PLR 1216021: IRS grants a foreign entity more time to elect partnership classification

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 the regulations were satisfied and granted the entity an additional 120 days from the date of the letter to file the form and elect partnership classification effective on the redacted date. The relief was conditioned on the entity's owners filing required returns and amended returns consistent with the requested effective date. The IRS did not otherwise opine on the tax consequences or establish that the entity was eligible to make the election.

Ruling snapshot

• Question: May the foreign eligible entity receive an extension of time to file Form 8832 and elect partnership classification?
• Outcome: Approved, subject to filing conditions
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-2, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201216021 Third Party Communication: None
Release Date: 4/20/2012 Date of Communication: Not Applicable
Person To Contact:
Index Numbers: 7701.00-00, 9100.31-00 ---------------------, ID No. -----------------
Telephone Number:
-------------------
---------------------------- Refer Reply To:
----------------------------------------------- CC:PSI:B03
-------------------------------------------------- PLR-138139-11
---------------- Date:
-------------- December 06, 2011

                                                 LEGEND

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

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

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

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

    This letter responds to a letter dated June 15, 2011, and subsequent

correspondence, submitted on behalf of X by its authorized representative, requesting
that X be granted an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to elect to be treated as a partnership under § 301.7701-3.

                                                 FACTS

     X was formed under the laws of Country on Date. X represents that it is a foreign

entity eligible to elect to be classified as a partnership for federal tax purposes. X
intended to be classified as a partnership effective Date. However, due to inadvertence,
Form 8832, Entity Classification Election, was not timely filed.

                                                   LAW

     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. An eligible
entity with at least two members can elect to be classified as either an association (and
PLR-138139-11 2

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) provides that, except as provided in § 301.7701-

3(b)(3), unless the entity elects otherwise, a foreign eligible entity is: (A) a partnership if
it has two or more 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(b)(2)(ii) provides that, for purposes of § 301.7701-3(b)(2)(i),

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, in part, that an eligible entity may elect to

be classified other than as provided under § 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, in part, 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.

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

   Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will 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 the taxpayer
acted reasonably and in good faith, and 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 the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied.
PLR-138139-11 3

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
partnership effective Date. A copy of this letter should be attached to the Form 8832.

    This ruling is contingent on the owners of X filing within 120 days of this letter all

required returns and amended income tax returns consistent with the requested relief
being effective Date. To the extent appropriate, these returns must include, but are not
limited to, Forms 8865, Return of U.S. Persons with Respect to Certain Foreign
Partnerships, such that these forms reflect the consequences of the relief granted in this
letter.

   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. In addition, § 301.9100-1(a) provides that the granting of an
extension of time for making an election is not determinative 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.

  In accordance with the power of attorney on file with this office, we are sending a

copy of this letter to your 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:____/s/___________________________
                                      Richard T. Probst
                                      Senior Technician Reviewer, Branch 3
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)

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

cc: