Foreign entity receives late partnership-classification relief

Plain-English summary

A foreign eligible entity intended to be classified as a partnership for federal tax purposes but did not timely file Form 8832. It represented that it was eligible to elect partnership status effective from its formation date. The IRS concluded that the entity satisfied the standards for discretionary election relief and granted 120 days to file Form 8832 with the requested effective date. The relief was conditioned on the entity's owners filing all required returns for open years consistently with partnership treatment. Those filings could include Forms 5471, 8865, and 8858, depending on what the relief required.

Ruling snapshot

• Question: Could the foreign entity make a late election to be classified as a partnership from its formation date?
• Outcome: Approved, with 120 days to file Form 8832 and consistent owner returns for all open years.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201641004 Third Party Communication: None
Release Date: 10/7/2016 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-104643-16
Date:
July 01, 2016

LEGEND

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

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

D = --------------------

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

  This responds to a letter dated September 16, 2015, and subsequent

correspondence, 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 partnership for federal tax purposes.

FACTS

    According to the information submitted, X was organized under the laws of

Country on D. X represents that it is a foreign entity eligible to elect to be classified as a
partnership effective D. X failed to timely file Form 8832, Entity Classification Election,
to be treated as a partnership for federal tax purposes effective D.

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. An eligible entity with at least two
members can elect to be classified as either an association or a partnership, and an
eligible entity with a single owner can elect to be classified as an association or to be
PLR-104643-16 2

disregarded as an entity separate from its owner.

     Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as
an association if all members have limited liability, unless the entity makes an election
to be treated otherwise. A foreign eligible entity with two or more members having
limited liability may elect to be treated as a partnership pursuant to the rules of
§ 301.7701-3(c). Section 301.7701-3(c) provides that an entity classification election
must be filed on Form 8832 and can be effective up to 75 days prior to the date the form
is filed or up to 12 months after the date the form is filed.

   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, 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 an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for making 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 §§ 301.9100-1 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 make
an election to be treated as a partnership for federal tax purposes effective D. X should
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 X filing within 120 days of this letter all

required returns for all open years consistent with the requested relief. These returns
may include, but are not limited to, the following forms: (i) Forms 5471, Information
Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms
8858, Information Return of U.S. Persons With Respect to Disregarded Entities, such
PLR-104643-16 3

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.

   Except as specifically set forth above, we express no opinion concerning the

federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code.

  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, a copy of this

letter is being sent to X’s authorized representatives.

                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)




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

Enclosures (2)

   Copy of this letter
   Copy of this letter for section 6110 purposes