date to make the election. The IRS did not address other federal tax consequences.

Ruling snapshot

• Question: Could the foreign entity make a late election to be classified as a disregarded entity?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200942005
Third Party Communication: None
Release Date: 10/16/2009
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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CC:PSI:B02
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PLR-103892-09
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Date:
July 01, 2009

Legend

X = ---------------------------------------------------------------------------------------------------
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Country = ---------

D1 = --------------------------------------------------------------------------------------------------- D2 = --------------------------

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

This responds to a letter dated January 7, 2009, submitted on behalf of X by its authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election to be classified as a disregarded entity for federal tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country on D1 as a foreign entity eligible to elect to be treated as a disregarded entity for federal tax purposes. X intended to be classified as a disregarded entity for federal tax purposes
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effective D2. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election, electing to treat X as a disregarded entity effective D2.

LAW AND ANALYSIS

Section 301.7701-2(a) generally provides that 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(a) provides that so long as a business entity is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8) (an eligible entity), it may elect its classification for federal tax purposes.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible 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 entity makes an election to be treated otherwise.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b) by filing a Form 8832 with the appropriate service center. Under § 301.7701-3(c)(1)(iii), this election 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 date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed and cannot be more than 12 months after the date on which the election 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 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 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 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.

Section 301.9100-3(a) provides that request 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.
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CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the requirements of § 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 disregarded entity for federal tax purposes, effective D2. 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 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 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 will be sent to X’s authorized representative.

Sincerely,

Curt G. Wilson
Associate Chief Counsel
(Passthroughs and Special Industries)

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