Foreign limited partnership may make a late corporate classification election

Plain-English summary

A foreign limited partnership intended to be treated as an association taxable as a corporation for U.S. federal tax purposes, but it inadvertently failed to file Form 8832. Without an election, the entity was treated as a partnership under the default classification rules. The IRS concluded that the requirements for discretionary late-election relief were satisfied. It gave the entity 120 days to file Form 8832 with the intended effective date.

Ruling snapshot

• Question: Could the foreign limited partnership make a late election to be classified as an association taxable as a corporation?
• Outcome: Approved, with 120 days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 201610009                                                Third Party Communication: None
Release Date: 3/4/2016                                           Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
                                                                 Person To Contact:
---------------------------------------                          -------------------------, ID No. ------------
------------------------------------------------------------     Telephone Number:
-----------------                                                --------------------
---------------------------------------                          Refer Reply To:
-------------------------                                        CC:PSI:B01
 -------------------------------                                 PLR-124340-15
                                                                 Date:
                                                                 November 30, 2015




Legend

         X                 =         --------------------------------------------------------------------
----------------------------------------------------------

         Country           =        ----------------------------

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


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

      This responds to a letter dated July 17, 2015, and accompanying materials,
submitted on behalf X, requesting an extension of time, pursuant to § 301.9100-3 of the
Procedure and Administration Regulations, to make an entity classification election
under Treas. Reg. § 301.7701-3.

                                                      Facts

       According to the letter and accompanying submission, X is limited partnership
organized under the laws of Country. Although X is treated as partnerships for federal
tax purposes under Treas. Reg. § 301.7701-3(b)(2)(i)(A), the management of X
intended that it be classified as an association taxable as a corporation for federal tax
purposes, effective Date 1. The election was inadvertently not filed.

                                              Law and Analysis

      Section 301.7701-3(a) provides that a business entity that is not classified as a
corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible
PLR-124340-15                                  2

entity), can elect its classification for federal tax purposes. An eligible entity with more
than one owner can elect to be classified as an association or as partnership.

       Section 301.7701-3(b) provides a default classification for an eligible entity that
does not make an election. Section 301.7701-3(b)(2)(i) provides that, unless the entity
elects otherwise, a foreign eligible entity is (A) a partnership if it has two members and
at least one member does not have limited liability; (B) an association if all members
have limited liability; or (C) disregarded as an entity separate from its owner if it has a
single owner that does not have limited liability.

        Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be
classified other than as provided under § 301.7701-3(b) by filing Form 8832, Entity
Classification Election, with the appropriate service center. Under § 301.7701-
3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832
or on the date filed if no such date is specified. The date specified on Form 8832 cannot
be more than 75 days prior to the date on which the election is filed.

       Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to
be classified other than as provided under section 301.7701-3(b) by filing Form 8832,
Entity Classification Election, with the applicable service center.

      Under section 301.9100-1(c) the Commissioner may 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
Code, except subtitles E, G, H, and I.

       Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner
will use to determine whether to grant an extension of time to make an election. Section
301.9100-2 provides automatic extensions of time for making certain elections. Section
301.9100-3 provides extensions of time for making elections that do not meet the
requirements of § 301.9100-2. Requests for relief under § 301.9100-3 will be granted
when 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.

                                         Conclusion

        Based solely on the facts submitted and representations made, we conclude that
the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an
extension of time of 120 days from the date of this letter to file Form 8832 to elect to
treat X as an association taxable as a corporation, effective Date 1. The election should
be filed with the appropriate service center. A copy of this letter should be attached to
the election. A copy of this letter is attached for this purpose.
PLR-124340-15                                 3

        Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the Code. Specifically, we do not express an opinion concerning whether X or any
entity described in the facts is a valid corporation for federal tax purposes.

       This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the
Internal Revenue 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 is
being faxed and mailed to X’s authorized representatives.

                                       Sincerely,


                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)


                                           David R. Haglund
                                       By: David R. Haglund
                                       Chief, Branch 1
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

Enclosures (2):
      Copy of this letter
      Copy for section 6110 purposes


cc: