PLR 200125028: Single-member company gets more time to elect corporate classification

Plain-English summary

The owner of a single-member company intended it to be taxed as a C corporation, but did not know that Form 8832 was required within the ordinary filing window. The form was not filed. Applying the discretionary relief rules for late regulatory elections, the IRS found that the requirements for an extension were met. It gave the company 60 days from the ruling letter to file its corporate classification election. The IRS did not rule on other federal tax consequences.

Ruling snapshot

• Question: Could the company file a late election to be taxed as a corporation?
• Outcome: Approved: the company received 60 days to make the election.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200125028
Washington, DC 20224
Release Date: 6/22/2001
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-125693-00
X = Date:
March 9, 2001

A =

D1 =

D2 =

State =
Dear
:

This letter responds to your letter dated November 8, 2000, and subsequent correspondence, written on behalf of X, requesting that the Service grant X an extension of time to make an election under § 301.7701-3(c) of the Procedure and Administration Regulations.

The information submitted states that X was created D1 in State. Effective D2, A, as the sole member of X, intended for X to be classified as a C corporation for federal tax purposes. A was not advised and was not aware that, in order for X to be taxed as a corporation as of D2 for federal tax purposes, an election needed to be made by filing Form 8832, Entity Classification Election, within 75 days of D2. Therefore, a Form 8832 was not filed for X.

Section 301.7701-3(b) provides guidance on the classification of domestic eligible entities for federal tax purposes. Section 301.7701-3(b)(1)(ii) provides that generally, a domestic eligible entity with a single owner is disregarded as a separate entity unless the entity elects otherwise.
Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the appropriate service center. Under § 301.7701-3(c)(1)(iii), the election under § 301.7701-3(c)(1)(i) will be effective on the date specified on the Form 8832 or on the date filed if no such date is specified on the form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed and cannot be more than 12 months after the date on which the election is filed.

-2-
Mr. Lewis A. Aldrich, CPA

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time, under the rules set forth in §§ 301.9100-2 and 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.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 sets forth the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based on the information submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of time for making the election to be classified as an association taxable as a corporation for federal tax purposes until 60 days following the date of this letter. The election should be made by following the procedure set forth in § 301.7701-3(c), including filing Form 8832. A copy of this letter should be attached to the form.
Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code.

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

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X.

Sincerely yours,
Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes