PLR 201213017: IRS grants time to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign entity 120 days to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity was wholly owned by one person and had intended to make the election on its formation date, but the form was not filed because of inadvertence. The IRS found that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied. The ruling only granted more time to make the election and did not determine that the entity was otherwise eligible.

Ruling snapshot

• Question: Could the foreign eligible entity receive more time to elect disregarded-entity status?
• Outcome: Approved, with 120 days to file Form 8832.
• Key authorities: 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: 201213017
Third Party Communication: None
Release Date: 3/30/2012
Date of Communication: Not Applicable
Index Numbers: 9100.00-00, 9100.31-00
Person To Contact:
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Telephone Number:
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--------------------------------------------------------- Refer Reply To:
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CC:PSI:B03
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PLR-137249-11
Date:
November 17, 2011

LEGEND

Taxpayer = -------------------------------------------------------------------------------------------------
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Country = ----------------------

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

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

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

This letter responds to a letter dated August 29, 2011, submitted on behalf of Taxpayer by its authorized representative, requesting that the Service grant Taxpayer an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 301.7701-3 to be treated as a disregarded entity for federal tax purposes.

FACTS

Taxpayer was formed under the laws of Country on Date 1. Since Date 1, Taxpayer has been wholly owned by X. Taxpayer represents that it is a foreign entity eligible to elect to be treated as a disregarded entity for federal tax purposes. Taxpayer intended to elect to be treated as a disregarded entity for federal tax purposes effective
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Date 1. However, due to inadvertence, Taxpayer failed to file Form 8832, Entity Classification Election, electing to be treated as a disregarded entity effective Date 1.

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 as provided in ' 301.7701-3. Under § 301.7701-3(a), 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)(B) provides that, unless an entity elects otherwise, a foreign eligible entity is an association if all members have limited liability.

Section 301.7701-3(b)(2)(ii) provides that 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 in § 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 under the rules set forth in §§ 301.9100-2 and 301.9100-3, 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 a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 provides extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will
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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 information submitted and the representations made, we conclude that Taxpayer has satisfied the requirements of §§ 301.9100-1 and 301.9100-

3. As a result, Taxpayer is granted an extension of time of 120 days from the date of
   this letter to file a properly executed Form 8832 with the appropriate service center electing to be treated as a disregarded entity effective Date 1. A copy of this letter should be attached to the Form 8832.

   Except as specifically set forth above, no opinion is expressed or implied
   concerning the federal tax consequences of the facts described above under any other provision of the 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 taxpayer requesting it. Section 6110(k)(3) of
   the Internal Revenue 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 Taxpayer’s authorized representative.

   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 ruling request, it is subject to verification on examination.

                                   Sincerely,
   
                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)
   
                             By: ___________________________________
                                 Tara P. Volungis
                                 Chief, Branch 3
                                 Office of Associate Chief Counsel
                                 (Passthroughs & Special Industries)
   

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