PLR 1216024: IRS grants more time for a partnership classification election

Plain-English summary

A foreign business entity intended to elect partnership classification for federal tax purposes but failed to timely file Form 8832. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied. It granted the entity 120 days from the ruling date to file the election effective on the requested date, subject to filing the form, attaching the ruling, and submitting required returns and amended returns consistent with the relief.

Ruling snapshot

• Question: Could the entity receive an extension of time to make its partnership classification election?
• Outcome: Approved, subject to filing conditions
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 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: 201216024 Third Party Communication: None
Release Date: 4/20/2012 Date of Communication: Not Applicable
Person To Contact:
Index Numbers: 7701.00-00, 9100.00-00, ----------------------, ID No. -----------------
Telephone Number:
9100.31-00
---------------------
Refer Reply To:
-------------------------- CC:PSI:B03
------------------------ PLR-139984-11
----------------------------------------- Date:
------------------------------------------- December 08, 2011

                                                LEGEND

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

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

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

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

    This letter responds to your letter dated September 20, 2011, submitted on

behalf of X by X’s authorized representative, requesting a ruling under §§ 301.9100-1
and 301.9100-3 of the Procedure and Administration Regulations, that X be granted an
extension of time to file an election to be treated as a partnership for federal tax
purposes under § 301.7701-3(c).

                                                 FACTS

    According to the information submitted, X was organized under the laws of

Country on Date 1. X represents that it intended to make an election to be treated as a
partnership for federal tax purposes effective Date 1. However, X inadvertently failed to
timely file a Form 8832, Entity Classification Election.
PLR-139984-11 2

                               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. An eligible
entity with at least two members can elect to be classified as an association (and thus a
corporation under § 301.7701-2(b)(2)) or a partnership.

     Section 301.7701-3(b)(2)(i) provides that, unless it 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 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 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. If an
election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was filed.

    Section 301.9100-1(c) provides that the Commissioner has discretion to 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 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 subject to § 301.9100-3

will be granted when the taxpayer provides the evidence (including affidavits described
PLR-139984-11 3

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 facts submitted and 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 elect to be treated as a
partnership for federal tax purposes effective Date 1. This election should be made by
filing a properly executed Form 8832 with the appropriate service center. A copy of this
letter should be attached to the Form 8832. A copy of this letter is attached for this
purpose.

     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.
These returns may include, but are not limited to, the following forms: (i) Forms 5471,
Information Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii)
Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, and
(iii) Forms 8858, Information Return of U.S. Persons With Respect to Disregarded
Entities, such that these forms reflect the consequences of the relief granted in this
letter. A copy of this letter should be attached to any such returns.

   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)

provides that it may not be used or cited as precedent.

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

copy of this letter to your authorized representative.
PLR-139984-11 4

   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:       ______________________________________
                                 Richard T. Probst
                                 Senior Technician Reviewer, Branch 3
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

Enclosures (2):

  A copy of this letter
  A copy for § 6110 purposes

cc: