Foreign entity granted more time to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign entity 60 more days to file Form 8832 and elect disregarded-entity status for federal tax purposes. The entity was eligible to make the classification election and intended for it to be effective on its formation date, but did not file the form on time. The IRS concluded that the requirements for relief under the regulations were satisfied. The extension was limited to the election described in the ruling.

Ruling snapshot

• Question: Could the foreign entity receive an extension of time to elect disregarded-entity status effective on its formation date?
• Outcome: Approved
• Key authorities: IRC § 7701; Treas. Reg. §§ 301.7701-2, 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: 201023010 Third Party Communication: None
Release Date: 6/11/2010 Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
Person To Contact:
-------------------------------- ----------------------------, ID No. --------------
------------------------------------ ----------------------------------------------------
-------------------------------- Telephone Number:

• Refer Reply To:
  CC:PSI:B01
  PLR-139458-09
  Date: February 26, 2010

LEGEND

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

Y = ----------------------------------------

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

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

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

  This responds to a letter dated August 3, 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

    The information submitted states that X was formed on Date under the laws of

Country. At the date of formation, Y was the sole shareholder of X. X is a foreign entity
eligible to make a classification election. X intended to be classified as a disregarded
entity for federal tax purposes effective Date. However, X failed to file a timely Form
8832, Entity Classification Election, electing to be treated as a disregarded entity
effective Date.
PLR-139458-09 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)(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.

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
PLR-139458-09 3

extension of time of 60 days from the date of this letter to make an election to be treated
as a disregarded entity for federal tax purposes effective Date. 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,

                                     /s/

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

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