PLR 1345022: IRS grants extra time to elect partnership classification

Plain-English summary

A foreign private limited company asked for more time to file Form 8832 and elect to be treated as a partnership for federal tax purposes. The company was eligible to make the election but did not file the form by the requested effective date. The IRS granted a 120-day extension from the ruling date because the company satisfied the requirements for regulatory-election relief. The relief required the company’s owners to file all required returns, including amended returns, consistently with the requested partnership treatment within the same 120-day period.

Ruling snapshot

• Question: May the foreign eligible entity file Form 8832 late to elect partnership classification effective on an earlier date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201345022 Third Party Communication: None
Release Date: 11/8/2013 Date of Communication: Not Applicable
Index Numbers: 9100.31-00, 7701.00-00
Person To Contact:
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Refer Reply To:
CC:PSI:B3
PLR-113762-13
Date:
July 8, 2013

                                                   Legend

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

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

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

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

  This letter responds to a letter dated March 21, 2013, 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 to be treated as a
partnership for federal tax purposes.

                                                   Facts

    The information submitted provides that X formed on Date 1 as a private limited

company under the laws of Country. X represents that it is a foreign entity eligible to
elect to be classified as a partnership effective Date 2. However, X failed to timely file
Form 8832, Entity Classification Election, electing to be a partnership effective Date 2.

                                          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 as provided in

PLR-113762-13 2

§ 301.7701-3. 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, 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)(i) provides, in part, that except as provided in

§ 301.7701-3(b)(3), unless the entity elects otherwise, a foreign eligible 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 owner that does not have limited
liability.

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

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

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

3(c)(i) will be effective on the date specified by the entity on Form 8832 or on the date
filed if no such date is specified on the election form. The effective date specified on
Form 8832 can not be more than 75 days prior to the date on which the election is filed
and can not be more than 12 months after the date on which the election is filed. If an
election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was filed.

    Section 301.9100-1(c) provides that the Commissioner in exercising the

Commissioner’s discretion 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 not 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 301.9100-2 provides the standards the Commissioner will use to

determine whether to grant an automatic extension of time for making certain elections.

   Section 301.9100-3 provides the guidelines for granting extensions of time for

making elections that do not meet the requirements of § 301.9100-2. Section 301.9100-
3(a) provides that requests for relief subject to § 301.9100-3 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 the taxpayer acted reasonably
and in good faith, and the grant of relief will not prejudice the interests of the
Government.
Conclusion

PLR-113762-13 3

    Based solely on the facts submitted and the representations made, we conclude

that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, we
grant X an extension of time of one hundred twenty (120) days from the date of this
letter to file Form 8832 with the appropriate service center to elect to be classified as a
partnership effective Date 2. A copy of this letter should be attached to the Form 8832.

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

this letter all required returns (including amended returns) consistent with the requested
relief granted in this letter. The owners' filing obligations may include those required
under section 6038 and the regulations thereunder. A copy of this letter should be
attached to any such returns.

   Except as specifically set forth above, we express or imply no opinion concerning

the federal tax consequences of any aspect of any transaction or item either discussed
or referenced in this letter.

  We are directing the ruling only to the taxpayer who requested it. Section

6110(k)(3) of the Code provides that it may not be used or cited as precedent.

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

this letter to X’s authorized representatives.

   The ruling contained in this letter is based upon information and representations

submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.

                                       Sincerely,
                                       Associate Chief Counsel
                                      (Passthroughs & Special Industries)


                                  By: _______________________
                                      Richard T. Probst
                                      Senior Technician Reviewer, Branch 3
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)

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