Foreign entity gets 120 days for late disregarded election

Plain-English summary

A foreign entity with one owner intended to elect disregarded-entity status but inadvertently failed to file Form 8832 on time. It represented that it was eligible to make the election, had acted reasonably and in good faith, and would not prejudice the government's interests. The IRS granted 120 days from the ruling date to file the election with the requested retroactive effective date. The relief was conditioned on the owners filing all consistent federal tax and information returns by the earlier of the 120-day deadline or the expiration of the limitations period for any affected year.

Ruling snapshot

• Question: Could a foreign single-owner eligible entity make a late Form 8832 election for disregarded-entity status?
• Outcome: Approved, with a 120-day filing period and related-return condition
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through -3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201448015 Third Party Communication: None
Release Date: 11/28/2014 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
------------------ ----------------, ID No. ------------
---------------- Telephone Number:
---------------------------- --------------------
------------------------------------- Refer Reply To:
CC:PSI:B01
PLR-112158-14
Date:
August 26, 2014

LEGEND

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

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

Date = ----------------

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

This is in response to a letter dated March 19, 2014, 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 be treated as a
disregarded entity for federal tax purposes.

                                                 FACTS

According to the information submitted, X was formed under the laws of Country on
Date. X represents that it is a foreign entity eligible to elect to be classified as a
disregarded entity for federal tax purposes effective Date. 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, to elect to be treated as a disregarded entity
for federal tax purposes.

X represents that granting relief to allow it to file a late election to be treated as a
disregarded entity will not prejudice the interests of the government. In addition, X
represents that it acted reasonably and in good faith.

                                          LAW AND ANALYSIS

PLR-112158-14 2

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. 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) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with a single owner having limited liability
may elect to be treated as a disregarded entity pursuant to the rules of § 301.7701-3(c).
Section 301.7701-3(c) provides 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
12 months after the date the form is filed.

Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time 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 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. Under § 301.9100-3, a request for relief 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.

                                    CONCLUSION

Based solely on the facts submitted and the 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 election to be
treated as a disregarded entity for federal tax purposes effective Date. X must make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form.

This ruling is contingent on the owners of X filing, by the earlier of 120 days from the
date of this letter or the expiration of the period of limitations for any year at issue in this
PLR-112158-14 3

ruling, all required federal income tax and information returns (including amended
returns) consistent with the requested relief being effective on Date.

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

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

                                               Sincerely,




                                               Associate Chief Counsel
                                               (Passthroughs & Special Industries)



                                                   Joy C. Spies
                                               By: Joy C. Spies
                                               Senior Technician Reviewer, Branch 1
                                               Office of Associate Chief Counsel
                                               (Passthroughs & Special Industries)

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

cc: