PLR 1208020: IRS grants late disregarded-entity classification election

Plain-English summary

The IRS granted a foreign single-owner entity 120 days to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity had intended the classification to apply from its formation date but missed the filing deadline. The relief was granted under the regulatory election extension rules because the taxpayer showed reasonable cause and no prejudice to the government. The ruling did not address any other federal tax consequences.

Ruling snapshot

• Question: Can a foreign eligible entity receive extra time to make a disregarded-entity classification election?
• Outcome: Approved, 120-day extension to file Form 8832
• Key authorities: IRC §§ 7701 and 9100; 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: 201208020 Third Party Communication: None
Release Date: 2/24/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.01-00, 9100.31-00 ----------------------, ID No. -----------------
Telephone Number:
---------------------
------------------------------ Refer Reply To:
------------------------------- CC:PSI:B01
--------------------------------------- PLR-134852-11
----------------------------------- Date:
November 03, 2011

Legend

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

D= --------------------------

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

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

This responds to a letter dated August 16, 2011, and subsequent correspondence,
submitted on behalf of X, 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

According to the information submitted, X was formed on D under the laws of Country.
X intended to be treated as a disregarded entity for federal tax purposes effective D.
However, X inadvertently failed to timely file Form 8832, Entity Classification Election, to
be treated as a disregarded entity for federal tax purposes effective D.

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. An eligible entity with at least two
members can elect to be classified as either an association or a partnership, and an
PLR-134852-11 2

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) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with a single member having limited
liability may elect to be treated as a disregarded entity pursuant to the rules of §
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 the form 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 except subtitles E, G, H, and I. Section 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.

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 the 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. 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.

CONCLUSION

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 to elect to be treated as a disregarded entity for federal tax
purposes effective D. A copy of this letter should be attached to the Form 8832. A copy
is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.
PLR-134852-11 3

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the 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 is
being sent to your authorized representative.

                                   Sincerely,

                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)



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

Enclosures (2)

   Copy of this letter
   Copy for section 6110 purposes

cc: