PLR 1341007: IRS grants more time to elect disregarded entity status

Plain-English summary

The IRS granted a foreign eligible entity 120 more days to elect disregarded entity status for federal tax purposes. The entity had failed to timely file Form 8832 for the intended effective date. The IRS found that the requirements for an extension under the procedural regulations were satisfied. The relief requires the entity to file Form 8832 within 120 days and the owner to file all required federal income tax and information returns consistent with the relief, including Form 8858. The ruling did not determine whether the entity was otherwise eligible to make the election.

Ruling snapshot

• Question: May the foreign eligible entity make a late election to be treated as disregarded for federal tax purposes?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3; IRC § 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201341007 Third Party Communication: None
Release Date: 10/11/2013 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
------------------- ----------------------, ID No. ---------------
-------------------------------------- Telephone Number:
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----------------------------------------- Refer Reply To:
------------------------------------- CC:PSI:B03
PLR-103271-13
Date:
June 25, 2013

                                               LEGEND

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

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

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

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

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

  This letter responds to a letter dated December 3, 2012, and subsequent

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

    The information submitted states that X was formed on Date 1 under the laws of

Country and was a foreign entity eligible to elect to be a disregarded entity as of Date 2.
X, however, failed to timely file Form 8832, Entity Classification Election, to elect to be
classified as a disregarded entity for federal tax purposes effective Date 2.

                                        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 a single owner can
PLR-103271-13 2

elect to be classified as an association or to be disregarded as an entity separate from
its owner.

    Section 301.7701-3(b)(2)(i) provides that, except as provided 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 with the
service center designated on Form 8832. Under § 301.7701-3(c)(1)(iii), the 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 effective date specified on Form 8832 cannot be more than
75 days prior to 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 (Code) except subtitles E, G, H, and I. Section 301.9100-1(b)
provides that the term “regulatory election” includes 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 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. Under § 301.9100-3, a request for relief will be
granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
the interests of the Government.

                                   CONCLUSION

    Based solely on the information submitted and the representations made, we

conclude that the requirements of §§ 301.9100-1 and 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 for federal tax purposes effective Date 2. A copy of this letter should
be attached to the Form 8832.
PLR-103271-13 3

    This ruling is contingent on the owner of X filing within 120 days from the date of

this letter all required federal income tax and information returns (including amended
returns) consistent with the requested relief being effective Date 2. These returns must
include, but are not limited to, Form 8858, Information Return of U.S. Persons With
Respect To Foreign Disregarded Entities, such that the form reflects the consequences
of the relief granted in this letter.

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

the federal tax consequences of the facts discussed above under any other provision of
the Code. In addition, § 301.9100-1(a) provides that the granting of an extension of
time for making an election is not a determination that the taxpayer is otherwise eligible
to make the election.

  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.

    Under a power of attorney on file with this office, we are sending a copy of this

letter to your authorized representatives.

                                   Sincerely,

                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)



                        By:        ______________________________________
                                   Mary Beth Carchia
                                   Acting Branch Chief, Branch 3
                                   Office of the Associate Chief Counsel
                                   (Passthroughs & Special Industries)

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