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Not only did both sets of regulations permit most domestic
(unincorporated) and foreign business organizations to elect
between association and partnership classification for Federal
tax purposes, as first proposed in Notice 95-14,6 but, of
particular relevance to this case, they both extended the
elective regime to single-owner organizations. Under the final
regulations, single-owner organizations are permitted to elect
“to be recognized or disregarded as entities separate from their
owners.” Sec. 301.7701-1(a)(4), Proced. & Admin. Regs.
The final regulations became effective as of January 1,
1997, with a special transition rule for existing entities. T.D.
8697, 1997-1 C.B. at 219.7
6 The final regulations provide a list of organizations
(substantially the same as those listed in the proposed
regulations) formed under foreign (or U.S. possession) law that,
subject to certain grandfather rules, are treated as per se
corporations. See sec. 301.7701-2(b)(8), (d), Proced. & Admin.
Regs. In general, the list includes the publicly traded, limited
liability organization that may be formed under the law of each
country or possession. The per se corporation under United
Kingdom law is a public limited company. H&C was not such a
company.
7 The check-the-box regulations, like the classification
regulations that they replaced, were issued under sec. 7701(a)(2)
and (3), which defines the terms “partnership” and “corporation”.
Some commentators have questioned whether the regulations
constitute a valid exercise of the Treasury Secretary’s
authority under sec. 7805(a) to issue interpretive regulations.
See, e.g., Staff of Joint Committee on Taxation, Review of
Selected Entity Classification and Partnership Tax Issues, at
13-17 (J. Comm. Print Apr. 18, 1997); McKee et al., Federal
Taxation of Partnerships and Partners, par. 3.08 at 3-102 (3d ed.
1997); Dougan et al., “Check The Box”--Looking Under The Lid, 75
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