Foreign entity may backdate late Form 8832 to formation

Plain-English summary

A foreign entity sought a tax classification different from its default but missed the deadline for Form 8832. The IRS concluded that it acted reasonably and in good faith and that granting relief would not prejudice the government. It allowed the entity 120 days to file Form 8832 effective on its formation date. The entity's owners must also file all required federal tax and information returns, including amended returns, consistently with the election during that period. The owners may have IRC § 6038 obligations, and the ruling must be attached to the election and related filings.

Ruling snapshot

• Question: Can the foreign entity file Form 8832 late with an effective date equal to its formation date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 6038

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201444029
Third Party Communication: None
Release Date: 10/31/2014
Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 9100.00-00,
9100.31-00
Person To Contact:
----------------------, ID No. ----------------
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Telephone Number:
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--------------------------------------------- Refer Reply To:
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CC:PSI:B3
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PLR-150293-13
Date:
May 15, 2014

LEGEND

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

Country = -----------

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

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

This letter responds to a letter dated December 11, 2013, submitted on behalf of X by X’s authorized representatives, 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 under § 301.7701-3(c).

FACTS

According to the information submitted, X was formed on Date 1 under the laws of Country. X desires to be treated as other than its default classification. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election.

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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. An eligible entity with at least two members can elect to be classified 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 either as association or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i) provides that, unless it 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(b)(2)(ii) provides that for purposes of § 301.7701-3(b)(2)(i), 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), 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)(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 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 has discretion to 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 automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

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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

Based solely on the facts 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 make an entity classification election by filing a Form 8832, effective Date 1, with the appropriate service center. A copy of this letter should be attached to the election. A copy of this letter is attached for this purpose.

This ruling is contingent on the owner(s) of X filing within 120 days from the date of this letter all required federal income tax and information returns (including amended returns) consistent with the requested relief being effective Date 1. The owner(s)’s filing obligations may include those under section 6038 and the regulations thereunder. 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) 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, we are sending a copy of this letter to your authorized representatives.

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

Enclosures (2):

A copy of this letter
A copy for § 6110 purposes

cc: