PLR 201013003: IRS grants more time for a partnership election

Plain-English summary

The IRS granted a foreign limited company an additional 60 days to file Form 8832 and elect partnership treatment for federal tax purposes. The company intended to make the election when another entity acquired an interest in it, but it failed to file the form on time through inadvertence. The IRS concluded that the requirements for relief under the regulatory-election rules were satisfied. The ruling is limited to the requested election and effective date, and the letter expresses no opinion on other tax consequences.

Ruling snapshot

• Question: May the company make a late election to be treated as a partnership, effective from the date another entity acquired an interest in it?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201013003
Third Party Communication: None
Release Date: 4/2/2010
Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-127925-09
Date: December 1, 2009

LEGEND

X = ------------------------------
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Y = ----------------------

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

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

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

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

This responds to a letter dated June 2, 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 partnership for federal tax purposes.

Facts

The information submitted states that X is a limited company formed on Date 1 under the laws of Country. On Date 2, Y acquired an interest in X. X represents that X is a foreign entity eligible to elect to be treated as a partnership. X intended to be treated as a partnership effective Date 2. Due to inadvertence, X failed to file a timely Form 8832, Entity Classification Election, electing to treat X as a partnership effective Date 2.

PLR-127925-09
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. 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(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; or (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 that to elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated service center. Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 and can be effective up to seventy-five (75) days prior to the date the form is filed or up to twelve (12) months after the date on which the form is filed.

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).

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.

PLR-127925-09
3

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 make an election to be treated as a partnership for federal tax purposes effective Date 2. X must make the election by filing a properly executed Form 8832 with the appropriate service center. A copy of this letter should be attached to the form.

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