A foreign entity received 120 days for a partnership election

Plain-English summary

A foreign entity with two owners intended to be classified as a partnership from its formation date but failed to file Form 8832 on time. The IRS found the section 301.9100-3 relief standards satisfied and granted 120 days to make the retroactive partnership election. Relief was conditioned on the entity and both owners filing all required returns for open years consistently with partnership treatment within the same 120-day period. The letter specifically noted that the filings could include Forms 5471, 8865, and 8858. Copies of the ruling had to accompany the election and any affected returns.

Ruling snapshot

• Question: Could the foreign eligible entity file a late Form 8832 electing partnership classification from its formation date?
• Outcome: Approved, subject to consistent open-year filings within 120 days
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201624006                                                 Third Party Communication: None
Release Date: 6/10/2016                                           Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
                                                                  Person To Contact:
------------------------------------------------------------      ----------------------, ID No. ------------------
-------                                                           Telephone Number:
------------------------------------------------------------      ----------------------
---------------------------------------------                     Refer Reply To:
---------------------------------                                 CC:PSI:B03
---------------------------                                       PLR-129632-15
                                                                  Date:
                                                                  February 22, 2016




LEGEND

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

Y        =        ---------------------------------------------


Z        =        -------------------------

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

Date =            --------------------------


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

       This responds to the letter dated August 26, 2015, and related correspondence,
submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an election under § 301.7701-3(c) to
be treated as a partnership for federal tax purposes.

       The information submitted states that X was organized under the laws of Country
on Date. X has been and is currently owned by Y and Z. X represents that it is a
foreign entity eligible to elect to be classified as a partnership effective Date. However,
X failed to timely file Form 8832, Entity Classification Election, to be treated as a
partnership for federal tax purposes effective Date.
PLR-129632-15                                  2


      Section 301.7701-2(a) generally provides that a business entity is any entity
recognized for federal tax purposes that is not properly classified as a trust under
§ 301.7704-4 or otherwise subject to special treatment under the Internal Revenue
Code.

        Section 301.7701-3(a) provides that an eligible entity with at least two members
may elect to be classified as either an association (and thus a corporation under
§ 301.7701-2(b)(2)) or as a partnership, and an eligible entity with a single owner can
elect to be classified as an association or to be disregarded as an entity separate from
its owner.

        Section 301.7701-3(a) further provides that so long as a business entity is not
classified as a corporation under § 301.7701-2(b)(1), (3), (4), (4), (5), (6), (7), or (8) (an
eligible entity), it may elect its classification for federal tax purposes.

       Section 301.7701-3(c) provides that an entity classification election must be filed
on Form 8832 and can be effective up to seventy-five (75) days prior to the date the
form is filed or up to twelve (12) months after the date on which the form is filed.

        Under § 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. Section 301.9100-1(b) defines the term “regulatory election” as
including an election whose due date is prescribed by a regulation published in the
Federal Register or a revenue ruling, revenue procedure, notice, or announcement
published in the Internal Revenue Bulletin.

        Sections 301.9100-1 through 301.9100-3 provide the standards that the
Commissioner will use to determine whether to grant an extension of time to make an
election. § 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time
for making certain elections. Section 301.9100-3 provides rules for requesting
extensions of time for regulatory 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. §
301.9100-3(a).

        Based solely on the information submitted and the representations made, we
conclude that the requirements of §§ 301.9100-1 and 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 a Form 8832 with the appropriate service center to elect to be treated as a
partnership for U.S. income tax purposes effective Date. A copy of this letter should be
attached to the Form 8832. A copy is enclosed for that purpose.
PLR-129632-15                                   3

        This ruling is contingent on X, Y and Z filing within 120 days of this letter all
required returns for all open years consistent with the requested relief. These returns
may include, but are not limited to, the following forms: (i) Forms 5471, Information
Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms
8858, Information Return of U.S. Persons With Respect to Disregarded Entities, such
that these forms reflect the consequences of the relief granted in this letter. A copy of
this letter should be attached to any such returns.

      Except as specifically ruled upon above, no opinion is expressed or implied
concerning the tax consequences of any facts discussed or referenced in this letter.

      This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)
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 ruling will be sent to your authorized representative.


                                   Sincerely,




                                   Bradford R. Poston
                                   Senior Counsel, Branch 3
                                   Office of Associate Chief Counsel
                                   (Passthroughs & Special Industries)



Enclosures (2)

       Copy of this letter
       Copy of this letter for section 6110 purposes

cc: