PLR 1102040: IRS grants extra time for a foreign entity to elect disregarded-entity status

Plain-English summary

The foreign entity was eligible to elect its federal tax classification, but it did not timely file Form 8832 to be treated as a disregarded entity. The IRS determined that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied. It granted the entity an additional 120 days from the letter date to file Form 8832 with the appropriate service center, effective as of the specified date. The ruling did not determine whether the entity was otherwise eligible to make the election or address other federal tax consequences.

Ruling snapshot

• Question: May the foreign entity receive an extension of time to file Form 8832 and elect disregarded-entity status?
• 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: 201102040 Third Party Communication: None
Release Date: 1/14/2011 Date of Communication: Not Applicable
Person To Contact:
Index Numbers: 7701.00-00, 9100.31-00 --------------------, ID No. -------------
Telephone Number:
---------------------
-------------------- Refer Reply To:
------------------------------- CC:PSI:3
----------------------------------------- PLR-117422-10
----------------------- Date:
------------------------------------------------------ October 4, 2010

                                                 LEGEND

Company = ---------------------

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

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

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

   This letter responds to a letter dated April 21, 2010, submitted on behalf of

Company 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

      Company was formed under the laws of Country on Date. Company represents

that it is a foreign entity eligible to elect to be treated as a disregarded entity for federal
tax purposes. Company intended to be treated as a disregarded entity effective Date.
However, due to inadvertence, Company failed to file Form 8832, Entity Classification
Election, electing to treat Company as a disregarded entity effective Date.

                                         LAW AND ANALYSIS

     Section 301.7701-3(a) provides, in part, 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

PLR-117422-10 2

eligible entity) can elect its classification for federal tax purposes as provided in
§ 301.7701-3. 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 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.

    Section 301.7701-3(b)(2)(i) provides that, except as provided in § 301.7701-

3(b)(3), unless the entity elects otherwise, a foreign eligible entity is: (A) a partnership if
it has two or more members and at least one member does not have limited liability;
(B) an association if all members have limited liability; or (C) disregarded as an entity
separate from its owner if it has a single owner that does not have limited liability.

   Section 301.7701-3(b)(2)(ii) provides, in part, 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)(i) provides, in part, that, except as provided in

§ 301.7701-3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as
provided under § 301.7701-3(b), or to change its classification, by filing Form 8832 with
the service center designated on Form 8832.

     Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under

§ 301.7701-3(c)(1)(i) 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 effective date
specified on Form 8832 can not be more than 75 days prior to the date on which the
election is filed and can not be more than 12 months after the date on which the election
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 (Code) except subtitles E, G, H, and I. Section 301.9100-1(b) provides
that the term “regulatory election” includes 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 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 requests for relief under § 301.9100-3 will be

granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer

PLR-117422-10 3

acted reasonably and in good faith, and the grant of 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 §§ 301.9100-1 and 301.9100-3 have been satisfied.
Consequently, Company 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 effective Date. A copy of this letter should be attached to the Form
8832.

   Except for the specific ruling above, we express or imply no opinion concerning

the federal tax consequences of the facts of this case under any other provision of the
Code. In addition, § 301.9100-1(a) provides that the granting of an extension of time for
making an election is not a determination that the taxpayer is otherwise eligible to make
the election.

  This ruling is directed only to the taxpayer requesting it. According to

§ 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.

    Under a power of attorney on file with this office, we are sending a copy of this

letter to Company’s authorized representatives.

                               Sincerely,


                               Associate Chief Counsel
                               (Passthroughs & Special Industries)


                                     /s/
                          By: _______________________________________
                              Mary Beth Carchia
                              Senior Technician Reviewer, Branch 3
                              Office of Associate Chief Counsel
                              (Passthroughs & Special Industries)

Enclosures (2)
A copy of this letter
A copy for § 6110 purposes

cc: