Private Letter Ruling 201534007 Released August 21, 2015 Approved

Parent received more time to file section 338 elections

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This page covers one taxpayer's ruling from 2015, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

A corporate parent requested extra time to file section 338(g) elections after a purchaser acquired a foreign target and the target's many foreign subsidiaries. The elections were not filed by their original deadline, and the omission was discovered before the IRS identified it. Based on the submitted information and representations, the IRS found that the parent and purchaser acted reasonably and in good faith and that relief would not prejudice the government. It granted 90 days to file Form 8023 and 120 days for the relevant parties to file or amend returns needed to report the acquisition as a section 338 transaction. The relief was conditioned on aggregate tax liability not being lower than it would have been with timely elections, and the IRS did not rule on whether the acquisition was a qualified stock purchase or on other tax consequences.

Ruling snapshot

Question: Could the parent receive an extension to file section 338(g) elections for the target and its subsidiaries?
Outcome: Approved
Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2(d), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201534007 Third Party Communication: None
Release Date: 8/21/2015 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:B05
------------------------------------- PLR-144468-14
Date:
May 18, 2015

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Purchaser = ----------------------------
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Company Official = ------------------------------------------------------
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Dear ------------:

   This letter responds to a letter dated November 25, 2014, submitted on behalf of

Parent, 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
“§ 338 election” under § 338(g) of the Internal Revenue Code (the “Code”) with respect
to Purchaser’s acquisition of the stock of Target and the deemed acquisitions of the
stock of Target Subs 1 - 56 (sometimes hereinafter referred to as the “Election”) on
Date A. The material information is summarized below.
PLR-144468-14 9

   Prior to Date A, Target was a foreign entity treated as a corporation for United

States federal income tax purposes, and wholly owned by Seller. On Date A, Target
owned at least 80 percent of the stock of Target Subs 2, 3, 4, 6, 7, 8, 9, 10, 11, 12, 13,
15, 16, 17, 18, 21, 25, 26, 27, 28, 29, 30, 32, 34, 36, 37, 38, 40, 41, 42, 44, 46, 47, 49,
50, 52, 54, 55, and 56. Target Sub 17 owned at least 80 percent of the stock of Target
Sub 45. Target and Target Sub 17 jointly owned at least 80 percent of the stock of
Target Subs 1, 5, 20, 24, 33, 39, and 43. Target Sub 21 owned at least 80 percent of
the stock of Target Subs 22, 23, and 35. Target Sub 15 owned at least 80 percent of
the stock of Target Sub 14. Target Sub 50 owned at least 80 percent of the stock of
Target Subs 31, 48, and 53. Target Sub 52 owned at least 80 percent of the stock of
Target Sub 51. Target and Target Sub 33 jointly owned at least 80 percent of the stock
of Target Sub 19. Target Subs 1 - 56 are all foreign corporations or foreign entities
treated as corporations for United States federal income tax purposes.

    Purchaser and Seller entered into a purchase agreement for Purchaser to

acquire all of the Target stock from Seller. On Date A, Purchaser acquired all of the
stock of Target from Seller in exchange for cash, pursuant to the purchase agreement.
It is represented that Purchaser’s acquisition of the stock of Target qualified as a
“qualified stock purchase,” as defined in § 338(d)(3). On Date C, a date after the due
date for the Election, Purchaser merged with and into Parent.

    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. 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 (taking into account any
qualified amended return filed within the meaning of § 1.6664-2(c)(3)) 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
PLR-144468-14 10

extensions of time for 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, as successor-in-interest to
Purchaser, to file the Election, provided Parent and Purchaser 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 and Company

Official explain the circumstances that resulted in the failure to file a valid Election. The
information establishes 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).

     Based on the facts and information submitted, including the representations

made, we conclude that Parent has shown that Purchaser and 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. Accordingly, an
extension of time is granted under § 301.9100-3, until 90 days from the date on this
letter, for Parent to file the Election with respect to Purchaser’s acquisition of stock of
Target and the deemed acquisitions of the stock of Target Subs 1 - 56, provided that:

With respect to Target Subs 2, 3, 4, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 21,
25, 26, 27, 28, 29, 30, 32, 34, 36, 37, 38, 40, 41, 42, 44, 46, 47, 49, 50, 52, 54,
55, and 56, a valid § 338(g) election is made with respect to the purchase of
Target.
With respect to Target Sub 45, a valid § 338(g) election is made with respect to
the purchase of Target Sub 17.
With respect to Target Subs, 1, 5, 20, 24, 33, 39, and 43, a valid § 338(g)
election is made with respect to the purchase of each of Target and Target Sub
17.
With respect to Target Subs 22, 23, and 35, a valid § 338(g) election is made
with respect to the purchase of Target Sub 21.
With respect to Target Sub 14, a valid § 338(g) election is made with respect to
the purchase of Target Sub 15.
With respect to Target Subs 31, 48, and 53, a valid § 338(g) election is made
with respect to the purchase of Target Sub 50.
With respect to Target Sub 51, a valid § 338(g) election is made with respect to
the purchase of Target Sub 52.
PLR-144468-14 11
With respect to Target Sub 19, a valid § 338(g) election is made with respect to
the purchase of each of Target and Target Sub 33.

WITHIN 90 DAYS OF THE DATE ON THIS LETTER, Parent must file the
Election of 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.
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WITHIN 120 DAYS OF THE DATE ON THIS LETTER, all relevant parties must
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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.

The above extension of time is conditioned on the taxpayers’ (Parent’s,
Purchaser’s, Target’s, and Target Subs 1 – 56’s) tax liability (if any) being not lower, in
the aggregate, for all years 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.
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We express no opinion as to: (1) whether the acquisition of the Target stock
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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 letter is directed only to the taxpayer who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
PLR-144468-14 12

Pursuant to the power of attorney on file in this office, copies of this letter are
being sent to your authorized representatives.
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                                Sincerely,

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

cc:

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Apply this to your situation

This page covers one taxpayer's ruling from 2015, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.

On this page

Document type

Private Letter Ruling

IRS subject

Time in which Election must be made; Section 338(g); Election Under Section 1.338-1T(c)(1)

Topics

Corporate transactions and reorganizations Late election relief (§ 9100)

Code sections

§ 338, § 6110, § 6662, § 6664

Ruling dated

May 18, 2015

Publicly released

August 21, 2015

View Official PDF