Parent received more time to file a section 338 election

Plain-English summary

A consolidated group's parent intended to make a section 338(g) election after a member acquired all the stock of an unrelated foreign target, but a valid election was not filed by the deadline. The parent requested relief after discovering the missed filing and before the IRS found the failure. Based on the submitted affidavits and representations, the IRS concluded that the parent acted reasonably and in good faith and that relief would not prejudice the government's interests. It gave the parent 75 days to file Form 8023 and required affected parties to attach the ruling and Form 8883 to amended returns within 150 days. The relief was conditioned on aggregate tax liability not being lower than it would have been with a timely election, and the IRS did not decide whether the acquisition was a qualified stock purchase.

Ruling snapshot

• Question: Could the consolidated group's parent receive extra time to file a section 338(g) election for the foreign target acquisition?
• Outcome: Approved
• Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202324009                                             Third Party Communication: None
 Release Date: 6/16/2023                                       Date of Communication: Not Applicable
 Index Number: 9100.06-00
                                                               Person To Contact:
 ---------------------------------                             ------------------, ID No. -----------------
 -----------------------------------------------------         Telephone Number:
 -------------------------------------------                   --------------------
 --------------------------------                              Refer Reply To:
                                                               CC:CORP:B03
                                                               PLR-122257-22
                                                               Date:
                                                               March 21, 2023




Legend

Parent                    =        -----------------------------------------------------
                                   ------------------------

Purchaser                 =        -----------------
                                   ------------------------

Target                    =        -------------------------------------------
                                   ----------------------------------------

Date 1                    =        -----------------

Company Official          =        ---------------------------------
                                   -----------------------------------------------------

Tax Professionals         =        -----------------------------------
                                   ---------------

                                   -----------------------------
                                   ---------------


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

This letter responds to a letter dated November 8, 2022, submitted on behalf of Parent,
as common parent of the consolidated group of which Purchaser is a member,
requesting an extension of time under §301.9100-3 of the Procedure and Administration
Regulations to file an election. Parent is requesting an extension to file an election
under section 338(g) with respect to Purchaser's acquisition of the stock of Target on
Date 1 (the “Election”). The material information submitted is summarized below.
PLR-122257-22                                  2


Parent is the common parent of a consolidated group (“Parent Group”) and Purchaser is
a member of the Parent Group. On Date 1, Purchaser acquired all the stock of Target,
an unrelated foreign corporation. 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 in
section 338(h)(2)). Parent has represented that Purchaser's acquisition of the stock of
Target qualified as a “qualified stock purchase” as defined in section 338(d)(3). Parent
has also 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.

Parent 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.

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
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. 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 Parent to file the Election, provided Parent 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 Parent, Company Official, and
Tax Professionals 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).
PLR-122257-22                                  3

Based on the facts and information submitted, including the representations made, we
conclude that Parent 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 Parent 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, Parent 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, having
originally filed or amended their returns for all relevant taxable years to be consistent
with a valid Election having been made, must amend their returns for the taxable year in
which the transaction was consummated (and for any other affected taxable year) to
attach a copy of this letter and a copy of Form 8883. 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-122257-22) of, this letter ruling.

The above extension of time is conditioned on the taxpayers' (i.e., Parent Group's and
Target's) 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 filed (taking
into account the time 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
Parent, 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 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.
PLR-122257-22                                  4

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




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