PLR 200146023: Entity gets time to elect corporate tax classification from formation

Plain-English summary

A newly formed entity and its owners intended corporate tax classification from the day the entity began operating, but Form 8832 was not filed on time. The IRS found that the entity satisfied the standards for late election relief under the regulations. It granted 60 days from the ruling date to file Form 8832 with the intended effective date. The ruling addresses only the late classification election and leaves other federal tax consequences unresolved.

Ruling snapshot

• Question: May the entity file a late Form 8832 effective from the date it began operations?
• Outcome: Approved: a 60-day extension to make the corporate classification election.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200146023
Washington, DC 20224
Release Date: 11/16/2001
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:Br.1-PLR-133640-01
Date:
July 20, 2001

Legend:

X
=
State =
D1
=

This letter responds to your June 15, 2001, request for a private letter ruling, submitted on behalf of X, requesting a time extension under § 301.9100-3 of the Procedure and Administration Regulations.

FACTS

According to the information submitted, X was validly formed under State law on D1 and began operations on D1. Further, X and X’s shareholders intended from inception to elect to classify X as a corporation for federal tax purposes. However Form 8832, Entity Classification Election, was not timely filed.

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 such 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 service center designated on the form.

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

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PLR-133640-01

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.

CONCLUSIONS

Based solely on the facts and representations submitted, we conclude that the requirements of sections 301.9100-1 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 with the appropriate service center to have its election effective D1. 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 provisions of the Code.

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

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

Sincerely,
Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2)
Copy of this letter/Copy for section 6110 purposes