PLR 1027021: IRS granted extra time for a foreign entity to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign eligible entity 120 extra days to file Form 8832 and elect to be classified as a disregarded entity for federal tax purposes. The entity had failed to file the election on time because of inadvertence, even though it intended the election to be effective on its formation date. The IRS found that the requirements for discretionary relief were satisfied. The entity and its owner also had to file all required federal income tax and information returns, including Forms 8858, consistent with the requested treatment. The ruling did not address other tax consequences.

Ruling snapshot

• Question: Could the foreign eligible entity make a late disregarded-entity election effective as of its formation date?
• Outcome: approved
• Key authorities: 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: 201027021 Third Party Communication: None
Release Date: 7/9/2010 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00 Person To Contact:
--------------------, ID No. -------------
------------------------------------------- Telephone Number:
------------- ---------------------
---------------------------------------------- Refer Reply To:
------------------------------------------- CC:PSI:B02
PLR-144210-09

                                                         Date:
                                                         March 11, 2010

Legend

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

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

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

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

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

This responds to a letter dated September 30, 2009, and subsequent correspondence
submitted on behalf of X by its authorized representative, requesting an extension of
time under § 301.9100-3 of the Procedure and Administration Regulations to file an
election to be classified as a disregarded entity for federal tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country on D1 as
a foreign entity eligible to elect to be treated as a disregarded entity for federal tax
PLR-144210-09 2

purposes. However, X inadvertently failed to timely file a Form 8832, Entity
Classification Election, electing to treat X as a disregarded entity effective D1.

LAW AND ANALYSIS

Section 301.7701-2(a) generally provides that 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(a) provides that so long as a business entity is not classified as a
corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8) (an eligible entity), it
may elect its classification for federal tax purposes.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible
entity for federal 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.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified
other than as provided under § 301.7701-3(b) by filing a Form 8832 with the appropriate
service center. Under § 301.7701-3(c)(1)(iii), this election 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 date specified on Form 8832 cannot be more than 75 days prior
to the date on which the election is filed and cannot be more than 12 months after the
date on which the election 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
six months except in the case of a taxpayer who is abroad), under all subtitles of the
Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term
regulatory election as including an election with a deadline prescribed by a regulation
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 an election. Section
301.9100-2 provides automatic extensions of time for making certain elections. Section
301.9100-3 provides extensions of time for making elections that do not meet the
requirements of § 301.9100-2.

Section 301.9100-3(a) provides that request 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-144210-09 3

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an
extension of 120 days from the date of this letter to elect to be classified as a
disregarded entity for federal tax purposes, effective D1. The election should be made
by filing Form 8832 with the appropriate service center. A copy of this letter should be
attached to the election.

This ruling is contingent on X and its owner filing within 120 days of this letter all
required Federal income tax and information returns consistent with the requested relief
being effective D1. These returns must include all required Forms 8858, Information
Return of U.S. Persons With Respect to Disregarded Entities.

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
Internal Revenue Code 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 will
be sent to X’s authorized representatives.

                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs and Special Industries)



                                       By:

                                                 Melissa C. Liquerman
                                                 Chief, Branch 2
                                                 Associate Chief Counsel
                                                 (Passthroughs and Special Industries)

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