PLR 200015030: Entity receives more time to elect corporate tax classification

Plain-English summary

A domestic entity with at least two members intended to be taxed as a corporation but did not timely elect that classification. Under the default rule, such an eligible entity is treated as a partnership unless it elects otherwise. The IRS found that the entity met the standards for late election relief under the section 301.9100-3 regulations. It gave the entity 60 days from the letter's date to file Form 8832 electing association status effective from the requested date. The IRS expressly did not decide whether the entity could qualify as an S corporation.

Ruling snapshot

• Question: May the entity make a late election to be taxed as a corporation from its requested effective date?
• Outcome: Approved: file Form 8832 within 60 days.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Index Number: 9100.00-00 Washington, DC 20224

Number: 200015030
Person to Contact:
Release Date: 4/14/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:Br.1-PLR-118227-99
Date:
January 12, 2000

Legend

X
=

D1
=

D2
=

STATE =

This responds to your representative’s letter dated November 6, 1999, written on behalf of X, requesting a ruling that X be given an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to elect to be treated as a corporation for federal tax purposes for its taxable year beginning D1.

FACTS

Although X intended that it be taxed as a corporation for federal tax purposes as of D1, it failed to elect timely corporate status as of D1. X learned of this failure during D2.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an "eligible entity") can elect its classification for federal tax purposes. A "business entity" is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Code. Section

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301.7701-2(a). An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(b)(1)(i) provides that unless a domestic eligible entity elects otherwise, the entity is a partnership if it has two or more members.

To elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election, with the designated service center. Section 301.7701-3(c)(1)(i). An election can be effective on the date specified on the Form 8832 or on the date filed if no such date is specified. The effective date specified on the Form 8832 cannot be more than 75 days prior to the date the election is filed. Section 301.7701-3(c)(2)(iii).

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in § 301.9100-3 to make a regulatory election. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

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 an election. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government. Section 301.9100-3(a).

CONCLUSIONS

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of time to elect to be taxed as an association as of D1. X has until 60 days from the date of this letter to file Form 8832 with the applicable service center to elect to be treated as an association for federal tax purposes as of D1.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item other than

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those explicitly set forth in this letter. Specifically, no opinion is expressed or implied concerning whether X can be a subchapter S corporation.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file in this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

Signed/Paul F. Kugler
Paul F. Kugler
Assistant Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)
Copy of this letter
Copy for section 6110 purposes