Late disregarded-entity election received relief

Plain-English summary

A business entity owned all of a second entity and intended the subsidiary to be treated as disregarded for federal tax purposes from its formation date. The subsidiary inadvertently failed to file Form 8832 on time. The IRS found that the requirements for discretionary relief under Treasury Regulation section 301.9100-3 were satisfied. It granted 120 days from the letter date to file a properly executed Form 8832 with the requested effective date. The relief was conditioned on the subsidiary's owners filing all required returns consistently with the election.

Ruling snapshot

• Question: Could the subsidiary receive extra time to elect disregarded-entity status effective on its formation date?
• Outcome: Approved, with a 120-day filing period
• 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: 201623008                                               Third Party Communication: None
Release Date: 6/3/2016                                          Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
                                                                Person To Contact:
-----------------------------------------------                 --------------, ID No. ----------------
-------------------------------                                 Telephone Number:
-------------------------------                                 --------------------
--------------------------------------                          Refer Reply To:
                                                                CC:PSI:1
                                                                PLR-137591-15
                                                                Date:
                                                                March 02, 2016




LEGEND

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

Y                 =         ---------------------------------------
----------------------------------------------------

D1                =        -------------------

D2                =        ---------------------

State             =        --------


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

This is in response to a letter dated November 9, 2015, 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 on D1 under the laws of State. Y
was formed on D2. X owns 100% of Y. X and Y intended that Y be treated as a
disregarded entity for federal tax purposes effective D2. However, Y inadvertently failed
to file Form 8832, Entity Classification Election, to be treated as a disregarded entity for
federal tax purposes.
PLR-137591-15                                  2

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. 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.

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 Internal Revenue
Code, except subtitles E, G, H, and I. Section 301-9100-1(b) defines the term
"regulatory election" as including an election whose due date is prescribed by a
regulation published in the Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner
will use to determine whether to grant an extension of time to make an election. Section
301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides rules for requesting extensions of time for regulatory
elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides
evidence to establish that the taxpayer acted reasonably and in good faith, and that
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, Y 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 D2. Y 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 Y filing all required Federal income tax and
informational returns (including amended returns) consistent with the requested relief
granted in this letter. A copy of this letter should be attached to any such return.

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.
PLR-137591-15                                  3

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 representative.

                                       Sincerely,



                                       Curt G. Wilson
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



                                       By: David R. Haglund
                                       David R. Haglund
                                       Branch Chief, Branch 1
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)



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