A foreign entity received 120 days for a partnership election

Plain-English summary

A foreign eligible entity whose owners all had limited liability intended to be classified as a partnership from its formation date. It failed to file Form 8832 on time because of inadvertence, while its indirect owners consistently filed their federal returns as if the entity were a partnership. Treasury Regulation section 301.7701-3 otherwise defaults such a foreign entity to association status when all members have limited liability. The IRS found the section 301.9100-3 relief standards satisfied. It granted 120 days to file Form 8832 electing partnership classification retroactive to the intended effective date.

Ruling snapshot

• Question: Could the foreign eligible entity file a late Form 8832 electing partnership classification from its formation date?
• Outcome: Approved, a 120-day extension was granted
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201624010                                              Third Party Communication: None
Release Date: 6/10/2016                                        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-129923-15
                                                               Date:
                                                               March 07, 2016




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

A                 =        ------------------------

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

d1                =        ----------------------


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

       This letter responds to a letter dated September 8, 2015, submitted on behalf of
X, requesting a ruling under §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations that X be granted an extension of time to file an election to
be classified as a partnership under § 301.7701-3(c) effective d1.

FACTS

        According to the submission, X is an entity formed under the laws of Country on
d1. X‘s owners have limited liability as a result of their investment in X under the laws of
Country. X is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6),
(7) or (8). X intended that it be treated as a partnership for federal tax purposes
effective d1. However, due to inadvertence, X failed to file a timely Form 8832, Entity
Classification Election. The entities that indirectly own X have filed all required federal
income tax and information returns consistent with X being treated as a partnership for
PLR-129923-15                                  2

federal tax purposes effective d1. Also according to the submission, A is authorized to
act for X.

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 as provided in § 301.7701-3.

         Section 301.7701-3(b)(2)(i) provides that, unless it 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(c)(1)(i) provides that an eligible entity may elect to be
classified other than as provided in § 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 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 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 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3,
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 a regulatory election to include
an election whose due date is prescribed by a regulation published in the Federal
Register.

       Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections. Section 301.9100-3 sets forth 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.

        Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3
will be granted when the taxpayer provides 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) granting relief will not prejudice the
interests of the Government.
PLR-129923-15                                3

CONCLUSION

       Based on the facts submitted and the 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 Form 8832
with the appropriate service center to elect to be classified as a partnership for federal
tax purposes effective d1. A copy of this letter should be attached to the Form 8832. A
copy is enclosed for that purpose.

       Except as expressly set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts discussed above under any other provision of
the Code.

      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 a power of attorney on file with this office, we are sending a
copy of this letter to X’s authorized representatives.


                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                By: Faith P. Colson
                                    Faith P. Colson
                                    Senior Counsel, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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

cc: