PLR 201244011: IRS grants more time to elect disregarded-entity treatment

Plain-English summary

A domestic corporation formed a foreign entity and intended to elect disregarded-entity treatment for it, but did not timely file Form 8832. The IRS concluded that the requirements for late-election relief under Treas. Reg. § 301.9100-3 were satisfied. It granted the corporation 120 days from the ruling letter to make the election effective as of the requested date. The corporation also had to file required returns and amended returns, including Form 8858 when appropriate, to reflect the relief.

Ruling snapshot

• Question: Could the corporation receive more time to elect disregarded-entity treatment for its foreign subsidiary?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3; Form 8832

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201244011
Third Party Communication: None
Release Date: 11/2/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.00-00, 7701.00-00,
---------------------, ID No. -----------------
9100.31-00
Telephone Number:
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------------------------------------------------------ Refer Reply To:
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CC:PSI:B02
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PLR-120230-12
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Date:
June 28, 2012

Legend

X = ----------------------------.
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Y = ---------------------------------------------------------------------------------------
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Date = -----------------

Country = --------

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

This is in response to a letter dated May 2, 2012, and subsequent correspondence, submitted on behalf of X, by X’s authorized representative, requesting that the Service grant X an extension of time under § 301.9100-1(c) of the Procedure and Administration Regulations to elect to treat Y as a disregarded entity for federal tax purposes.

According to the information submitted, X is a domestic corporation. On Date, X formed Y under the laws of Country. X indirectly owns all of the interests in Y. X represents that it always intended to elect to treat Y as a disregarded entity effective Date; however, X failed to timely file Form 8832, Entity Classification Election to elect to treat Y as a disregarded entity for federal tax purposes effective Date.

Section 301.7701-3(a) provides in part 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 a single owner
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can elect to be classified as an association or disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Unless the entity elects otherwise, a foreign eligible entity is treated as an association if all members have limited liability. A foreign eligible entity with a single owner having limited liability may elect to be treated as a disregarded entity pursuant to the rules under § 031.7701-3(c).

Section 301.7701-3(c)(1)(iii) provides that an entity classification election must be filed on Form 8832 and can be effective up to 75 days prior to the election filing date or more than 12 months after the election filing date.

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 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 by which the Commissioner will determine whether to grant an extension of time to make an election. Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. Section 301.9100-3 describes the conditions under which the Commissioner will grant requests for relief 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 (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 facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an extension of 120 days from the date of this letter to elect to treat Y as a disregarded entity for federal tax purposes, effective Date. The election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to each election.

This ruling is contingent on X filing within 120 days of this letter all required returns and amended income tax returns consistent with the requested relief in this letter. To the extent appropriate these returns must include, but are not limited to Form 8858, Information Return of U.S. Persons With Respect to Disregarded Entities, such that the forms and returns 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
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referenced in this letter. 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, copies of this letter will be sent to X's authorized representatives.

Sincerely,

Bradford Poston
Senior Counsel, Branch 2
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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