PLR 200125064: Extra time to elect corporate classification

Plain-English summary

A domestic corporation converted into a state limited partnership and intended to retain corporate treatment for federal tax purposes from the conversion date. The partnership missed the deadline to file the entity classification election. The IRS found that the requirements for discretionary relief were met and granted 60 days from the letter to file Form 8832 with the intended effective date. The letter did not rule on other tax consequences of the conversion.

Ruling snapshot

• Question: Could the limited partnership file a late election to be taxed as a corporation from its conversion date?
• Outcome: Approved: 60 additional days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200125064
Washington, DC 20224
Release Date: 6/22/2001
ndex Number: 9100.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B01-PLR-127293-00
Date:
March 27, 2001

Legend

X =

Y =

State =

Date 1 =

:

This letter responds to a letter, dated November 22, 2000, written on behalf of X, requesting a ruling that X be granted an extension of time pursuant to section 301.9100-3 of the Procedure and Administration Regulations to file an election to be treated as a corporation for federal tax purposes under section 301.7701-3(c)

FACTS

According to the information submitted, on Date 1, Y, a domestic corporation, converted to X, a State limited partnership. X intended to elect to be treated as an association taxable as a corporation for Federal tax purposes as of Date 1. However, X failed to file the election timely.
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LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, 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 as provided in this section. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under section 301.7701-2(b)(2)) or a partnership.

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

Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to be classified other than as provided under section 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the applicable service center.

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under section 301.7701-3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed.

Under section 301.9100-1(c) the Commissioner may 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 Code, except subtitles E, G, H, and I, if the taxpayer demonstrates to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting the relief will not prejudice the interests of the government.

Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 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 section 301.9100-2. Requests for relief under section 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.
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CONCLUSIONS

Based solely on the facts and representations submitted, we conclude that the requirements of section and 301.9100-3 have been satisfied. Accordingly, X is granted an extension of time of 60 days from the date of this letter to file Form 8832, effective on Date 1, with the appropriate service center. A copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as specifically set forth above, we express no opinion concerning the federal income 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) provides that it may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office a copy of this letter is being sent to your authorized representative.

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

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