Purchaser receives 75 days to file late Section 338 elections for foreign targets

Plain-English summary

A U.S. corporation acquired all the stock of a foreign target and treated the target's foreign affiliates as deemed acquired. The purchaser intended to make Section 338(g) elections so the stock acquisitions would be treated as asset acquisitions, but later discovered that valid elections might not have been filed. It requested relief before the IRS discovered the possible failure, and represented that no return reported inconsistent treatment. The IRS found that the purchaser acted reasonably and in good faith and granted 75 days to file Form 8023. Relevant parties received 150 days to file or amend affected returns, and the relief was conditioned on aggregate tax liability not being lower than it would have been with timely elections.

Ruling snapshot

• Question: Could the purchaser receive extra time to file Section 338(g) elections for the target and its affiliates?
• Outcome: Approved, with 75 days for Form 8023 and 150 days for affected returns.
• Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2(d), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202133012 Third Party Communication: None
Release Date: 8/20/2021 Date of Communication: Not Applicable
Index Number: 338.00-00, 338.01-00,
9100.00-00, 9100.06-00 Person To Contact:
---------------------------, ID No. ---------------
------------------------------------- -----------------
--------------------------- Telephone Number:
------------------------------ --------------------
--------------------------------------- Refer Reply To:
CC:CORP:1
PLR-128503-20
Date:
May 26, 2021

Legend

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PLR-128503-20 2

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

Company = --------------------------------------------------------------------------------------------
Official ---------------------

Tax = --------------------------------------------------------------------------------------------
Professional --------------------------

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

This letter responds to a letter submitted December 16, 2020, 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 “section 338 elections” under section 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. The material
information submitted for consideration is summarized below.

Purchaser is a domestic corporation. Target and Target Affiliates were foreign
corporations or entities treated as corporations for federal income tax purposes as of
Date 1. Target and the Target Affiliates were members of the same affiliated group
within the meaning of section 1504(a), determined without regard to the exceptions
contained in section 1504(b). Purchaser represented that neither Target nor any of
Target Affiliates was a controlled foreign corporation, passive foreign investment
company, or foreign personal holding company at any time during the portion of their
respective taxable years that ended on the acquisition date (as defined in section
338(h)(2)).

On Date 1, Purchaser acquired all the stock of Target. Purchaser represented that the
acquisition of Target constituted a “qualified stock purchase” within the meaning of
section 338(d)(3). Purchaser intended to file the Elections, but for various reasons,
valid Elections may not have been filed. After the due date for the Elections, it was
discovered that the Elections may not have been filed. Subsequently, this request was
submitted, under §301.9100-3, for an extension of time to file the Elections.

Purchaser represented that it is not seeking to alter a return position for which an
accuracy-related penalty has been or could be imposed under section 6662 at the time
Purchaser requested relief. Purchaser also represented that no person has filed a
United States tax return treating the transaction or transactions constituting the qualified
stock purchase in a manner that is inconsistent with the tax consequences that would
have resulted if valid Elections had been timely made.

PLR-128503-20 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 “section 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, Company Official,
and Tax Professional explain the circumstances that resulted in the possible failure to
timely file valid Elections. The information establishes that the request for relief was
filed before the possible 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 75 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
acquisitions of the stock of the Target Affiliates.

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, Purchaser must file the Elections
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 150 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 section 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 on, and control number (PLR-128503-20) of, the letter ruling.

PLR-128503-20 4

The above extension of time is conditioned on the relevant 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 acquisitions of the stock of Target Affiliates qualifies as a “qualified stock
purchase” under section 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
Purchaser, Company Official, and Tax Professional. 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 representatives.

                                       Sincerely,


                                       ____________________________________
                                       Thomas I. Russell
                                       Chief, Branch 1
                                       Office of Associate Chief Counsel (Corporate)

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