Parent receives more time for foreign target stock election

Plain-English summary

A consolidated group's parent intended to make an IRC § 338(g) election for its purchase of a foreign target's stock but failed to file the election on time. The IRS found that the parent reasonably relied on a qualified tax professional and requested relief before the IRS discovered the failure. It granted 45 days to file Form 8023 and 120 days for all relevant parties to file or amend affected returns. Relief was conditioned on aggregate tax liability not being lower than it would have been with a timely election, and the IRS did not rule on whether the acquisition was a qualified stock purchase.

Ruling snapshot

• Question: Could the parent receive additional time to make the § 338(g) election for the foreign target acquisition?
• Outcome: Approved, with 45 days to file the election and 120 days to update affected returns
• Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201503007 Third Party Communication: None
Release Date: 1/16/2015 Date of Communication: Not Applicable
Index Number: 338.01-02, 9100.06-00
Person To Contact:
----------------------- -------------------------, ID No. ------------
---------------------------------- Telephone Number:
------------------------------------- --------------------
--------------------------------------------------- Refer Reply To:
CC:CORP:B06
PLR-120326-14
Date:
October 10, 2014

Legend

Parent = -------------------------

Purchaser = -------------------------------------

Target = -----------------------------------------------

Seller = --------------------------------------------

Date A = -----------------

Date B = ------------------

Company Officials = -----------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
--------------------------------------------------------------------

Tax Professional = -----------------------------------------------------------------------------------------
---------
PLR-120326-14 2

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

This letter responds to a letter dated May 15, 2014, submitted on behalf of Parent, as
common parent of the consolidated group of which Purchaser is a member, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations to file an election. Parent is requesting an extension to file a Ҥ 338
election” under § 338(g) with respect to Purchaser’s acquisition of the stock of Target
(sometimes hereinafter referred to as the “Election”), on Date A. Additional information
was received in a letter dated September 11, 2014. The material information is
summarized below.

Parent is the common parent of a consolidated group of which Purchaser is a member.
Target is a foreign corporation, and was a controlled foreign corporation during the
portion of its taxable year that ends on the acquisition date.

On Date A, Purchaser acquired all of the stock of Target from Seller in exchange for
cash. It is represented that Purchaser’s acquisition of the stock of Target qualified as a
"qualified stock purchase," as defined in § 338(d)(3).

Parent intended to file the Election. The Election was due on Date B, but for various
reasons a valid Election was not filed. After the due date for the Election, it was
discovered that the Election had not been filed. Subsequently, this request was
submitted, under § 301.9100-3, for an extension of time to file the Election. The period
of limitations on assessment under § 6501(a) has not expired for Parent’s consolidated
group’s or Target’s taxable years in which the acquisition occurred, the taxable years in
which the Election should have been filed, or any taxable years that would have been
affected by the Election had it been timely filed. Parent has represented that it is not
seeking to alter a return position for which an accuracy-related penalty has been or
could be imposed under § 6662 at the time Parent requested relief and for which the
new return position requires or permits a regulatory election for which relief is
requested.

Section 338(a) permits certain stock purchases to be treated as asset acquisitions if:
(1) the purchasing corporation makes or is treated as having made a "§ 338 election" or
a “§ 338(h)(10) election”; and (2) the acquisition is a "qualified stock purchase."

Under § 301.9100-1(c), the Commissioner has discretion to 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
Internal Revenue Code except subtitles E, G, H, and I.

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 a regulatory election.
Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for
PLR-120326-14 3

making certain elections. Requests for relief under § 301.9100-3 will be granted when
the taxpayer provides evidence to establish to the satisfaction of the Commissioner that
the taxpayer acted reasonably and in good faith, and that granting relief will not
prejudice the interests of the government. Section 301.9100-3(a).

In this case, the time for filing the Election is fixed by the regulations (i.e., § 1.338-2(d)).
Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an
extension of time for Parent to file the Election, provided Parent acted reasonably and in
good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and
granting relief will not prejudice the interests of the government.

Information, affidavits, and representations submitted by Parent, Company Officials, and
Tax Professional explain the circumstances that resulted in the failure to timely file a
valid Election. The information establishes that Parent reasonably relied on a qualified
tax professional who failed to make, or advise Parent to make, the Election, and that the
request for relief was filed before the failure to make the Election was discovered by the
Internal Revenue Service. See §§ 301.9100-3(b)(1)(i) and (v).

Based on the facts and information submitted, including the representations made, we
conclude that Parent has shown it acted reasonably and in good faith, the requirements
of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the
interests of the government. Accordingly, an extension of time is granted under
§ 301.9100-3, until 45 days from the date on this letter, for Parent to file the Election
with respect to the acquisition of the stock of Target, as described above.

WITHIN 45 DAYS OF THE DATE ON THIS LETTER, Parent must file the Election on
Form 8023, in accordance with § 1.338-2(d) and the instructions to the form. A copy of
this letter must be attached to Form 8023.

WITHIN 120 DAYS OF THE DATE ON THIS LETTER, all relevant parties must file or
amend, as applicable, all returns and amended returns (if any) necessary to report the
transaction as a § 338 transaction for the taxable year in which the transaction was
consummated (and for any other affected taxable year). A copy of this letter and a copy
of Form 8883 must be attached to any tax return to which it is relevant. Alternatively,
taxpayers filing their returns electronically may satisfy the requirement of attaching a
copy of this letter by attaching a statement to their return that provides the date and
control number of the letter ruling.

Parent must also deliver written notice of the election (and a copy of Forms 8023 and
8883, their attachments and instructions) to U.S. persons selling or holding stock in
Target. See §1.338-2(e)(4).

The above extension of time is conditioned on the taxpayers' (Parent’s consolidated
group’s and Target’s) tax liability (if any) being not lower, in the aggregate, for all years
PLR-120326-14 4

to which the Election applies, than it would have been if the Election had been timely
made (taking into account the time value of money). No opinion is expressed as to the
taxpayers’ tax liability for the years involved. A determination thereof will be made by
the applicable Director’s office upon audit of the Federal income tax returns involved.

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. In particular, we express no opinion as to: (1) whether the acquisition of the
Target stock qualifies as a "qualified stock purchase" under § 338(d)(3); or (2) any other
tax consequences arising from the Election.

In addition, we express no opinion as to the tax consequences of filing the Election late
under the provisions of any other section of the Code and regulations, or as to the tax
treatment of any conditions existing at the time of, or resulting from, filing the Election
late that are not specifically set forth in the above ruling. For purposes of granting relief
under § 301.9100-3, we relied on certain statements and representations made by the
taxpayers. However, the Director should verify all essential facts. In addition,
notwithstanding that an extension is granted under § 301.9100-3 to file the Election,
penalties and interest that would otherwise be applicable, if any, continue to apply.

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 the Power of Attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

                                   Sincerely,


                                   _Ken Cohen_______________
                                   Ken Cohen
                                   Senior Technician Reviewer, Branch 3
                                   Office of Associate Chief Counsel (Corporate)