Grants late foreign partnership classification election

Plain-English summary

A foreign entity intended to be classified as a partnership for U.S. federal tax purposes but did not timely file Form 8832. The entity requested relief under the Treasury regulations for late regulatory elections. The IRS found that the requirements for discretionary relief were satisfied and granted 120 days to file the entity classification election with the requested effective date. Relief was conditioned on the owners filing all required returns for open years within the same 120-day period and treating the entity consistently with partnership status. The ruling identifies Forms 5471, 8865, and 8858 as examples of information returns that might need to be filed or corrected.

Ruling snapshot

• Question: Could the foreign entity file a late Form 8832 election to be treated as a partnership from the requested date?
• Outcome: Approved, with 120 days to file the election and all required consistent returns for open years.
• 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: 201834003 Third Party Communication: None
Release Date: 8/24/2018 Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
Person To Contact:
-------------------- ----------------, ID No. ------------------
-------------------------------- Telephone Number:
------------------------------------- ----------------------
---------------------------- Refer Reply To:
------------------- CC:PSI:B01
PLR-101030-18
Date:
May 29, 2018

LEGEND

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

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

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

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

This responds to a letter dated December 27, 2017, and subsequent correspondence,
submitted on behalf of X, requesting that the Service grant X 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 classified as a partnership for U.S. federal income tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country. X
represents that X intended to be treated as a partnership for federal income tax
purposes effective Date. However, X inadvertently failed to timely file Form 8832, Entity
Classification Election, electing to be treated as a partnership effective Date.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity that is not classified as a
corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can
PLR-101030-18 2

elect its classification for federal tax purposes. An eligible entity with at least two
members can elect to be classified as either an association or a partnership.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with two or more members having limited
liability may elect to be treated as a partnership pursuant to the rules of § 301.7701-
3(c). Section 301.7701-3(c) provides that an entity classification election must be filed
on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up
to 12 months after the date 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 Internal Revenue
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.

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. Section
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.

CONCLUSION

Based solely on the facts submitted and the 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 make an election to be
treated as a partnership for federal tax purposes effective Date. X shall make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form.

This ruling is contingent on the owners of X 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,
PLR-101030-18 3

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 expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

This ruling is directed only to the taxpayer requesting 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 is
being sent to your authorized representative.

                                   Sincerely,

                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)


                                      Laura C. Fields
                              By: _____________________________
                                  Laura C. Fields
                                  Technician Reviewer, Branch 1
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes