IRS grants extra time to file a late Section 338(g) election under 9100 relief

Plain-English summary

The parent of a consolidated corporate group asked the IRS for more time to file
a Section 338(g) election. That election lets a stock purchase be treated, for tax
purposes, as if the buyer had instead bought the target's assets. Here a subsidiary
had acquired all the stock of a foreign target (a controlled foreign corporation)
through a disregarded entity, in what the group represented was a qualified stock
purchase. The election was due but, for various reasons, was never validly filed,
and the miss was discovered after the deadline. Using the discretionary "9100
relief" standard in Treas. Reg. § 301.9100-3, the IRS found the taxpayer acted
reasonably and in good faith and that granting relief would not prejudice the
government, so it granted an extension: the parent has 45 days from the date of the
letter to file the election on Form 8023. The IRS expressed no opinion on whether
the deal actually qualified as a qualified stock purchase or on any other tax
consequences. This is routine late-election relief, useful to corporate groups that
missed a Section 338 election deadline.

Ruling snapshot

• Question: Should the parent get an extension of time under Treas. Reg. § 301.9100-3 to file a late Section 338(g) election?
• Outcome: Approved (45-day extension granted, subject to conditions)
• Key authorities: IRC § 338(g), § 338(a), § 338(d)(3); Treas. Reg. §§ 301.9100-1 through 301.9100-3; Treas. Reg. § 1.338-2(d)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201850019 Third Party Communication: None
Release Date: 12/14/2018 Date of Communication: Not Applicable
Index Number: 338.01-02, 9100.06-00
Person To Contact:
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--------------------- Telephone Number:
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-------------- Refer Reply To:
--------------------------- CC:CORP:2
PLR-122788-18
Date:
September 17, 2018

Legend

Parent = ------------------------------------------------------------------------------------
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Purchaser = ------------------------------------------------------------------------------------
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Purchaser DRE = ------------------------------------------------------------------------------------
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Target = ------------------------------------------------------------------------------------
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Sellers ------------------------------------------------------------------------------------
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Date A = -------------------------

Date B = ------------------------

State A = --------------

Country A = ------------

Company Official = ------------------------------------------------------------------------------------
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Tax Professional = ------------------------------------------------------------------------------------
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Dear ------------------:

  This letter responds to a letter dated July 16, 2018, submitted on behalf of

Parent, as common parent of the consolidated group of which Purchaser is a member,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to file an election. Parent is requesting an extension to file a
"§ 338(g) election" under § 338(g) with respect to Purchaser's acquisition of the stock of
Target through Purchaser DRE (hereinafter referred to as the "Election") on Date A. The
material information is summarized below.

  Parent is a domestic corporation and the common parent of an affiliated group of

corporations that join in the filing of a consolidated federal income tax return (the
"Parent Consolidated Group"). Parent wholly owns Purchaser, a domestic corporation
and a member of the Parent Group. Purchaser wholly owns Purchaser DRE, a foreign
company treated as a disregarded entity for federal income tax purposes. Prior to Date
A, Target, a controlled foreign corporation, was owned entirely by Sellers.

  On Date A, Purchaser, through Purchaser DRE, acquired all of the stock of

Target from Sellers in exchange for cash and a note issued by Purchaser DRE. On the
same date, Target and Purchaser DRE amalgamated under Country A law with
Purchaser DRE continuing as the amalgamated entity.

  Parent has represented that Purchaser's acquisition of the stock of Target

through Purchaser DRE qualified as a "qualified stock purchase," as defined in
§ 338(d)(3). Parent has also represented that it is not seeking to alter a return position
PLR-122788-18 3

for which an accuracy-related penalty has been or could be imposed under § 6662 at
the time Parent requested relief and for which the new return position requires or
permits a regulatory election for which relief is requested. Further, Parent has
represented that the returns for all relevant taxable years have been filed consistent
with having made a valid Election.

  Parent intended to file the Election. The Election was due on Date B, but for

various reasons a valid Election was not filed. After the due date for the Election, it was
discovered that the Election had not been filed. Subsequently, this request was
submitted, under § 301.9100-3, for an extension of time to file the Election.

  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" or a "§ 338(h)(10) 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. Section 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. Section 301.9100-3(a).

  In this case, the time for filing the Election is fixed by the regulations (i.e.,

§ 1.338-2(d)). Therefore, the Commissioner has discretionary authority under
§ 301.9100-3 to grant an extension of time for Parent to file the Election, provided
Parent 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.

   Information, affidavits, and representations submitted by Parent, Company

Official, and Tax Professional explain the circumstances that resulted in the failure to
timely file a valid Election. The information establishes that the request for relief was
filed before the failure to make the Election 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 Parent has shown it acted reasonably and in good faith, the
PLR-122788-18 4

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 Parent to file the
Election with respect to the acquisition of the stock of Target, as described above.

   WITHIN 45 DAYS OF THE DATE ON THIS LETTER, Parent must file the

Election on Form 8023, in accordance with § 1.338-2(d) 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,

having originally filed or amended their returns for all relevant taxable years to be
consistent with a valid Election having been made, must amend their returns for the
taxable year in which the transaction was consummated (and for any other affected
taxable year) to attach a copy of this letter and a copy of Form 8883. Alternatively,
taxpayers filing their returns electronically may satisfy the requirement 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.

  Parent must also deliver written notice of the election (and a copy of Forms 8023

and 8883, their attachments, and instructions) to U.S. persons selling or holding stock in
Target. See § 1.338-2(e)(4).

   The above extension of time is conditioned on the taxpayers' (i.e., the Parent

Consolidated Group's and Target's) tax liability (if any) being not lower, in the
aggregate, for all years to which the Election applies, than it would have been if the
Election had been timely filed (taking into account the time value of money). No opinion
is expressed 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 Target stock

qualifies as a "qualified stock purchase" under § 338(d)(3); or (2) any other tax
consequences arising from the Election.

   In addition, we express no opinion as to the tax consequences of filing the

Election 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 Election 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
Election, penalties and interest that would otherwise be applicable, if any, continue to
apply.
PLR-122788-18 5

  This letter is directed only to the taxpayer(s) who requested it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

   Pursuant to the power of attorney on file in this office, copies of this letter are

being sent to your authorized representatives.

                                    Sincerely,


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