Entity granted more time to elect disregarded-entity status

Plain-English summary

The IRS granted an entity 60 days to file Form 8832 and elect to be classified as a disregarded entity for federal tax purposes, effective on an earlier specified date. The entity was eligible to make the election but failed to file it on time through inadvertence. The ruling states that the entity was initially wholly owned through a trust, and that ownership interests were later transferred to two other entities. The IRS concluded that the requirements for an extension of time were satisfied.

Ruling snapshot

• Question: Could the entity receive an extension of time to elect disregarded-entity classification effective on the specified earlier 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: 201023013 Third Party Communication: None
Release Date: 6/11/2010 Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
---------------------------------- ----------------------, ID No. -----------------
----------------------------------- Telephone Number:
---------------------------------------------- -------------------
------------------------------------------ Refer Reply To:
---------------------------------- CC:PSI:B3
PLR-140478-09
Date:
February 23, 2010

                                                Legend

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

A = ---------------------------------------------------------------------------------------------------
-------------------------

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

Trust = --------------------------------

B = ---------------------------------------------------------------------------------------------------
-----------------------

C = ---------------------------------------------------------------------------------------------------
-----------------------

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

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

a% = ------

b% = ----
PLR-140478-09 2

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

    This letter responds to a letter dated August 24, 2009, and subsequent

correspondence, submitted on behalf of X by X’s authorized representative, requesting
relief under §301.9100-3 of the Procedure and Administration Regulations.

                                        Facts

    The information submitted discloses that X was organized on D1 under the laws

of Country. At the time of formation, X was wholly owned by A through Trust. On D2,
a% of the ownership interests in X were transferred to B and b% of the ownership
interests in X were transferred to C. X represents that prior to D2 it was a foreign entity
eligible to elect to be classified as a disregarded entity for federal tax purposes.
However, due to inadvertence, a Form 8832, Entity Classification Election, to treat X as
a disregarded entity, effective D1, was not timely filed.

                                  Law and Analysis

    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 this
section. 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 separate from its owner.

     Section 301.7701-3(b)(2)(i) provides, in part, 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(c)(1)(i) provides, in part, that an eligible entity may elect to

be classified other than as provided under § 301.7701-3(b), or to change its
classification, by filing Form 8832, Entity Classification Election, with the service center
designated on Form 8832.

    Section 301.7701-3(c)(1)(iii) provides that an election under § 301.7701-3(c)(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
PLR-140478-09 3

can not be more than 12 months after the date on which the election is filed. If an
election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was filed.

   Section 301.9100-1(c) provides that the Commissioner may grant a reasonable

extension of time under the rules set forth in § 301.9100-2 and § 301.9100-3 to make a
regulatory election, or a statutory election (but not more than 6 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 301.9100-2 provides the standards the Commissioner will use to

determine whether to grant an automatic extension of time for making certain elections.

   Section 301.9100-3 provides the guidelines for granting extensions of time for

making elections that do not meet the requirements of § 301.9100-2. Section 301.9100-
3(a) provides that requests for relief subject to §3 01.9100-3 will be granted when the
taxpayer provides 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 facts submitted and the representations made, we conclude

that X has satisfied the requirements of § 301.91001-1 and § 301.9100-3. As a result, X
is granted an extension of sixty (60) days from the date of this letter to file a properly
executed Form 8832 with the appropriate service center, to elect to be classified as a
disregarded entity, effective D1 up to, but not including, D2. A copy of this letter should
be attached to the Form 8832.

   Except as specifically set forth above, we express no opinion concerning the

federal tax consequences of the above described facts under any other provision of the
Internal Revenue Code.

  This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.
PLR-140478-09 4

   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.

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter 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