PLR 1244001: IRS grants more time for a disregarded-entity election

Plain-English summary

A foreign eligible entity failed to timely file Form 8832 to elect classification as a disregarded entity for federal tax purposes, effective from its formation date. The IRS granted the entity 120 days from the ruling date to file the form and make the election retroactively. The ruling was based on the conclusion that the entity satisfied the reasonable-cause and government-interest requirements under Treas. Reg. § 301.9100-3.

Ruling snapshot

• Question: May the foreign eligible entity receive an extension to make a disregarded-entity classification election effective from its formation date?
• Outcome: Approved
• Key authorities: 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: 201244001 Third Party Communication: None
Release Date: 11/2/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.31-00 -------------------, ID No. -----------------
Telephone Number:
-------------------------------------------------- --------------------
--------------------------------------------------------------- Refer Reply To:
----- CC:PSI:02
-------------------------------- PLR-103083-12
------------------ Date:

--------------------------------------- June 06, 2012

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

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

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

    This responds to a letter dated January 17, 2012, and subsequent

correspondence, submitted on behalf of X, requesting that the Service grant X an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations
to make an entity classification election to be classified as a disregarded entity for
federal tax purposes.

    The information submitted states that X was formed under the laws of Country on

Date 1. X represents that, as of Date 1, X was a foreign entity eligible to elect to be
treated as a disregarded entity for federal tax purposes. However, X inadvertently failed
to timely file a Form 8832, Entity Classification Election, electing to treat X as a
disregarded entity effective Date 1.

    Section 301.7701-3(a) provides that a business entity with at least two members

can elect to be classified either as an association (and 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(a) further provides that so long as a business entity is not

classified as a corporation under § 301-7701-2(b)(1) or (3)-(8) (an “eligible entity”) it
may elect its classification for federal tax purposes.

PLR-103083-12 2

    Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

eligible entity for federal income tax purposes. Generally, a foreign eligible entity is
treated as an association taxable as a corporation if all members have limited liability,
unless the entity makes an election to be treated otherwise.

    Section 301.7701-3(c) provides that to elect to be classified other than as

provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated
service center and 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 twelve months
after the date on which 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) defines
the term "regulatory election" as an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

   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 extensions 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 regulatory
elections that do not meet the requirements of § 301.9100-2.

    Section 301.9100-3(a) provides that a request for relief under § 301.9100-3 will

be granted when the taxpayer provides evidence to establish to the satisfaction of the
Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting
relief will not prejudice the interests of the government.

    Based solely on the information 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 file a Form 8832
with the appropriate service center and elect to be treated as a disregarded entity
effective Date 1. A copy of this letter should be attached to the Form 8832. A copy is
enclosed for that purpose.

   Except as expressly provided herein, we express or imply no opinion concerning

the federal 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.

PLR-103083-12 3

   In accordance with a power of attorney on file with this office, copies of this letter

are being sent to X’s authorized representatives.

                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs and Special Industries)



                                       By:       _______________
                                                 Melissa C. Liquerman
                                                 Chief, Branch 2
                                                 Office of Associate Chief Counsel
                                                 (Passthroughs & Special Industries)

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

cc: