Foreign entity received 120 days for partnership election

Plain-English summary

After a married U.S. couple became the owners of a foreign eligible entity, the entity intended to elect partnership classification but inadvertently failed to file Form 8832 on time. The IRS found the regulatory-election relief requirements satisfied and granted 120 days to file Form 8832 electing partnership treatment effective from the requested ownership-change date.

Ruling snapshot

• Question: Could the foreign eligible entity make a late Form 8832 election for partnership classification?
• Outcome: Approved, with a 120-day extension and the requested retroactive effective date.
• Key authorities: 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: 201432003 Third Party Communication: None
Release Date: 8/8/2014 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
--------------------------- -------------------, ID No. ----------------
----------------------------------------------------------- Telephone Number:
------------------- --------------------
------------- Refer Reply To:
--------- CC:PSI:02
PLR-139445-13
Date:
January 29, 2014

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

Country = -------
Date 1 = ----------------
Date 2 = ------
Date 3 = ----------------
A = --------------

B = ----------------

y = ------

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

  This responds to a letter dated September 3, 2013, and subsequent

correspondence, submitted on behalf of X, requesting that the Service grant X an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations
to make an entity classification election to be classified as a partnership for federal tax
purposes.

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

Date 1. Until Date 2, the owners of X were Country residents and citizens. In Date 2, A
and B, a married couple and US citizens residing in Country, acquired a y interest in X.
On Date 3, A and B became 100% owners of X. X represents that, as of Date 3, X was
a foreign entity eligible to elect to be treated as a partnership for federal tax purposes.
However, X inadvertently failed to timely file a Form 8832, Entity Classification Election,
electing to treat X as a partnership effective Date 3.

   Section 301.7701-3(a) provides that a business entity with at least two members

can elect to be classified either as 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(a) further provides that so long as a business entity is not

classified as a corporation under § 301-7701-2(b)(1) or (3)-(8) (an “eligible entity”) it
may elect its classification for federal tax purposes.

    Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

eligible entity for federal income tax purposes. Generally, a foreign eligible entity is
treated as an association taxable as a corporation if all members have limited liability,
unless the entity makes an election to be treated otherwise.

    Section 301.7701-3(c) provides that to elect to be classified other than as

provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated
service center and 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 twelve 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 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
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.

    Section 301.9100-3(a) provides that a request for relief under § 301.9100-3 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.

    Based solely on the information submitted and 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 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 partnership effective
Date 3. A copy of this letter should be attached to the Form 8832. A copy is enclosed
for that purpose.

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

the federal 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) of

the Code provides that it may not be used or cited as precedent.

   In accordance with a power of attorney on file with this office, copies of this letter

are being sent to X’s authorized representative.

                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs and Special Industries)



                                       By:       _______________
                                                 Melissa C. Liquerman
                                                 Chief, Branch 2
                                                 Office of Associate Chief Counsel
                                                 (Passthroughs & Special Industries)

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

cc: