PLR 201342002: IRS grants more time to elect disregarded-entity status

Plain-English summary

A foreign entity eligible to choose its federal tax classification intended to be treated as a disregarded entity. It failed to timely file Form 8832 because of inadvertence. The IRS found that the entity acted reasonably and in good faith and that relief would not prejudice the government. It granted 120 days from the ruling date to file Form 8832 and make the election effective on the requested date. The relief was conditioned on filing all required federal income tax and information returns consistent with the election.

Ruling snapshot

• Question: Could the foreign eligible entity file a late Form 8832 election to be treated as a disregarded entity?
• Outcome: Approved, a 120-day extension was granted subject to filing conditions.
• Key authorities: IRC § 6110(k)(3); Treas. Reg. §§ 301.7701-2, 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: 201342002
Third Party Communication: None
Release Date: 10/18/2013
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-103677-13
Date:
July 09, 2013

LEGEND:

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

Date = ------------------------

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

This is in response to a letter dated December 28, 2012, 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. X represents that it is a foreign entity eligible to elect to be classified as a disregarded entity for federal tax purposes effective Date. X intended to be classified as a disregarded entity effective Date. However, due to inadvertence, X failed to timely file Form 8832, Entity Classification Election, to elect to be treated as a disregarded entity for federal tax purposes.

X represents that granting relief to allow it to file a late election to be treated as a disregarded entity will not prejudice the interests of the government. In addition, X represents that it acted reasonably and in good faith.
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Law and Analysis

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 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 owner 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) provides that an entity classification election must be filed on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date the form 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 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 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 information submitted and the representations made, we conclude that X has satisfied the requirements of § 301.9100-1 and 301.9100-3. As a result, X is granted an extension of time of 120 days from the date of this letter to file a properly executed Form 8832 with the appropriate service center to elect to be treated
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as a disregarded entity effective Date. A copy of this letter should be attached to the Form 8832.

This ruling is contingent on X filing within 120 days of this letter all required federal income tax and information returns (including amended returns) consistent with the requested relief. These returns may include, but are not limited to, the following forms: (i) Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, and (ii) 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. 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) provides that it may not be used or cited as precedent.

In accordance with the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

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

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

cc: