Purchaser received more time to file section 338 elections

Plain-English summary

A U.S. corporate purchaser acquired more than 80 percent of a foreign target and was treated as acquiring the target's foreign subsidiary, but valid section 338(g) elections were not filed on time. The missed elections were discovered after their deadline, and the purchaser requested relief before the IRS found the failure. Based on the submitted affidavits and representations, the IRS concluded that the purchaser acted reasonably and in good faith and that relief would not prejudice the government's interests. It gave the purchaser 75 days to file Form 8023 and required affected parties to attach the ruling and Form 8883 to amended returns within 150 days. The relief was conditioned on aggregate tax liability not being lower than it would have been with timely elections, and the IRS did not decide whether the acquisitions were qualified stock purchases.

Ruling snapshot

• Question: Could the purchaser receive extra time to file section 338(g) elections for the foreign target and its subsidiary?
• Outcome: Approved
• Key authorities: IRC § 338; Treas. Reg. §§ 1.338-2 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                        Department of the Treasury
                                                                 Washington, DC 20224

 Number: 202324010                                               Third Party Communication: None
 Release Date: 6/16/2023                                         Date of Communication: Not Applicable
 Index Number: 9100.06-00
                                                                 Person To Contact:
 ----------------------------                                    -------------------------
 -----------------------------------                             ID No. -----------------
 --------------------                                            Telephone Number:
 ------------------------------------                            --------------------
                                                                 Refer Reply To:
                                                                 CC:CORP:BO2
                                                                 PLR-124167-22
                                                                 Date:
                                                                 March 22, 2023



Legend

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

ForeignTarget              =       ---------------------------

ForeignTargetSub =                 -----------------------------

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

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


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

This letter responds to a letter dated December 12, 2022, submitted 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 more than 80% of the stock of ForeignTarget and the deemed
acquisition of the stock of ForeignTargetSub on Date 1 (sometimes hereinafter referred
to as the “Elections”). The material information submitted is summarized below.

Purchaser is the common parent of a consolidated group. Each of ForeignTarget and
ForeignTargetSub is a foreign entity classified as a corporation for federal tax purposes,
and as of Date 1 ForeignTarget wholly owned ForeignTargetSub. On Date 1,
Purchaser acquired more than 80% of the stock of ForeignTarget. Purchaser has
represented that its acquisition of more than 80% of the stock of ForeignTarget on Date
1 qualified as a “qualified stock purchase,” as defined in section 338(d)(3). For various
PLR-124167-22                                  2

reasons, however, 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.

Neither ForeignTarget nor ForeignTargetSub was a controlled foreign corporation, a
passive foreign investment company, or a foreign personal holding company at any time
during the portion of its taxable year that ends on the acquisition date (as defined in
section 338(h)(2)). Purchaser has 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.

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 and Company
Official explain the circumstances that resulted in the failure to timely file the 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).

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 ForeignTarget and the deemed
acquisition of the stock of ForeignTargetSub, 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.
PLR-124167-22                                  3


WITHIN 150 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 requirements of attaching a copy of this letter by
attaching a statement to their return that provides the date on, and control number
(PLR-124167-22) of, the letter ruling.

The above extension of time is conditioned on the 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 ForeignTarget
and the deemed acquisition of the stock of ForeignTargetSub qualify 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 and Company Official. 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
PLR-124167-22                               4

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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