Foreign purchaser received 75 days to make a late Section 338(g) election

Plain-English summary

A foreign corporation, acting through a disregarded foreign entity, bought all the stock of another foreign corporation and intended to make a Section 338(g) election. That election would treat the stock purchase as an asset acquisition for U.S. federal tax purposes. The purchaser did not file a valid election by the deadline but represented that affected U.S. returns were filed consistently with the intended election and that the election was not prompted by later tax-law changes. 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 150 days for affected parties to file consistent returns, subject to an aggregate tax-liability condition.

Ruling snapshot

• Question: Could the foreign purchaser make a late Section 338(g) election for its acquisition of a foreign target?
• Outcome: Approved, with filing and tax-liability conditions
• Key authorities: IRC § 338; Treas. Reg. § 1.338-2; Treas. Reg. § 301.9100-1 through -3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202135001 [Third Party Communication:
Release Date: 9/3/2021 Date of Communication: Month DD, YYYY]
Index Number: 338.00-00, 338.01-00,
338.01-02, 9100.06-00 Person To Contact:
--------------------, ID No. -----------------
--------------------------- Telephone Number:
----------------------------------------- --------------------
------------------------------------------------------ Refer Reply To:
-------------------------------------- CC:CORP:2
------------ PLR-100119-21
Date:
June 09, 2021

Legend

Purchaser = ---------------------------------------------------------------------------------
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Purchaser DRE = ---------------------------------------------------------------------------------
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Target = ---------------------------------------------------------------------------------
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Date A = ------------------

Company Official = ---------------------------------------------------------------------------------
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Tax Professional = ---------------------------------------------------------------------------------
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Dear ------------:

This letter responds to a letter dated December 29, 2020, submitted on behalf of
Purchaser, requesting an extension of time under §301.9100-3 of the Procedure and
PLR-100119-21 2

Administration Regulations to file an election. Purchaser is requesting an extension of
time to file a “section 338(g) election” under section 338(g) with respect to Purchaser's
acquisition of the stock of Target, through Purchaser DRE (hereinafter referred to as the
“Election”), on Date A. The material information submitted is summarized below.

Purchaser and Target are foreign corporations. On Date A, Purchaser, through
Purchaser DRE (a foreign entity treated as a disregarded entity for federal income tax
purposes), acquired all the stock of Target. Purchaser has represented that
Purchaser's acquisition of the stock of Target through Purchaser DRE qualified as a
“qualified stock purchase” as defined in section 338(d)(3).

Purchaser intended to file the Election, but for various reasons a valid Election was not
filed. After the due date for the Election, it was discovered that the Election had not
been filed. Subsequently, this request was submitted, under §301.9100-3, for an
extension of time to file the Election.

Purchaser has represented that Target was not 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 by
section 338(h)(2)). Purchaser also 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 at the time Purchaser requested relief and for which the new return
position requires or permits a regulatory election for which relief is requested. In
addition, Purchaser has represented that Purchaser would have made a section 338(g)
election regarding the acquisition of Target as of the election due date regardless of the
enactment of the Tax Cuts and Jobs Act (TCJA) and the issuance of regulations relating
to the TCJA. Further, Purchaser has represented that all United States returns required
to be filed by any persons affected by a section 338(g) election with respect to the
acquisition of Target were filed in a manner consistent with a section 338(g) election
having been validly made.

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” or a “section 338(h)(10) 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.

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.
Section 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
PLR-100119-21 3

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.
Section 301.9100-3(a).

In this case, the time for filing the Election is fixed by the regulations (i.e., §1.338-2(d)).
Therefore, the Commissioner has discretionary authority under §301.9100-3 to grant an
extension of time for Purchaser to file the Election, provided Purchaser 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.

Information, affidavits, and representations submitted by Purchaser, Company Official,
and Tax Professional explain the circumstances that resulted in the failure to timely file
a valid Election. The information establishes that the request for relief was filed before
the failure to make the Election 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
Election with respect to the acquisition of the stock of Target, as described above.

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, Purchaser must file the Election
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
transaction as a section 338 transaction for the taxable year in which the transaction
was 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
Election; 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
transaction consistently with the making of the Election had the Election 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 requirement of attaching a copy of this letter by attaching a statement to their
return that provides the date on, and control number (PLR-100119-21) of, the letter
ruling.

The above extension of time is conditioned on the relevant taxpayers' tax liability (if any)
being not lower, in the aggregate, for all years to which the Election applies, than it
would have been if the Election had been timely made (taking into account the time
PLR-100119-21 4

value of money). No opinion is expressed as to the taxpayers' tax liability for the years
involved. 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 Target stock qualifies
as a “qualified stock purchase” under section 338(d)(3); or (2) any other tax
consequences arising from the Election.

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

This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

Pursuant to the power of attorney on file in this office, a copy of this letter is being sent
to your authorized representative.

                                   Sincerely,



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

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