Purchaser receives more time for section 338 elections

Plain-English summary

A U.S. purchaser acquired a foreign target and indirectly acquired the target's foreign affiliates in a transaction represented to be a qualified stock purchase. The purchaser intended to make section 338(g) elections but discovered after the deadline that they had not been filed. The IRS found that the purchaser acted reasonably and in good faith and granted 45 days to file Form 8023. Relevant parties also received 120 days to file consistent returns, subject to notice requirements and the condition that aggregate tax liability not be lower than if the elections had been timely.

Ruling snapshot

• Question: Could the purchaser receive more time to make section 338(g) elections for the target and its affiliates?
• Outcome: Approved, with 45 days for the elections and 120 days for consistent returns.
• Key authorities: IRC §§ 338, 6501(a), and 6662; Treas. Reg. §§ 1.338-2 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201611016                                              Third Party Communication: None
Release Date: 3/11/2016                                        Date of Communication: Not Applicable
Index Number: 338.01-02, 9100.06-00
                                                               Person To Contact:
------------------------                                       -------------------, ID No. -----------------
------------------------------------------                     Telephone Number:
-------------------------                                      -------------------
                                                               Refer Reply To:
--------------------------                                     CC:CORP:3
 ---------------------------                                   PLR-130976-15
                                                               Date:
                                                               December 09, 2015

Legend

Purchaser                           =         ------------------------------
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Subco                               =         ------------------------------
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Target                              =         ----------------------------------------------
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Target Affiliates                   =         -----------------------------------------------------------------
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Date 1                              =        -------------------

Date 2                              =        -----------------------------

Company Officials                   =         -----------------------------------------------------
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PLR-130976-15                                        2

Tax Professionals                   =         ---------------------------------
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State A                             =        -------------

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

This letter responds to a letter dated September 4, 2015, submitted on behalf of
Purchaser, a U.S. corporation, 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 “§ 338 elections” under § 338(g) with respect to Purchaser’s
acquisition of the stock of Target and the deemed acquisitions of the stock of Target
Affiliates (sometimes hereinafter referred to as the “Elections”) on Date 1. Additional
information was submitted on November 16, 2015 and December 7, 2015. The material
information submitted for consideration is summarized below.

Purchaser, a State A corporation, is the common parent of a consolidated group.
Target directly and/or indirectly held all the outstanding stock in the Target Affiliates.
Prior to the acquisition described herein, Target was a publicly held company. Neither
Target nor any of the Target Affiliates is a U.S. person.

Purchaser formed Subco and transferred cash, common stock, and common
stock warrants of Purchaser to Subco for the purpose of acquiring the stock of Target.
On Date 1, Purchaser acquired all of the stock of Target in exchange for cash, common
stock, and common stock warrants of Purchaser by amalgamating Subco with Target,
with Target surviving, and, thus, Purchaser also indirectly acquired all the outstanding
stock in Target Affiliates.

Purchaser has represented that the acquisition of Target constituted a “qualified
stock purchase” within the meaning of § 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 § 6662 at the time Purchaser requested relief.

Purchaser intended to file the Elections. The Elections were due on Date 2, but
for various reasons the 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. The period
of limitations on assessment under § 6501(a) has not expired for Purchaser’s
consolidated group, Target, or Target Affiliates for the taxable years in which the
acquisition occurred, the taxable years in which the Elections should have been filed, or
any taxable years that would have been affected by the Elections if they had been
timely filed.

PLR-130976-15                                 3

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
“§ 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 Purchaser, Tax
Professionals, and Company Officials 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).

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 45 days from the date on this letter, for Purchaser to file the
Elections with respect to the acquisition of the stock of Target and the deemed
acquisition of the stock of the Target Affiliates.

WITHIN 45 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 120 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 § 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 and control number of the letter ruling.

PLR-130976-15                                  4

Purchaser must also deliver written notice of the Elections (and a copy of Forms
8023 and 8883, their attachments and instructions) to U.S. persons selling or holding
stock in Target or the Target Affiliates. See § 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
and the deemed acquisition of the stock of Target Affiliates qualifies as a “qualified
stock purchase” under § 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 the taxpayers. 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, a copy of this
letter is being sent to your authorized representative.

                                       Sincerely,


                                       ______________________
                                       Ken Cohen
                                       Senior Technician Reviewer, Branch 3
                                       Office of Associate Chief Counsel (Corporate)