PLR 1136001: Foreign entities granted time to elect disregarded-entity status

Plain-English summary

Three foreign entities intended to be treated as disregarded entities for federal tax purposes but failed to timely file Forms 8832. The IRS found that the entities were eligible to make the elections, acted reasonably and in good faith, and would not prejudice the government by receiving relief. It granted each entity 120 days from the ruling date to file the election with the requested effective date. The ruling expressed no opinion on other tax consequences of the transactions.

Ruling snapshot

• Question: Could the foreign entities receive extra time to file Forms 8832 and elect disregarded-entity classification with the requested effective dates?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201136001 Third Party Communication: None
Release Date: 9/9/2011 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.31-00 --------------, ID No. -----------------
Telephone Number:
---------------------
-------------------------- Refer Reply To:
--------------------------------------- CC:PSI:03
------------------------------------------ PLR-101732-11; PLR-101733-11;
-------------------- PLR-101734-11
--------------------------------- Date:
May 05, 2011

                                               LEGEND:

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

Y = ---------------------------------------

Z = ----------------------------------------------------------------

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

Country Y = ---------------------

Country Z = --------

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

Date 2 = ------------------

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

This letter responds to your letter dated December 21, 2010, and subsequent
correspondence, submitted on behalf of X, Y, and Z, requesting extensions of time
under § 301.9100-3 of the Procedure and Administration Regulations to elect to be
treated as a disregarded entities under § 301.7701-3.

                                                 FACTS

PLR-101732-11 2

The information submitted states that X was formed under the laws of Country X, Y was
formed under the laws of Country Y, and Z was formed under the laws of Country Z. X
and Y both intended to be treated as disregarded entities effective Date 1. Z intended
to be treated as a disregarded entity effective Date 2. X, Y, and Z each represent that it
is a foreign entity eligible to elect to be treated as a disregarded entity. However, all of
X, Y, and Z inadvertently failed to timely file Forms 8832, Entity Classification Election.

                               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 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 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 that 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 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.

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 (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.
PLR-101732-11 3

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 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.

Section 301.9100-3 provides that requests for relief subject to § 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 (1) the taxpayer
acted reasonably and in good faith, and (2) the grant of relief will not prejudice the
interests of the Government.

                                 CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, X, Y, and Z are granted
extensions of time of one hundred and twenty (120) days from the date of this letter to
elect to be treated as disregarded entities for federal tax purposes effective Date 1 for X
and Y, and Date 2 for Z. The elections should be made by filing Forms 8832 with the
appropriate service center. A copy of this letter should be attached to the elections.

Except as expressly provided herein, we express or imply no opinion 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 taxpayers requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter to your authorized representative.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party.
PLR-101732-11 4

While this office has not verified any of the material submitted in support of the request
for rulings, it is subject to verification on examination.

                                  Sincerely,


                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)



                           By:
                                  Richard T. Probst
                                  Senior Technician Reviewer, Branch 3
                                  Office of Associate Chief Counsel (Passthroughs
                                  & Special Industries)

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

cc: