IRS grants extra time to elect partnership classification

Plain-English summary

The IRS granted a foreign eligible entity 120 days to file Form 8832 and elect to be treated as a partnership for federal tax purposes. The entity had intended to make that classification effective on a specified date but did not timely file the form. The relief is conditioned on the entity and its owners filing any required amended or original returns within 120 days, including Form 8865 where appropriate. The IRS did not express an opinion on other tax consequences.

Ruling snapshot

• Question: Whether the entity could obtain extra time to file Form 8832 and elect partnership classification under Treas. Reg. § 301.7701-3(c).
• Outcome: Approved.
• 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: 201234015
Third Party Communication: None
Release Date: 8/24/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.00-00,
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9100.31-00
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Telephone Number:
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Refer Reply To:
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Date:
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April 18, 2012
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Legend

X = -----------------------------------------------------------
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Country = ------------------------------------

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

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

This letter responds to a letter dated October 12, 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
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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. 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
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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.

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
Senior Technician Reviewer, Branch 1
(Passthroughs & Special Industries)

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