PLR 1038009: IRS granted late-election relief for disregarded-entity status

Plain-English summary

A foreign eligible entity intended to be treated as a disregarded entity for federal tax purposes but failed to timely file Form 8832. The IRS granted a 120-day extension to make the election effective as of the requested date. The entity also had to file amended returns and Form 8858 if those filings had not already been made. The relief was based on the conclusion that the requirements for an extension of time under the applicable regulations had been satisfied.

Ruling snapshot

• Question: Could the entity receive additional time to elect disregarded-entity status for federal tax purposes?
• 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: 201038009 Third Party Communication: None
Release Date: 9/24/2010 Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
Person To Contact:
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------------------------------------------------ Telephone Number:
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------------------------------------------- Refer Reply To:
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PLR-106882-10
Date:
June 21, 2010

LEGEND

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

D = ----------------------

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

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

This responds to a letter dated February 1, 2010, and subsequent correspondence,
submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an election under § 301.7701-3(c) to
be treated as a disregarded entity for federal tax purposes.

FACTS

According to the information submitted, X was formed under the laws of Country. X
intended to be treated as a disregarded entity for federal tax purposes effective D.
However, X inadvertently failed to timely file Form 8832, Entity Classification Election, to
be treated as a disregarded entity for federal tax purposes.

LAW AND ANALYSIS

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. 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-106882-10 2

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 if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with a single owner having limited liability
may elect to be treated as a disregarded entity pursuant to the rules of § 301.7701-3(c).
Section 301.7701-3(c) provides that an entity classification election must be filed on
Form 8832 and can be effective up to 75 days prior to the date the form is filed or up to
12 months after the date the form is filed.

Under § 301.9100-1(c), 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 Internal Revenue
Code, except subtitles E, G, H, and I. Section 301-9100-1(b) defines the term
"regulatory election" as including an election whose due date is prescribed by a
regulation published in the Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner
will use to determine whether to grant an extension of time to make an election. Section
301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides rules for requesting extensions of time for regulatory
elections that do not meet the requirements of § 301.9100-2.

Requests 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.

CONCLUSION

Based solely on the facts 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 make an election to be
treated as a disregarded entity for federal tax purposes effective D. X should make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form. As a condition of this ruling, X must
file amended returns, including a properly executed Form 8858, Information Return of
U.S. Persons with Respect to Foreign Disregarded Entities, with respect to X, if not
already filed, consistent with X having made a timely election to be treated as a
disregarded entity effective D. A copy of this letter should be attached to the form.

PLR-106882-10 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 requesting it. Section 6110(k)(3) 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 is
being sent to X’s authorized representatives.

                                      Sincerely,

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



                                By:      Faith P. Colson
                                         Faith P. Colson
                                         Senior Counsel, Branch 1
                                         Office of Associate Chief Counsel
                                         (Passthroughs & Special Industries)

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

PLR-106882-10 4

                                List of entities receiving ruling

X (name) and EIN D (effective date of election) PLR number

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