PLR 1216012: IRS grants more time for a foreign entity to elect partnership status

Plain-English summary

A foreign entity intended to be treated as a partnership for federal tax purposes but did not timely file Form 8832. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied and granted 120 days from the date of the letter to file the election with the requested effective date. The relief was conditioned on the entity and its owners filing required original or amended returns consistently with the relief, including Forms 8865 where appropriate. The ruling did not otherwise address the tax consequences of the transaction.

Ruling snapshot

• Question: May the entity make a late election to be treated as a partnership for federal tax purposes?
• Outcome: Approved, subject to filing the election and consistent returns
• Key authorities: Treas. Reg. §§ 301.7701-2, 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: 201216012 Third Party Communication: None
Release Date: 4/20/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.00-00, ----------------------, ID No. -----------------
Telephone Number:
9100.31-00
---------------------
Refer Reply To:
--------------------------------- CC:PSI:B01
---------------------------------------- PLR-131124-11
------------------------- Date:
--------------------- January 12, 2012

Legend

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

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

Date = --------------------------

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

    This letter responds to a letter dated July 22, 2011, and subsequent

correspondence, submitted on behalf of X, requesting an extension of time under
§§ 301.9100-1 and 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.

                                                     FACTS

    According to the information submitted, X was formed under the laws of Country.

X intended to be treated as a partnership for federal tax purposes effective Date.
However, X failed to timely file Form 8832, Entity Classification Election, to be treated
as a partnership for federal tax purposes.

                                         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
PLR-131124-11 2

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.

     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 two or more members having
limited liability may elect to be treated as a partnership 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.

   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, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term
“regulatory election” as including 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 that the

Commissioner will use to determine whether to grant an extension of time to make an
election. Sections 301.9100-2 provides automatic extensions of time for making certain
elections. Sections 301.9100-3 provides extensions of time for making elections that do
not meet the requirements of § 301.9100-2. Requests for relief under § 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.

                                   CONCLUSION

   Based solely on the facts 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 make an election to be
treated as a partnership for federal tax purposes effective Date. X should make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form.

    This ruling is contingent on X and the owners of X filing, within 120 days from the

date of this letter, any required amended or original returns consistent with the
requested relief. To the extent appropriate, these returns or amended returns must
include Forms 8865, Return of U.S. Persons With Respect to Certain Foreign
Partnerships, reflecting the consequences of the relief granted in this letter. Copies of
this letter should be attached to any such returns or amended returns.
PLR-131124-11 3

   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 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: Joy C. Spies
                                   Joy C. Spies
                                   Acting Senior Technician Reviewer, Branch 1
                                   (Passthroughs & Special Industries)

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

cc: