PLR 1031024: IRS granted an extension to elect disregarded-entity treatment

Plain-English summary

The IRS granted a foreign entity an extension of time to file Form 8832 and elect to be treated as a disregarded entity for U.S. income tax purposes. The entity had inadvertently failed to timely file the election. 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 owner's filing of required and amended returns, including Form 8858 where appropriate.

Ruling snapshot

• Question: Could the foreign 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: 201031024 Third Party Communication: None
Release Date: 8/6/2010 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
----------------------------- -------------------, ID No. -------------
------------------------------------- Telephone Number:
-------------------- ---------------------
--------------------------------- Refer Reply To:
CC:PSI:B02
PLR-149017-09
Date: April 13, 2010

Legend

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

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

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

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

   This responds to a letter dated September 29, 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 information submitted states that X was formed on Date 1 under the laws of

Country. X represents that X is a foreign entity eligible to elect to be treated as a
disregarded entity for U.S. income tax purposes. However, X inadvertently failed to
timely file a Form 8832, Entity Classification Election, electing to treat X as a
disregarded entity effective Date 1.

    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-149017-09 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 120 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 U.S.
income 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 on the owner of X filing within 120 days of this letter all

required returns and amended income tax returns consistent with the requested relief
being effective Date 1. To the extent appropriate these returns must include, but are
not limited to Forms 8858, Information Return of U.S. Persons With Respect to
Disregarded Entities, such that these forms reflect the consequences of the relief
granted in this letter.

   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-149017-09 3

   Pursuant to a power of attorney on file with this office, a copy of this letter is

being sent to X’s authorized representatives.

                                           Sincerely,

                                           Associate Chief Counsel
                                           (Passthroughs & Special Industries)



                                       By:__________________________
                                          Melissa C. Liquerman, Branch Chief
                                          Branch 2
                                          Office of Chief Counsel

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