QUESTION: Can an IBC make an election to be treated as a disregarded
entity by the IRS?

REPLY: Probably.

For those not familiar with the election to be treated as a
disregarded entity, the IRS permits certain eligible entities to
choose whether it will be taxed as a corporation or as a partnership
(multiple owners) or as a disregarded entity (one owner). Certain
types of entities referred to as "per-se" corporations are not
eligible to make this election.

As I understand it, an IBC (International Business Company) is not
allowed to transact business in the host country other than to provide
administrative or investment services to entities in other countries.
Therefore, an IBC will rarely be an in-eligible entity for the
check-the-box election. Translation; an IBC will be an eligible entity
to make an election to be a disregarded entity for U.S. tax purposes.
If the entity has more than one owner it will be treated as a foreign
partnership for U.S. tax purposes. If it has only owner, it will be
disregarded and the income and expenses will be reported on a Schedule
C (except for certain investment income) for the U.S. owner.

A corporation will usually be treated as a resident of the host
country and will be able to transact business in that country, as well
as in other countries. Certain types of corporations in various
countries are not eligible to make an election to be treated as a
non-corporation for U.S. tax purposes. These entities are listed in
IRS Reg. Section 301.7701-2. I haven't been able to find a copy of
that regulation on the IRS web site, but one is available at
http://taxalmanac.org/index.php/Reg._301.7701-2

An eligible entity is one that is NOT on the IRS list.

South American corporations that are described as a Sociedad Anonima
or S.A. corporation are not eligible to make an election to be taxed
as a partnership or disregarded entity.

Further details are provided in the instructions to Form 8832, which
is used to make the election. The election is made by the various U.S.
shareholders (or members in the case of a foreign LLC) and should be
made within 75 days after forming the entity.

Vern