PLR 1028010: The IRS granted a foreign eligible entity more time to elect disregarded-entity treatment

Plain-English summary

The IRS granted a foreign eligible entity 60 more days to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity intended the election to be effective on an earlier date but missed the filing deadline. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government. The election had to be filed with the appropriate service center, with a copy of the ruling attached.

Ruling snapshot

• Question: Could the foreign eligible entity receive more time to elect disregarded-entity treatment?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 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: 201028010 Third Party Communication: None
Release Date: 7/16/2010 Date of Communication: Not Applicable
Person To Contact:
--------------, ID No. -------------
Telephone Number:
---------------------
--------------------------------- Refer Reply To:
------------------------------------------- CC:PSI:B02
----- PLR-140692-09
----------------------------------------------- Date:
-------------------- February 23, 2010

Legend

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

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

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

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

This responds to your letter dated July 31, 2009, and subsequent correspondence,
submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to elect to be treated as a disregarded entity.

The information submitted states that X was formed under the laws of Country. X
represents that, as a foreign eligible entity, X intended to elect to be treated as a
disregarded entity effective D1. However, X inadvertently failed to timely file a Form
8832, Entity Classification Election.

Section 301.7701-3(a) of the Income Tax Regulations provides that an eligible entity
with at least two members may elect to be classified as either an association (and thus
a corporation under § 301.7701-2(b)(2)) or as a partnership, and 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.
PLR-140692-09 2

Section 301.7701-3(a) further 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)(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; (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(b)(2)(ii) provides that for purposes of § 301.7701-3(b)(2)(i), a
member of a foreign eligible entity has limited liability if the member has no personal
liability for the debts of or claims against the entity by reason of being a member.

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 facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an
extension of time of sixty (60) days from the date of this letter to elect to be treated 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. A copy is enclosed for that purpose.
PLR-140692-09 3

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(s) 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 your authorized representatives.

                                    Sincerely,



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

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