IRS grants foreign purchaser more time for Section 338(g) elections

Plain-English summary

A foreign purchaser acquired all the stock of a foreign target, with deemed acquisitions of several foreign target affiliates. The purchaser represented that the transaction was a qualified stock purchase and intended to make Section 338(g) elections, but the elections were not filed on time. The purchaser sought relief before the IRS discovered the failure and submitted information and affidavits explaining the circumstances. The IRS found that the purchaser acted reasonably and in good faith and that relief would not prejudice the government. It granted 75 days to file Form 8023 and required the relevant parties to file or amend affected returns within 150 days, subject to the conditions stated in the letter.

Ruling snapshot

• Question: Could the foreign purchaser receive additional time to file Section 338(g) elections for the target and target affiliates?
• Outcome: Approved.
• Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202131008 Third Party Communication: None
Release Date: 8/6/2021 Date of Communication: Not Applicable
Index Number: 338.00-00, 338.01-00,
338.01-02, 9100.06-00 Person To Contact:
------------------------, ID No. ---------------
-------------------------------- Telephone Number:
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---------------------------------- Refer Reply To:
---------------------------------- CC:CORP:3
PLR-126872-20
Date:
May 12, 2021

Legend

Purchaser = ------------------------------------
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Target = --------------------------------------
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Target Affiliates = ----------------------------------------------------------
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Date A = --------------------------

Company Official = ---------------------------
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Tax Professionals = ---------------------------------
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PLR-126872-20 2

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

This letter responds to a letter dated November 20, 2020, submitted on behalf of
Purchaser, requesting an extension of time under §301.9100-3 of the Procedure and
Administration Regulations to file an election. Purchaser is requesting an extension to
file a “section 338 election” under section 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 Affiliates (sometimes hereinafter referred to as the
“Elections”) on Date A. The material information submitted is summarized below.

Prior to Date A, each of Purchaser, Target, and Target Affiliates was a foreign
corporation or a foreign entity treated as a corporation for United States federal income
tax purposes. Neither Target nor any of Target Affiliates was a controlled foreign
corporation, a passive foreign investment company, or a foreign personal holding
company at any time during the portion of its taxable year that ends on the acquisition
date (as defined in section 338(h)(2)).

Purchaser has represented that its acquisition of all the stock of Target on Date A
qualified as a “qualified stock purchase,” as defined in section 338(d)(3). For various
reasons, however, valid Elections were not filed. After the due date for the Elections, it
was discovered that the Elections had not been filed. Subsequently, this request was
submitted, under §301.9100-3, for an extension of time to file the Elections.

Purchaser 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 section 6662 (taking into
account any qualified amended return filed within the meaning of §1.6664-2(c)(3)) at the
time Purchaser requested relief 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 “section 338
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.

PLR-126872-20 3

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.
See §301.9100-1(a). Section 301.9100-2 provides automatic 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.

Information, affidavits, and representations submitted by Purchaser, Company Official,
and Tax Professionals explain the circumstances that resulted in the failure to timely file
the Elections. The information establishes that the request for relief was filed before the
failure to make the Elections 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 Purchaser has shown it 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 75 days from the date on this letter, for Purchaser to file the
Elections with respect to the acquisition of the stock of Target and the deemed
acquisitions of the stock of Target Affiliates.

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, Purchaser must file the Elections
on 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.

WITHIN 150 DAYS OF THE DATE ON THIS LETTER, all relevant parties must file or
amend, as applicable, all returns and amended returns (if any) necessary to report the
transactions as section 338 transactions for the taxable year in which the transactions
were consummated (and for any other affected taxable year). Note, however, that the
relief granted by this ruling letter is limited to the above extension of time to file the
Elections; no opinion is expressed with respect to any other relief or permission (e.g.,
permission to change a method of accounting) that any relevant parties would otherwise
be required to receive or obtain from the Internal Revenue Service in order to report the
transactions consistently with the making of the Elections had the Elections been timely
made. 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 requirements of attaching a copy of this letter by attaching a statement to
their return that provides the date on, and control number (PLR-126872-20) of, the letter
ruling.

The above extension of time is conditioned on the taxpayers' tax liability (if any) being
not lower, in the aggregate, for all years to which the Elections apply, than it would have
been if the Elections had been timely made (taking into account the time value of
money). We express no opinion as to the taxpayers' tax liability for the years involved.

PLR-126872-20 4

A determination thereof will be made by the applicable Director's office upon audit of the
federal income tax returns involved.

We express no opinion as to: (1) whether the acquisition of the stock of Target and the
deemed acquisitions of the stock of Target Affiliates qualifies as a “qualified stock
purchase” under section 338(d)(3); or (2) any other tax consequences arising from the
Elections.

In addition, we express no opinion as to the tax consequences of filing the Elections 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 Elections
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
Purchaser, Company Official, and Tax Professionals. However, the Director should
verify all essential facts. In addition, notwithstanding that an extension is granted under
§301.9100-3 to file the Elections, penalties and interest that would otherwise be
applicable, if any, continue to apply.

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 your authorized representatives.

                                                    Sincerely,


                                                    _____________________
                                                    Thomas I. Russell
                                                    Chief, Branch 1
                                                    Office of Associate Chief Counsel (Corporate)

cc: --------------------

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