PLR 201039023: IRS granted extra time to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign single-owner entity an additional 120 days to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity had intended that classification from its formation date but had not timely filed the election. The relief was granted because the entity satisfied the requirements for reasonable cause and lack of prejudice to the government. The ruling required the entity and its owner to file consistent federal tax and information returns, including Forms 8858.

Ruling snapshot

• Question: Could the entity receive an extension of time to file Form 8832 and elect disregarded-entity treatment effective from its formation date?
• Outcome: Approved
• Key authorities: IRC §§ 7701 and 9100; Treas. Reg. §§ 301.7701-2, 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: 201039023
Third Party Communication: None
Release Date: 10/1/2010
Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
Person To Contact:
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PLR-155831-09
Date:
June 25, 2010

X = ---------------------------------------------------------------------------------------------------
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Country = ------------------------------------

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

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

This responds to a letter dated December 18, 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.

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 any and all required Federal income tax and information returns consistent with the requested relief being effective Date 1. These returns must include, but are not limited to, all required Forms 8858, Information Return of U.S. Persons with Respect to Disregarded Entities. A copy of this letter should be attached to each such return.

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-155831-09
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 representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: ____
Bradford R. Poston
Acting Chief, Branch 2
(Passthroughs & Special Industries)

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