Foreign entity received extra time for partnership election

Plain-English summary

A foreign eligible entity intended to elect partnership classification for federal tax purposes but inadvertently failed to file Form 8832 on time. The IRS found that the requirements for discretionary election relief under Treasury regulations sections 301.9100-1 and 301.9100-3 were satisfied. It granted 120 days from the letter date to file Form 8832 with the requested effective date. The relief was conditioned on the entity and its owners timely filing any required original or amended returns consistent with partnership treatment, including relevant Forms 8865 and 5471.

Ruling snapshot

• Question: Could the foreign entity receive extra time to elect partnership classification effective on the requested date?
• Outcome: Approved, subject to filing conditions
• Key authorities: Treas. Reg. §§ 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: 201526002 Third Party Communication: None
Release Date: 6/26/2015 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
--------------------------------------------------- -------------------, ID No. ----------------
------------------------------------------ Telephone Number:
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---------------------------- Refer Reply To:
-------------------------------- CC:PSI:03
PLR-134604-14
Date:
March 16, 2015

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

Country = ---------
Date 1 = ----------------------
Year = ------

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

  This letter responds to a letter dated September 15, 2014, 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 election to be classified as a partnership under § 301.7701-3 for federal tax
purposes.

                                                  FACTS

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

X represents that, as of Date 1, X was a foreign entity eligible to elect to be classified as
a partnership for federal tax purposes. However, X inadvertently failed to timely file a
Form 8832, Entity Classification Election, electing to be classified as a partnership
effective Date 1.

                                        LAW AND ANALYSIS

    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 as provided in
§ 301.7701-3. An eligible entity with at least two members can elect to be classified as
PLR-134604-14 2

either 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(b)(2)(i) provides that, except as provided in § 301.7701-

3(b)(3), unless the entity 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, in part, 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, except as provided in

§ 301.7701-3(c)(1)(iv) and (v), 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, in part, 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 cannot be more than 75 days prior to the date on which the
election is filed and cannot be more than 12 months after the date on which the election
is filed.

    Section 301.7701-3(g)(1)(ii) provides that if an eligible entity classified as an

association elects to be classified as a partnership, the following is deemed to occur:
The association distributes all of its assets and liabilities to its shareholders in liquidation
of the association, and immediately thereafter, the shareholders contribute all of the
distributed assets and liabilities to a newly formed partnership.

   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)
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.
PLR-134604-14 3

   Section 301.9100-3(a) provides that a request for relief under § 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 (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
the interests of the Government.

                                  CONCLUSION

    Based solely on the information submitted and representations made, we

conclude that the requirements of §§ 301.9100-1 and 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 classified as a
partnership effective Date 1. A copy of this letter should be attached to the Form 8832.

     This ruling is contingent on X and the owners of X filing, within the earlier of 120

days from the date of this letter or the expiration of X’s owners’ statute of limitations for
Year, any required returns (including amended returns) consistent with the requested
relief (including the application of § 301.7701-3(g)(1)(ii)) being effective on Date 1. To
the extent appropriate, these returns or amended returns must include, but are not
limited to, Forms 8865, Information Return of U.S. Persons With Respect to Certain
Foreign Partnerships, and Forms 5471, Information Return of U.S. Persons With
Respect to Certain Foreign Corporations, such that these forms reflect the
consequences of the relief granted in this letter. A copy of this letter should be attached
to any such returns or amended 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.

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter to X’s authorized representative.
PLR-134604-14 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 and Special Industries)



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

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

cc: