PLR 1213015: IRS grants late relief for a foreign entity's partnership election

Plain-English summary

The IRS granted a foreign eligible entity 120 days to file Form 8832 electing partnership treatment for federal tax purposes. The entity intended to make that election effective on a specified date, but it filed Form 8832 late and mistakenly elected disregarded-entity treatment, a status for which it was not eligible. The IRS found that the entity satisfied the requirements for relief under the regulations governing regulatory elections. The entity was also instructed to file Forms 8865 for the taxable year beginning on the specified date and later taxable years.

Ruling snapshot

• Question: Could the foreign eligible entity receive an extension of time to file Form 8832 electing partnership treatment?
• Outcome: Approved, a 120-day extension was granted.
• 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: 201213015 Third Party Communication: None
Release Date: 3/30/2012 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
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---------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:02
PLR-136063-11
Date:
November 21, 2011

Legend
X = ---------------------------------------------------------------------------------------------------
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D1 = ------------------------
Country = ---------------------

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

  This letter responds to a letter dated August 29, 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 partnership for federal tax purposes.

   The information submitted states that X was formed under the laws of Country on

D1. X is a foreign eligible entity classified as an association under § 301.7701-
3(b)(2)(i)(B). X represents that it intended to file an election, Form 8832, Entity
Classification Election, to change its classification to partnership for federal tax
purposes effective D1. However, Form 8832 was not timely filed for X. Instead, X
mistakenly filed a Form 8832 to be treated as a disregarded entity, a status for which it
was not eligible.

    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. Elections are necessary only when an
eligible entity does not want to be classified under the default classification or when an
eligible entity chooses to change its classification.

   Section 301.7701-3(b) provides default classification for an eligible entity that

does not make an election. Section 301.7701-3(b)(2)(i) provides that, unless the entity
elects otherwise, a foreign eligible entity is (A) a partnership if it has two 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(c)(1)(i) provides that an eligible entity may elect to be

classified other than as provided under § 301.7701-3(b)(2) by filing Form 8832 with the
appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective
on the date specified by the entity on Form 8832 or on the date filed if no such date is
specified. The date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election is filed and no more than 12 months after the date 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 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 the
election. Section 301.9100-2 provides the rules governing automatic extension 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 the
regulatory elections that do not meet the requirements of § 301.9100-2. Under
§ 301.9100-3, a request for relief will be granted when a taxpayer provides evidence to
establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonable
and in good faith, and (2) granting relief will not prejudice the interests of the government.

    Based solely on the facts submitted and representations made, we conclude that

X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly, X is
granted an extension of time of one hundred twenty (120) days from the date of this
letter to file Form 8832, effective D1, with the appropriate service center. A copy of this
letter should be attached to the election. Taxpayer should file Forms 8865, Return of
U.S. Person with respect to Certain Foreign Partnerships, for the taxable year beginning
D1 and all subsequent taxable years. A copy of this letter should be attached to each
such return.
PLR-136063-11 2

   Except as expressly set forth herein, no opinion is expressed or implied

concerning the federal tax consequences of the facts described above under any other
provision of the Code. 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. Pursuant
to a power of attorney on file with this office, a copy of this letter is being sent to X’s
authorized representative.

                                  Sincerely,



                                  Bradford R. Poston
                                  Senior Counsel, Branch 2
                                  (Passthroughs & Special Industries)

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