PLR 201008011: Foreign entity receives more time to elect disregarded status

Plain-English summary

X was formed under foreign law and intended to be treated as a disregarded entity for federal tax purposes. It did not timely file Form 8832, Entity Classification Election, and asked for 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 Form 8832 and make the election effective on the redacted date. The ruling illustrates that relief may be available when a taxpayer acted reasonably and in good faith and the extension would not prejudice the government.

Ruling snapshot

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

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

Number: 201008011                                             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:B03
-------------------------------------------------------         PLR-124295-09
---------------------------------------------                   Date:
 ---------------------                                          October 16, 2009




                                                     LEGEND

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

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

 Date         = -------------------------


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

        This letter responds to a letter dated April 15, 2009, and subsequent
 correspondence, submitted on behalf of X by its authorized representative, requesting
 that X be granted an extension of time under § 301.9100-3 of the Procedure and
 Administration Regulations to elect to be treated as a disregarded entity under
 § 301.7701-3.

                                                          FACTS

         X was formed under the laws of Country on Date. X represents that it is a foreign
 entity eligible to elect to be classified as a disregarded entity for federal tax purposes. X
 intended to be classified as a disregarded entity effective Date. However, due to
 inadvertence, Form 8832, Entity Classification Election, was not timely filed.

                                                          LAW

         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
PLR-124295-09                                  2

§ 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
association or to be disregarded as an entity separate from its owner.

         Section 301.7701-3(b)(2)(i) provides 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(b)(2)(ii) provides, in part, 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, except as provided in
§ 301.7701-3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as
provided in § 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, in part, 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 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.

       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 the
election.

       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
Internal Revenue Code (Code) except subtitles E, G, H, and I. Section 301.9100-1(b)
defines the term “regulatory election” as an election whose due date is prescribed by a
regulation published in the Federal Register, or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

       Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections. Section 301.9100-3 provides the standards the Commissioner
will use to determine whether to grant an extension of time for regulatory elections that
do not meet the requirements of § 301.9100-2.
PLR-124295-09                                 3

       Section 301.9100-3(a) provides that requests for relief under § 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 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 and the representations made, we
conclude that the requirements of §§ 301.9100-1 and 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 Form 8832 with the appropriate service center to elect to be treated as a
disregarded entity effective Date. 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) of the
Code provides that it may not be used or cited as precedent.

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

       The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.


                                      Sincerely,


                                      /s/

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

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

cc: