PLR 201206008: Extension granted for a late disregarded-entity election

Plain-English summary

The IRS granted a foreign entity 120 additional days to file Form 8832 and elect to be treated as disregarded from its owner for federal tax purposes. The entity was eligible to make the election but inadvertently failed to file the form on time. The IRS concluded that the entity acted reasonably and in good faith and that granting relief would not prejudice the government. The election was to be effective on the redacted date, and the taxpayer was instructed to attach a copy of the letter to the election.

Ruling snapshot

• Question: May a foreign entity receive additional time to elect disregarded-entity treatment for federal tax purposes?
• Outcome: Approved.
• Key authorities: IRC § 7701; 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: 201206008
Third Party Communication: None
Release Date: 2/10/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.00-00, 7701.00-00
-----------------, ID No. -----------------
Telephone Number:
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------------------------------------------------------------ Refer Reply To:
--------------------------------------------------------- CC:PSI:BR01
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PLR-128894-11
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Date:
October 13, 2011

Legend:

X = --------------------------------------------------------------------------------
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Y = --------------------------------------------------------------------------------
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Z = -------------------------------------------------------------
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Date 1 = ------------------

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

State = --------------

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

This private letter ruling is in response to your request, dated June 27, 2011, on behalf of X, requesting an extension of time under section 301.9100-3 of the Procedure and Administration Regulations to file an election to be disregarded as an entity separate from its owner for federal tax purposes under section 301.7701-3(c).

Facts
PLR-128894-11
2

Based on the information submitted, X is a Country entity that is wholly-owned by Y, that is, in turn, wholly-owned by Z, a State entity. X represents that as of Date 1, X was eligible to make an election, under section 301.7701-3(c), to be disregarded as an entity separate from its owner for federal income purposes. However, the Form 8832, Entity Classification Election, was inadvertently not timely filed. X represents that granting relief to allow X to file a late election to be disregarded as an entity separate from its owner will not prejudice the interests of the government. In addition, X represents that it acted reasonably and in good faith.

Law and Analysis

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 taxable as a corporation if all members have limited liability, unless the entity makes an election to be treated otherwise. If a foreign eligible entity has one owner, it may elect to be treated as a disregarded entity pursuant to the rules in section 301.7701-3(c). If a foreign eligible entity has more than one owner, it may elect to be treated as a partnership pursuant to the rules in section 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 on which the form is filed.

Under section 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 Code, except subtitles, E, G, H, and I. Section 301.9100-1(b) defines the term “regulatory election” as including an election whose deadline is prescribed by a regulation published in the Internal Revenue Bulletin.

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 301.9100-1(a).

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

Requests for relief under section 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. Section 301.9100- 3(a).
Conclusion
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Based solely on the facts submitted and representations made, we conclude that the requirements of section 301.9100-3 have been satisfied. Accordingly, X is granted an extension of time of 120 days from the date of this letter to elect to be disregarded as an entity separate from its owner for federal tax purposes, effective Date 1. The election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the election.

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(s) requesting it. Section 6110(k)(3) of the Internal Revenue Code 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 will be sent to the taxpayer.

Sincerely,

Associate Chief Counsel
(Passthroughs and Special Industries)

David R. Haglund
By: David R. Haglund
Chief, Branch 1
(Passthroughs and Special Industries)

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

cc: