PLR 201250016: IRS grants extra time to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign entity an additional 120 days to file Form 8832 and elect to be treated as disregarded as an entity separate from its owner for federal tax purposes. The entity was eligible to make the election, but the original filing was late. The IRS found that the entity acted reasonably and in good faith and that granting relief would not prejudice the government. The election was allowed to be effective on the specified earlier date.

Ruling snapshot

• Question: Could the entity receive an extension of time to file Form 8832 and elect disregarded-entity treatment?
• Outcome: Approved
• Key authorities: IRC §§ 7701 and 6110; 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: 201250016
Third Party Communication: None
Release Date: 12/14/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.31-00, 7701.00-00
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Telephone Number:
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----------------------------------------- Refer Reply To:
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PLR-125525-12
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Date:
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September 17, 2012

Legend:

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

D = ----------------------

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

This responds to the letter dated June 14, 2012, and related correspondence, submitted on behalf of X, requesting an extension of time under § 301.9100 of the Procedure and Administration Regulations to file an entity classification election to treat X as disregarded as an entity separate from its owner for federal tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country.
X represents X was a foreign entity eligible to elect to be classified as a disregarded entity for federal tax purposes, effective D. The election, however, was not timely filed.

X represents that the granting of relief will not prejudice the interests of the government. X also represents that its failure to file a Form 8832, Entity Classification Election, was reasonable and that it has acted in good faith.
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LAW AND ANALYSIS

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)(2)(i) provides that, except for certain existing entities described in § 301.7701-3(b)(3), unless a foreign eligible entity elects otherwise, the entity is: (A) a partnership if it has two or more 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 member 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) by filing Form 8832, Entity Classification Election, with the appropriate campus. 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.

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 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. § 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for regulatory 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. § 301.9100-3(a).

CONCLUSION
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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 and, therefore, it is granted an extension of time of 120 days from the date of this letter to file a Form 8832, Entity Classification Election, to elect to be treated as a disregarded entity for federal tax purposes, effective D. A copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as specifically ruled upon above, no opinion is expressed or implied concerning the federal tax consequences of facts described under any other provision of the Internal Revenue Code.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) 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 ruling will be sent to your authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

Joy C. Spies
By: Joy C. Spies
Senior Technician Reviewer, Branch 1
Office of Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)

Copy of this letter
Copy for § 6110 purposes

cc: