PLR 1032012: IRS granted late-election relief for partnership classification

Plain-English summary

A foreign eligible entity intended to elect partnership classification for federal tax purposes but inadvertently failed to timely file Form 8832. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government. It granted the entity 120 days from the ruling date to make the partnership election effective on the stated date. The owner also had to file required returns and information forms consistent with the relief.

Ruling snapshot

• Question: Can a foreign eligible entity receive more time to make a late partnership-classification election?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3; IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201032012 Third Party Communication: None
Release Date: 8/13/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.31-00 --------------, ID No. -------------
Telephone Number:
---------------------
----------------------------------------- Refer Reply To:
------------------------- CC:PSI:B02
------------------------------- PLR-130933-09
--------------------------------------- Date:
March 02, 2010

Legend

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

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

Date = ---------------------

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

This responds to your letter dated June 23, 2009 submitted on behalf of X, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations to file an election to be classified as a partnership for federal tax purposes.

The information submitted states that X was formed in Country on Date. X represents
that as a foreign eligible entity, X was eligible to elect to be treated as a partnership for
federal tax purposes effective Date. 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 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(a) further provides that an eligible entity with at least two members
can 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-130933-09 2

Section 301.7701-3(b)(2)(i)(B) provides that unless the entity elects otherwise, a foreign
eligible entity is a partnership if it has two or more members and at least one member
does not have limited liability except as provided in § 301.7701-3(b)(3).

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.

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 one hundred twenty (120) days from the date of this letter to elect to be
classified as a partnership for federal tax purposes, effective Date. 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 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. To the extent appropriate these returns must include, but are not limited
to, the following forms: (i) Forms 5471, Information Return of U.S. Persons With
Respect to Certain Foreign Corporations (ii) Forms 8865, Return of U.S. Persons With
Respect to Certain Foreign Partnerships, and (iii) Forms 8858, Information Return of
PLR-130933-09 3

U.S. Persons With Respect to Disregarded Entities, such that these forms reflect the
consequences of the relief granted in this letter.

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 representative.

                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                By:      ________________________________
                                         Melissa Liquerman, Chief
                                         Branch 2
                                         Office of Associate Chief Counsel
                                         (Passthroughs & Special Industries)

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