Purchaser received 75 days to make late Section 338 elections for two foreign targets

Plain-English summary

A U.S. corporation acquired all the stock of two foreign corporations and intended to make Section 338(g) elections that would treat the stock purchases as asset acquisitions for federal tax purposes. Valid elections were not filed by the deadline, and the purchaser sought regulatory relief after discovering the omission. The IRS found that the purchaser acted reasonably and in good faith and that granting relief would not prejudice the government. It gave the purchaser 75 days to file Form 8023 and required affected parties to file consistent returns within 150 days. Relief was conditioned on the taxpayers' aggregate liability not being lower than it would have been with timely elections.

Ruling snapshot

• Question: Could the purchaser make late Section 338(g) elections for its acquisitions of two foreign target corporations?
• Outcome: Approved, with filing and tax-liability conditions
• Key authorities: IRC § 338; Treas. Reg. § 1.338-2; Treas. Reg. § 301.9100-1 through -3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202135004 Third Party Communication: None
Release Date: 9/3/2021 Date of Communication: Not Applicable
Index Numbers: 338.05-00, 9100.06-00
Person To Contact:
---------------------------------------------- ------------------, ID No. -----------------
---------------------------------- Telephone Number:
----------------------------------- --------------------
-------------------------------- Refer Reply To:
CC:CORP:1
PLR-101308-21
Date:
June 10, 2021

Legend

Purchaser = ----------------------------------
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------------------------

Target 1 = --------------------------------

Target 2 = ----------------------------------------------------

Seller = --------------------------------

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

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

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

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

This letter responds to a letter dated January 19, 2021, submitted on behalf of
Purchaser, 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 the acquisitions
of Target 1 and Target 2 (sometimes hereinafter referred to as the “Elections”), on Date

1. The material information submitted is summarized below.
   PLR-101308-21 2

Purchaser and Seller are U.S. corporations. Target 1 and Target 2 are foreign entities
classified as corporations for U.S. federal income tax purposes. At the time of the
acquisitions, Seller owned (through disregarded entities) all the stock of Target 1 and
Target 2, both of which were controlled foreign corporations as defined in section
957(a).

On Date 1, Purchaser acquired all the stock of Target 1 and all the stock of Target 2. It
is represented that Purchaser's acquisition of the stock of Target 1 and the stock of
Target 2 qualified as “qualified stock purchases,” as defined in section 338(d)(3).

Purchaser intended to file the Elections, but for various reasons valid 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.

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. Purchaser
also represented that no person filed a United States tax return treating the transactions
constituting the qualified stock purchases in a manner that is inconsistent with the tax
consequences that would have resulted had valid Elections been made.

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.
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, 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 Purchaser, Company Official,
and Tax Professional 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).
PLR-101308-21 3

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 acquisitions of Target 1 and Target 2, as described above.

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). Note, however, that the
relief granted by this ruling letter is limited to the above extension of time to file the
Elections; no opinion is expressed with respect to any other relief or permission (e.g.,
permission to change a method of accounting) that any relevant parties would otherwise
be required to receive or obtain from the Internal Revenue Service in order to report the
transactions consistently with the making of the Elections had the Elections been timely
made. 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-101308-21) of, the letter
ruling.

Purchaser must also deliver written notice of the Elections (and a copy of Forms 8023
and 8883, their attachments and instructions) to any U.S. persons selling or holding
stock in Target 1 or Target 2 in accordance with §1.338-2(e)(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). 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 acquisitions of the Target 1 and Target 2
stock qualified as “qualified stock purchases” 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
PLR-101308-21 4

Professional. However, the Director should verify all essential facts. In addition,
notwithstanding than 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, copies of this letter are
being sent to your authorized representatives.

                                  Sincerely,

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

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