IRS accepts late branch-profits-tax assessment consent

Plain-English summary

A foreign corporation indirectly participated in a U.S. trade or business through a partnership, then its U.S. business assets were sold and its shareholder adopted an irrevocable liquidation resolution. The corporation filed its Form 1120-F about five months late and attached Form 8848, which extends the assessment period for branch profits tax, together with a disclosure that it would request late-filing relief. It sought relief before the IRS discovered the missed deadline. The IRS found that the corporation met the discretionary regulatory-election standards and extended the filing deadline to the date the form was actually filed. The ruling did not decide whether the corporation was otherwise eligible to file Form 8848 and did not waive interest or penalties tied to the late Form 1120-F.

Ruling snapshot

• Question: Could the foreign corporation obtain an extension to file Form 8848 with its late Form 1120-F?
• Outcome: Approved.
• Key authorities: Treas. Reg. §§ 1.884-2 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202130001 Third Party Communication: None
Release Date: 7/30/2021 Date of Communication: Not Applicable
Index Number: 884.00-00, 884.08-00,
884.08-10, 9100.00-00 Person To Contact:
-----------------------, ID No. -----------------
--------------------- Telephone Number:
------------------------------- --------------------
--------------------- Refer Reply To:
---------------------------------------------- CC:INTL:B01
------------------------------- PLR-100231-21
Date:
May 05, 2021

Legend

Taxpayer = -----------------------------------------------------------------------------------
----------------------

Foreign = ----------------------------------
Partnership
US LLC = ---------------------------------

US Corporation = -----------------------------------------------------------------------------------
------------------------

Country X = -------

Country Y = ----------------------

Date A = --------

Date B = ------------------

Date C = -----------

Year 1 = -------

Year 2 = -------

Year 3 = ------
PLR-100231-21 2

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

This is in response to your letter dated August 19, 2020, requesting an extension of time
under Treas. Reg. § 301.9100-1(c) and Treas. Reg. § 301.9100-3 for Taxpayer to file a
Form 8848 (Consent to Extend the Time to Assess the Branch Profits Tax Under
Regulations Sections 1.884-2(a) and (c)). The ruling contained in this letter is based
upon facts and representations submitted by Taxpayer and accompanied by a penalty
of perjury statement executed by an appropriate party. This office has not verified any of
the material submitted in support of the request for a ruling. Verification of the factual
information, representations, and other data may be required as a part of the audit
process.

Taxpayer is a corporation organized under the laws of Country X. As of the beginning of
Year 1, Taxpayer owned an interest in Foreign Partnership, a partnership organized in
Country Y. Foreign Partnership held indirect interests in US LLC, a domestic limited
liability company that was treated as a partnership for U.S. tax purposes and that was
engaged in a U.S. trade or business. As a consequence, Taxpayer was engaged in a
U.S. trade or business.

On Date A of Year 1, US LLC sold its U.S. business and domestic corporation stock to a
third party. The parties agreed to treat the portion of the sales proceeds held in escrow
until Year 2 as proceeds from an installment sale within the meaning of section 453. For
all subsequent periods through the date of the request, Taxpayer represents that it has
not, nor has any related corporation, used the proceeds from the sale of the U.S.
business in the conduct of another U.S. trade or business, as provided in Treas. Reg. §
1.884-2T(a)(2).

On Date B of Year 1, Taxpayer’s shareholder adopted an irrevocable resolution to
liquidate and dissolve Taxpayer before the close of the immediately succeeding taxable
year. Taxpayer determined that its interest in Foreign Partnership qualified, in part, as a
U.S. asset pursuant to Treas. Reg. § 1.884-1(d)(3) and Treas. Reg. § 1.884-1(d)(2)(iii).
Taxpayer represents that its only effectively connected income derived in all subsequent
periods through the date of the request was income that is treated as effectively
connected solely by reason of section 864(c)(6).

Taxpayer filed its Form 1120-F for Year 1 on Date C of Year 3, approximately five
months after the due date for the return. Taxpayer attached Form 8848 to its Form
1120-F and included a disclosure statement informing the IRS that Taxpayer would be
seeking relief under Treas. Reg. § 301.9100-1(c) and Treas. Reg. § 301.9100-3 for its
untimely filing of Form 8848.

Taxpayer requests an extension of time under Treas. Reg. § 301.9100-3 to file Form
8848. The IRS did not discover Taxpayer’s failure to timely file the required statement
before this request for relief was filed.
PLR-100231-21 3

Treas. Reg. § 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under the standards set forth in Treas. Reg. § 301.9100-3
to make a regulatory election under all subtitles of the Internal Revenue Code except
subtitles E, G, H, and I.

Treas. Reg. § 301.9100-1(b) defines a regulatory election as an election whose due
date is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or
announcement.

Treas. Reg. § 301.9100-3 provides standards for extensions of time for making
regulatory elections when the deadline for making the election is other than a due date
prescribed by statute.

Treas. Reg. § 301.9100-3(a) provides that requests for relief subject to this section will
be granted when the taxpayer provides the evidence (including affidavits described in
Treas. Reg. § 301.9100-3(e)) to establish to the satisfaction of the Commissioner
that the taxpayer acted reasonably and in good faith, and the grant of relief will not
prejudice the interests of the Government. Except as otherwise provided in Treas. Reg.
§ 301.9100-3(b)(3)(i) through (iii), a taxpayer is deemed to have acted reasonably
and in good faith if the taxpayer requests relief before the failure to make the regulatory
election is discovered by the IRS. Treas. Reg. § 301.9100-3(b)(1)(i).

In the present situation, Treas. Reg. § 1.884-2(c)(2)(iii) fixes the time to file Form 8848.
Therefore, the Commissioner has discretionary authority under Treas. Reg. § 301.9100-
1(c) to grant Taxpayer an extension of time, provided that Taxpayer satisfies the
standards set forth in Treas. Reg. § 301.9100-3(a).

Based on the facts and circumstances of this case, we conclude that Taxpayer satisfies
Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayer is granted an extension of time
until Date C of Year 3 to file Form 8848. The granting of an extension of time is not a
determination that Taxpayer is otherwise eligible to file
Form 8848.

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. In addition, no relief is provided with respect to any interest or penalties
associated with the late filing of Form 1120-F.

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.
PLR-100231-21 4

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

                                       Sincerely,


                                               ___________________________
                                               Nancy J. Erwin
                                               Branch Chief, Branch 1
                                               Associate Chief Counsel (International)

Enclosure:
Copy for 6110 Purposes

cc: