PLR 1031022: IRS granted an extension to elect disregarded-entity treatment

Plain-English summary

The IRS granted an entity an extension of time to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity was organized under foreign law by a single owner with limited liability and intended disregarded-entity treatment effective on its formation date. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied and granted 120 days from the letter date to file. The relief was conditioned on the entity and its owner filing required federal income tax and information returns, including Form 8858.

Ruling snapshot

• Question: Could the entity receive additional time to elect disregarded-entity treatment?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201031022 Third Party Communication: None
Release Date: 8/6/2010 Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
Person To Contact:
----------------------- ----------------------, ID No. -------------
------------------------------------------------------- Telephone Number:
------------------------------------------ ---------------------
-------------------------------- Refer Reply To:
CC:PSI:B02
PLR-144586-09
Date:
March 10, 2010

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

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

Date 1 = -------------------

Dear ---------------

This responds to a letter dated September 30, 2009, 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 for X to file an election to be treated as a
disregarded entity.

The information submitted states X is an entity organized on Date 1, under the laws of
Country, by a single owner with limited liability. X intended to be treated as a
disregarded entity for federal tax purposes, effective Date 1. However, X did not timely
file a Form 8832, Entity Classification Election.

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 as provided in § 301.7701-3.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Under § 301.7701-3(b)(2)(i)(B), except as provided in
§ 301.7701-3(b)(3), unless it elects otherwise, a foreign eligible entity is classified as an
association if all members 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.
PLR-144586-09 2

Section 301.7701-3(c)(1)(iii) provides that an election under § 301.7701-3(c)(1)(i) will be
effective on the date specified on Form 8832 or on the date filed if no such date is
specified on the form. The effective date specified on Form 8832 cannot be more than
75 days prior to the date the form is filed and cannot be more than 12 months after the
date on which the form is filed.

Section 301.9100-1(c) provides that the Commissioner has discretion to 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 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 a regulatory election to include
an election whose due date is prescribed by a regulation published in the Federal
Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections.

Section 301.9100-3 sets forth 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 120 days from the date of this letter to file a Form 8832 with the
appropriate service center and 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.

This ruling is contingent upon 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 Date 1. These returns must include all required Forms 8858, Information
Return of U.S. Persons with Respect to Disregarded Entities.

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.
PLR-144586-09 3

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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent
to X's authorized representative.

                                    Sincerely,

                                    Associate Chief Counsel
                                    (Passthroughs & Special Industries)



                              By: ____________________________
                                  Melissa C. Liquerman
                                  Chief, Branch 2
                                  (Passthroughs & Special Industries)

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