PLR 201249008: IRS grants more time for a partnership classification election

Plain-English summary

The IRS granted a foreign eligible entity an extension of time to elect partnership classification for federal tax purposes. The entity had failed to timely file Form 8832, even though it was eligible to be treated as a partnership. The IRS found that the requirements for relief were satisfied and gave the taxpayer 120 days from the ruling date to make the election. The taxpayer also had to file required and amended returns consistent with the relief within that period.

Ruling snapshot

• Question: Could the foreign eligible entity receive more time to elect partnership classification?
• 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: 201249008
Third Party Communication: None
Release Date: 12/7/2012
Date of Communication: Not Applicable
Index Number: 9100.00-00, 7701.00-00,
9100.31-00
Person To Contact:
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Refer Reply To:
----------------------------------------- CC:PSI:B02 PLR-129690-12
Date:
September 04, 2012

Legend

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

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

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

This is in response to a letter dated July 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 partnership for federal tax purposes.

According to the information submitted, X formed Y under the laws of Country on Date. Y is a foreign entity eligible to be treated as a partnership for U.S. income tax purposes. However, Y failed to timely file Form 8832, Entity Classification Election electing to treat Y as a partnership 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 at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701–2(b)(2)) or a partnership.
PLR-129690-12
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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 more than one owner having may elect to be treated as a partnership pursuant to the rules under § 301.7701-3(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 partnership 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. 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) of the Internal Revenue Code provides that it may not be used or cited as precedent.
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In accordance with the power of attorney on file with this office, a copy of this letter will be sent to X's authorized representative.

Sincerely,

Charlotte Chyr
Senior Technician Reviewer, Branch 2
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)