PLR 201236024: 120-day extension granted to make an entity classification election

Plain-English summary

A foreign eligible entity asked for more time to file Form 8832 and elect partnership classification for federal tax purposes. The entity had intended the election to be effective on a specified date but did not file the form on time. The IRS concluded that the entity acted reasonably and in good faith and that granting relief would not prejudice the government. It granted a 120-day extension from the date of the letter to file the election, effective on the specified date.

Ruling snapshot

• Question: May the foreign eligible entity receive an extension of time to file Form 8832 and elect partnership classification?
• Outcome: Approved
• Key authorities: IRC §§ 7701 and 9100; 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: 201236024
Third Party Communication: None
Release Date: 9/7/2012
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:02
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PLR-152741-11
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Date:
May 21, 2012

Legend
X = ---------------------------------------------------------------------------------------------------
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Country = ---------------------
D1 = -------------------

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

This letter responds to a letter dated December 20, 2011, and subsequent correspondence, submitted on behalf of X, requesting an extension of time under § 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.

The information submitted states that X was formed under the laws of Country on D1. X is a foreign eligible entity classified as an association under § 301.7701- 3(b)(2)(i)(B). X represents that it intended to file an election, Form 8832, Entity Classification Election, to change its classification to partnership for federal tax purposes effective D1. However, Form 8832 was not timely filed for X.

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. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification.

Section 301.7701-3(b) provides default classification for an eligible entity that does not make an election. Section 301.7701-3(b)(2)(i) provides that, unless the entity elects otherwise, a foreign eligible entity is (A) a partnership if it has two 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(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b)(2) by filing Form 8832 with the appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified. The date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed and no more than 12 months after the date the election is filed.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election (but no more than 6 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) 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 the election. Section 301.9100-2 provides the rules governing automatic extension of time for making certain elections. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for the regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when a taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonable and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the facts submitted and representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly, X is granted an extension of time of one hundred twenty (120) days from the date of this letter to file Form 8832, effective D1, with the appropriate service center. A copy of this letter should be attached to the election.
PLR-152741-11
3

Except as expressly set forth herein, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the Code. 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. Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

Melissa C. Liquerman
Branch Chief, Branch 2
(Passthroughs & Special Industries)

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

cc: