Foreign purchaser received more time for section 338(g) elections

Plain-English summary

A foreign corporation intended to make IRC § 338(g) elections for its deemed acquisitions of two controlled foreign corporations but discovered after the deadline that valid elections may not have been filed. The IRS concluded that the purchaser acted reasonably and in good faith and granted 75 days to file Forms 8023. All relevant parties must file or amend affected returns within 150 days, attach the required ruling and Form 8883 materials, and notify U.S. sellers or stockholders as required. The relief is conditioned on aggregate tax liabilities not being lower than if the elections had been timely filed. The ruling does not decide whether the acquisitions were qualified stock purchases, and otherwise applicable penalties and interest remain in effect.

Ruling snapshot

• Question: May the foreign purchaser receive additional time to make section 338(g) elections for the two deemed stock acquisitions?
• Outcome: Approved, with 75 days for Forms 8023 and 150 days for consistent returns
• Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202510008
Third Party Communication: None
Release Date: 3/7/2025
Date of Communication: Not Applicable
Index Number: 338.00-00, 9100.00-00,
9100.06-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:CORP:B02
PLR-111616-24
Date: December 6, 2024

LEGEND

Purchaser = -------------------------------------------------
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Target 1 = -------------------------------------------------
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Target 2 = -------------------------------------------------
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Date 1 = ----------------------
Company Official = -------------------------------------------------
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Tax Professional = -------------------------------------------------
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Dear ------------:

This letter responds to a letter dated June 21, 2024, submitted on behalf of Purchaser, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file elections. Purchaser is requesting an extension of time to file “section 338 elections” under section 338(g) with respect to Purchaser's
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deemed acquisitions of the stock of Target 1 and Target 2 on Date 1 (sometimes hereinafter referred to as the “Elections”). The material information submitted for consideration is summarized below.

Purchaser has represented that it is a foreign corporation and does not have a U.S. income tax filing requirement at this time as it does not have income, gains, or losses that are effectively connected with the conduct of a U.S. trade or business. Purchaser has also represented that Target 1 and Target 2 were each a controlled foreign corporation within the meaning of section 957(a). Purchaser has represented that the acquisition of Target 1 and Target 2 constituted a “qualified stock purchase” within the meaning of section 338(d)(3). Purchaser 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.

Purchaser intended to file section 338(g) elections with respect to the acquisition of Target 1 and Target 2 but for various reasons valid section 338(g) elections may not have been filed. After the due date for the elections, it was discovered that valid elections may not have been filed. Purchaser then filed, on extension, a Form 1120-F and subsequently, this request was submitted, under § 301.9100-3, for an extension of time to file the Elections.

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.

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 Company Official and Tax Professional explain the circumstances that resulted in the failure to timely file the valid 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).
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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 deemed acquisitions of the stock of Target 1 and Target 2.

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 (e)(3) 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-111616-24) of, the letter ruling.

Purchaser must also deliver written notice of the Elections (and a copy of Forms 8023 and 8883, their attachments and instructions) to any U.S. persons selling or holding stock in Target 1 and Target 2 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. 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 1 and Target 2 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 Officials, 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.
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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,

__________
Gregory J. Galvin
Senior Technician Reviewer, Branch 1
Office of Associate Chief Counsel (Corporate)

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