PLR 1314037: Extension granted for a late disregarded-entity election

Plain-English summary

A foreign eligible entity failed to timely file Form 8832 to elect disregarded-entity status for federal tax purposes. The IRS found that the entity acted reasonably and in good faith and that granting relief would not prejudice the government. It granted an extension until the earlier of 120 days after the ruling date or the expiration of the period of limitations for the redacted tax year. The entity and its owners also had to file any required consistent returns and forms within that period.

Ruling snapshot

• Question: May a foreign eligible entity receive an extension to make a late election to be treated as disregarded for federal tax purposes?
• Outcome: Approved, subject to the stated filing conditions.
• 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: 201314037 [Third Party Communication:
Release Date: 4/5/2013 Date of Communication: Month DD, YYYY]
Index Number: 9100.00-00, 9100.31-00
Person To Contact:
----------------------- ----------------------, ID No. -------------
------------------------------------------------ Telephone Number:
------------------------------------------------- -------------------
------------------------------------------------ Refer Reply To:
CC:PSI:B01
PLR-147723-12
Date:
December 20, 2012

Legend

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

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

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

     Date 2            =        ----------------------

     Year              =        -------

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

  This responds to the letter dated November 2, 2012, and related

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 disregarded entity for federal tax purposes.

                                                    Facts

   According to the information submitted, X was formed under the laws of Country

on Date 1. X represents that, as of Date 2, X was a foreign entity eligible to elect to be
disregarded as an entity separate from its owner. However, X failed to timely file a
Form 8832, Entity Classification Election, electing to treat X as a disregarded entity for
federal tax purposes effective Date 2.
PLR-147723-12 2

    X represents that granting relief will not prejudice the interests of the government

and that hindsight is not involved in seeking relief to file a late election. X also
represents that the deemed liquidation occurring as a result of its elective change in
entity classification will not result in any gain or loss. Furthermore, X represents that it
acted reasonably and in good faith.

                                  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. An eligible entity with at least two
members can elect to be classified as either an association 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(b)(2) provides guidance on the classification of a foreign

eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as
an association if all members have limited liability, unless the entity makes an election
to be treated otherwise. A foreign eligible entity with a single member having limited
liability may elect to be treated as a disregarded entity pursuant to the rules of
§ 301.7701-3(c).

     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.

  Section 301.7701-3(g)(1)(iii) provides that if an eligible entity classified as an

association elects to be disregarded as an entity separate from its owner, the following
is deemed to occur: The association distributes all of its assets and liabilities to its single
owner in liquidation of the association.

   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
PLR-147723-12 3

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.

   Under § 301.9100-3, a request for relief 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.

                                     Conclusion

    Based solely on the facts submitted and the 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 the earlier of 120 days from the date of this letter or the expiration
of the period of limitations for Year to make an election to be treated as a disregarded
entity for federal tax purposes effective Date 2. X should make the election by filing a
properly executed Form 8832 with the appropriate service center. A copy of this letter
should be attached to the form.

   This ruling is contingent on X and the owners of X filing, within the earlier of 120

days from the date of this letter or the expiration of the period of limitations for Year, any
required amended or original partnership and partner returns consistent with the
requested relief (including application of § 301.7701-3(g)(1)) being effective on Date 2.
To the extent appropriate, these returns or amended returns must include, but are not
limited to, Forms 8858, Information Return of U.S. Persons With Respect to
Disregarded Entities, such that these forms reflect the consequences of the relief
granted in this letter. Copies of this letter should be attached to any such returns or
amended returns.

   Except as specifically set forth above, 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(s) requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.
PLR-147723-12 4

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your taxpayer representative.

                                   Sincerely,


                                   Laura C. Fields
                                   Laura C. Fields
                                   Senior Technician Reviewer
                                   Office of the Associate Chief Counsel
                                   (Passthroughs & Special Industries)

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

cc: