PLR 201008001: Foreign entity receives more time to file a disregarded-entity election

Plain-English summary

X was formed under foreign law and intended to be treated as a disregarded entity for federal tax purposes. It inadvertently failed to timely file Form 8832, Entity Classification Election, and requested an extension under the section 9100 regulations. The IRS concluded that the requirements for relief were satisfied and granted X 60 days from the date of the letter to file a properly executed Form 8832, effective on the redacted date. The ruling shows that an extension can be granted when the taxpayer acted reasonably and in good faith and relief would not prejudice the government.

Ruling snapshot

• Question: May a foreign entity receive more time to file Form 8832 and elect to be classified as disregarded?
• Outcome: Approved, 60-day extension granted
• Key authorities: Treas. Reg. §§ 301.7701-2 and 301.7701-3; Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

Number: 201008001                                             Third Party Communication: None
Release Date: 2/26/2010                                        Date of Communication: Not Applicable
                                                                Person To Contact:
Index Numbers: 7701.00-00; 9100.31-00                           -----------------, ID No. -------------
                                                                Telephone Number:
                                                                ---------------------
 -------------------------                                      Refer Reply To:
--------------------------------------------------------------- CC:PSI:1
------                                                          PLR-122181-09
------------------------                                        Date:
---------------------------------                               October 21, 2009
-------------------------------------
 --------------------------------




 LEGEND

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

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

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

 Country           =        ----------


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

 This is in response to a letter dated April 24, 2009, submitted on behalf of X, requesting
 an extension of time under § 301.9100-3 of the Procedure and Administration
 Regulations to file an election under § 301.7701-3(c) to be treated as a disregarded
 entity for federal tax purposes.

 FACTS

 According to the information submitted, X was formed on D1 under the laws of Country.
 X intended to be treated as a disregarded entity for federal tax purposes effective D2.
 However, X inadvertently failed to timely file Form 8832, Entity Classification Election, to
 be treated as a disregarded entity for federal tax purposes effective D2.
PLR-122181-09                                  2




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 to be classified as an association 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, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with a single owner having limited liability
may elect to be treated as a disregarded entity pursuant to the rules of § 301.7701-3(c).
Section 301.7701-3(c)(1)(i) and (iii) provides that an entity classification election must
be filed on Form 8832 and can be effective up to 75 days prior to the date the form is
filed or up to 12 months after the date the form is filed.

Section 301.7701-3(c)(2)(i) provides that an election under § 301.7701-3(c)(1)(i) must
be signed by – (A) Each member of the electing entity who is an owner at the time the
election is filed; or (B) Any officer, manager or member of the electing entity who is
authorized (under local law or the entity’s organizational documents) to make the
election and who represents to having such authorization under penalties of perjury.

Section 301.7701-3(c)(1)(iii) provides that, if a purchasing corporation makes an
election under § 338 regarding an acquired subsidiary, an election under § 301.7701-
3(c)(1)(i) for the acquired subsidiary can be effective no earlier than the day after the
acquisition date (within the meaning of § 338(h)(2)).

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 Internal Revenue
Code, except subtitles E, G, H, and I. Section 301-9100-1(b) defines the term
"regulatory election" as including an election whose due date is prescribed by a
regulation published in the Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner
will use to determine whether to grant an extension of time to make an election. Section
301.9100-1(a).
PLR-122181-09                                  3

Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides rules for requesting extensions of time for regulatory
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.

CONCLUSION

Based solely on the facts submitted and the 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 properly executed Form
8832, effective D2, with the appropriate service center, to elect to be classified as a
disregarded entity. A copy of this letter should be attached to the Form 8832.

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) 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 representative.

                                       Sincerely,

                                       Curt G. Wilson

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


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


cc: