PLR 1345011: IRS grants extra time to elect partnership classification

Plain-English summary

A foreign business entity defaulted to corporate tax classification because its members had limited liability, but it intended to be treated as a partnership for federal tax purposes. The entity failed to timely file Form 8832 to make that election. The IRS granted a 120-day extension to file the form and elect partnership classification effective on the entity's formation date. The ruling was based on the conclusion that the entity acted reasonably and in good faith and that relief would not prejudice the government.

Ruling snapshot

• Question: May the entity receive additional time to file Form 8832 and elect partnership classification effective on its formation date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201345011
Release Date: 11/8/2013
Index Number: 7701.00-00, 9100.00-00,
9100.31-00
Person To Contact:
------------------------------------------------------------ ---------------------------, ID No. --------------
-------------------------- Telephone Number:
--------------------------- ----------------------
---------------------------------------------------- Refer Reply To:
----------- CC:PSI:B03 – PLR-107985-13
------------------------------------------ Date:
July 8, 2013

LEGEND

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

Y = -----------------------------------------------

Z = ---------------------------------------------------------------------

Country = --------

d1 = -------------------

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

  This letter responds to a letter dated February 11, 2013, and subsequent

correspondence, submitted on behalf of X, requesting a ruling under §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations that X be granted an
extension of time to file an election to be classified as a partnership under § 301.7701-3.

FACTS

    The information submitted states that X was formed on d1 as a limitada under

the laws of Country. X’s default classification is an association taxable as a corporation
because all members have limited liability. As of d1, X had more than one member,
including Y. Z is the general partner of Y. X intended to elect to be treated as a
PLR-107985-13 2

partnership for federal tax purposes effective d1. However, a Form 8832, Entity
Classification Election, electing to be treated as a partnership effective d1 was not
timely filed.

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 as provided in § 301.7701-3. Under
§ 301.7701-3(a), 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.

   Section 301.7701-3(b)(2)(i)(B) provides that, unless an entity elects otherwise, a

foreign eligible entity is an association if all members have limited liability.

    Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be

classified other than as provided in § 301.7701-3(b), or to change its classification, by
filing a Form 8832 with the service center designated on the Form 8832.

     Section 301.7701-3(c)(1)(iii) provides that an election made under

§ 301.7701-3(c)(1)(i) will be effective on the date specified by the entity on Form 8832
or on the date filed, if no date is specified on the election form. The effective date
specified on Form 8832 cannot be more than 75 days prior to the date on which the
election is filed and cannot be more than 12 months after the date on which the election
is filed.

   Section 301.9100-1(c) provides that the Commissioner may grant a reasonable

extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3, 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 a regulatory election to include an election
whose due date is prescribed by a regulation published in the Federal Register.

  Section 301.9100-2 provides the rules governing automatic extensions of time for

making certain elections.

   Section 301.9100-3 provides extensions 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 (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.
PLR-107985-13 3

CONCLUSION

   Based on the facts 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 Form 8832
with the appropriate Service Center and elect to be classified as a partnership for
federal tax purposes effective d1. A copy of this letter should be attached to the Form
8832.

   Except as specifically set forth above, no opinion is expressed or implied

concerning the federal tax consequences of the transaction described above under any
other provision of the Code. Specifically, no opinion is expressed or implied as to
whether X is otherwise eligible to make the election.

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

copy of this letter to X’s authorized representative.

                                  Sincerely,


                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)



                             By: ___________________________________
                                 James A. Quinn, Senior Counsel, Branch 3
                                 Office of Associate Chief Counsel
                                 (Passthroughs & Special Industries)

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