A foreign buyer that missed its deadline gets extra time to elect asset treatment for its stock purchases

Plain-English summary

A foreign company bought all the stock of several foreign target companies, each a controlled foreign corporation for U.S. tax purposes. Code section 338(g) lets a buyer of stock elect to treat the purchase as if it had instead bought the target's assets, which resets the tax basis of those assets. The buyer intended to make those elections (on Form 8023) but missed the filing deadline and only caught the mistake afterward. It asked the IRS for a late-election extension under regulation section 301.9100-3, which the IRS grants when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. Because the request came in before the IRS itself spotted the missed elections, the IRS found the standard met and gave the buyer 75 days to file the elections and 150 days for all parties to file or amend affected returns. The relief is conditioned on the taxpayers' total tax not being lower than if the elections had been timely, and any otherwise-applicable penalties and interest still apply. This is a routine but high-stakes cure for a missed corporate acquisition election.

Ruling snapshot

• Question: Should the foreign purchaser get an extension of time under Treas. Reg. § 301.9100-3 to file late § 338(g) elections for its qualified stock purchases?
• Outcome: Approved (75-day extension granted, with conditions)
• Key authorities: IRC § 338(a), (d)(3), (g); Treas. Reg. §§ 301.9100-1 through 301.9100-3, 1.338-2

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202450010                                              Third Party Communication: None
 Release Date: 12/13/2024                                       Date of Communication: Not Applicable
 Index Number: 9100.06-00
                                                                Person To Contact:
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 ------------------------------------                           Telephone Number:
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 ----------------------------------------                       Refer Reply To:
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 ------------------------------------------------------         PLR-106623-24
                                                                Date:
                                                                September 11, 2024




Legend

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PLR-106623-24                                               2

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

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

Tax Professional           =        ------------------------------------
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Dear ------------:

This letter responds to a letter dated April 3, 2024, submitted on behalf of Foreign
Purchaser, requesting an extension of time under §301.9100-3 of the Procedure and
Administration Regulations to file elections. Foreign Purchaser is requesting an
extension of time to file "section 338 elections" under section 338(g) with respect to
Foreign Purchaser's acquisitions of the stock of Foreign Targets on Date 1 (the
"Elections"). The material information submitted for consideration is summarized below.

On Date 1, Foreign Purchaser acquired all of the stock of each of Foreign Targets (the
"Acquisitions"). At that time, each of Foreign Purchaser and Foreign Targets was a
foreign entity classified as a corporation for United States federal income tax purposes.
It has been represented that each of Foreign Targets was a controlled foreign
corporation as defined in section 957(a) at the time of the Acquisitions (as a result of the
repeal of section 958(b)(4) by the Tax Cuts and Jobs Act).

Foreign Purchaser has represented that each of the Acquisitions 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. Foreign
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 at the time
of the filing of the Forms 8023 nor at the time of the request for relief.

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
PLR-106623-24                                 3

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.
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 Foreign Purchaser, Company
Official, and Tax Professional 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 Foreign 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 Foreign Purchaser to
file the Elections with respect to the acquisitions of the stock of each of Foreign Targets.

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, Foreign 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). 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-106623-24) of, the letter ruling.

Foreign Purchaser must also deliver written notice of the election (and a copy of Forms
8023 and 8883, and their attachments and instructions) to any United States persons
selling or holding stock in Foreign Targets in accordance with §1.338-2(e)(4).

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-106623-24                                           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 each of the acquisitions of the stock of
Foreign Targets 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
Foreign 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 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, copies of this letter are
being sent to your authorized representatives.

                                                    Sincerely,


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

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