PLR 1027011: Foreign entity granted extra time to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign entity an extension of time to elect to be treated as a disregarded entity for federal tax purposes. The entity was eligible to make the election but had inadvertently failed to timely file Form 8832. The IRS found that the requirements for relief under Treasury Regulation section 301.9100-3 were satisfied and gave the entity 60 days from the ruling date to file the form, effective as of the redacted formation date. The entity had to attach a copy of the ruling to Form 8832.

Ruling snapshot

• Question: Could the foreign entity receive an extension of time to file its entity-classification election?
• Outcome: approved
• Key authorities: IRC § 7701; 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: 201027011 Third Party Communication: None
Release Date: 7/9/2010 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
--------------------------------- --------------------, ID No. -------------
--------------------------------------- Telephone Number:
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---------------------------------------------- Refer Reply To:
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PLR-138432-09
Date: January 27, 2010

Legend

X: ----------------------------------------

Country: -----------

Date 1: ---------------------------

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

   This responds to a letter dated August 12, 2009, and subsequent

correspondence submitted on behalf of X, requesting that the Service grant X 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(c).

   The facts submitted and representations made are summarized as follows. X

was formed on Date 1 under the laws of Country. X is a foreign entity eligible to elect to
be treated as a disregarded entity effective Date 1. However, X inadvertently failed to
timely file a Form 8832, Entity Classification Election.

    Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

entity for federal income tax purposes. Generally, a foreign eligible entity is treated as
an association taxable as a corporation if all members have limited liability, unless the
entity makes an election to be treated otherwise. If the foreign eligible entity has one
owner, it may elect to be treated as a disregarded entity pursuant to the rules in
§ 301.7701-3(c).
PLR-138432-09 2

   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.

   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
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 301.9100-1(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.

    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 301.9100-2 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. Under § 301.9100-3, a
request for relief will be granted when the taxpayer provides evidence to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) granting relief will not prejudice the interests of the government.

   Based solely on the information 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 Form 8832
with the appropriate service center to elect to be treated as a disregarded entity for
federal tax purposes effective Date 1. A copy of this letter should be attached to the
Form 8832. A copy is enclosed for that purpose.

   Except as specifically set forth above, no opinion is expressed concerning the

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

  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.
PLR-138432-09 3

   Pursuant to a power of attorney on file with this office, copies of this letter are

being sent to X’s authorized representative.

                                           Sincerely,



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

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