PLR 1136002: Foreign entities granted time to elect partnership classification

Plain-English summary

Five foreign entities intended to be treated as partnerships 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 its election with the requested effective date. The relief was conditioned on filing required and amended returns consistently with the partnership classification.

Ruling snapshot

• Question: Could the foreign entities receive extra time to file Forms 8832 and elect partnership 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: 201136002 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-101735-11; PLR-101736-11;
-------------------- PLR-101737-11; PLR-101738-11;
--------------------------------- PLR-101739-11
Date:
May 05, 2011

                                               LEGEND:

V = -----------------------------------------------------------

W = -------------------------------------------------

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

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

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

Country V = --------------

Country W ---------------

Country X = --------

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

Country Z = -----------

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

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

Date 3 = ---------------------------
PLR-101735-11 2

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

This responds to a letter dated December 21, 2010, and subsequent correspondence,
submitted on behalf of V, W, X, Y, and Z requesting extensions of time under
§ 301.9100-3 of the Procedure and Administration Regulations to file elections under
§301.7701-3(c) to be treated as a partnerships for federal tax purposes.

                                       FACTS

The information submitted states that V was formed under the laws of Country V, W
was formed under the laws of Country W, 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, Y, and Z intended to be treated as partnerships effective Date 1. V
intended to be treated as a partnership effective Date 2. W intended to be treated as a
partnership effective Date 3. V, W, X, Y, and Z each represent that it is a foreign entity
eligible to elect to be treated as a partnership. However, all of V, W, X, Y, and Z
inadvertently failed to timely file Forms 8832, Entity Classification Election.

                               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 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.
PLR-101735-11 3

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
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the Government.

                                  CONCLUSION

Based solely on the information submitted and the representations made, we conclude
that V, W, X, Y, and Z have all satisfied the requirements of §§ 301.9100-1 and
301.9100-3. Consequently, V, W, X, Y, and Z are granted extensions of time of one
hundred twenty (120) days from the date of this letter to file Forms 8832 with the
appropriate service center to elect to be treated as partnerships effective Date 1 for X,
Y, and Z, Date 2 for V, and Date 3 for W.

This ruling is contingent on the owners of V, W, X, Y, and Z filing within one hundred
twenty (120) days of this letter all required returns and amended income tax returns
consistent with the requested relief. These returns may 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 U.S. Persons
With Respect to Disregarded Entities, such that these forms reflect the consequences of
the relief granted in this letter. A copy of this letter should be attached to any such
returns.
PLR-101735-11 4

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
Internal Revenue 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 taxpayers 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
V, W, X, Y, and Z’s authorized representatives.

The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for ruling, 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: