Missed foreign disregarded-entity election gets relief

Plain-English summary

A single-owner foreign eligible entity intended to be disregarded for federal tax purposes but inadvertently failed to file Form 8832 on time. The IRS concluded that the entity satisfied the discretionary-relief requirements and granted 120 days to file the election retroactive to the intended effective date. Relief was conditioned on the owner filing all required original and amended tax and information returns consistently with disregarded-entity treatment, including Form 8858, within the same 120-day period. The ruling did not determine whether the entity was otherwise eligible for the classification election.

Ruling snapshot

• Question: Should the foreign entity receive an extension to elect disregarded-entity classification retroactive to the intended date?
• Outcome: Approved, subject to consistent-return conditions
• Key authorities: Treas. Reg. §§ 301.7701-3(c) and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201442033 Third Party Communication: None
Release Date: 10/17/2014 Date of Communication: Not Applicable
Index Numbers: 9100.00-00, 9100.31-00
Person To Contact:
----------------------------------------- ----------------------, ID No. ----------------
------------------------------------------------------------ Telephone Number:
--------- --------------------
------------------------------------ Refer Reply To:
------------------------------------- CC:PSI:B03
PLR-145900-13
Date:
May 05, 2014

                                                LEGEND

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

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

Country = -------

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

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

  This letter responds to a letter dated November 4, 2013, 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 treat X as a disregarded entity for federal tax purposes.

                                                 FACTS

    X was formed under the laws of Country and was owned by Y as of Date. X

represents that it is a foreign entity eligible to elect to be classified as a disregarded
entity for federal tax purposes. 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.

                                       LAW AND ANALYSIS

PLR-145900-13 2

    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
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 owner that does not have limited liability.

   Section 301.7701-3(b)(2)(ii) provides that a member of a foreign eligible entity

has limited liability if the member has no personal liability for the debts of or claims
against the entity by reason of being a member.

   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) 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)(1)(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.

   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.

  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.
PLR-145900-13 3

                                  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 electing to be treated
as a disregarded entity effective Date. A copy of this letter should be attached to the
Form 8832.

   This ruling is contingent on the owner of X filing within 120 days of this letter all

required federal income tax returns and information returns (including amended returns)
consistent with the requested relief being effective Date. 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. A copy of this letter should be attached to any such returns.

   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. 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.

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

this letter to your authorized representatives.
PLR-145900-13 4

   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:       ________________________________________
                                 Mary Beth Carchia
                                 Senior Technician Reviewer, Branch 3
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

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

cc: