PLR 200147019: Single-owner entity granted late corporate classification election

Plain-English summary

A single-owner entity and its owner intended corporate tax classification from the entity's formation, but they missed the deadline to file Form 8832. Without an election, the entity's default classification would be disregarded from its owner. The IRS found that the entity met the requirements for discretionary late-election relief and granted 60 days from the letter's date to file Form 8832, effective from formation. The letter did not decide other tax consequences of the entity's transactions.

Ruling snapshot

• Question: Could the entity file a late election to be taxed as a corporation from its formation date?
• Outcome: Approved: Form 8832 could be filed within 60 days.
• 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: 200147019
Washington, DC 20224
Release Date: 11/23/2001
Index Number: 9100.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-117553-01
Date:
July 25, 2001
X =

A =

D1 =

State =

Dear :

This letter responds to a letter dated March 21, 2001, and subsequent correspondence, submitted on behalf of X by X’s authorized representative, requesting that X be given an extension of time in which to elect to be treated as an association taxable as a corporation for federal tax purposes as of D1.
The information submitted states that X is a limited liability company formed under the laws of State on D1. A, the sole shareholder of X, intended for X to elect to be treated as an association taxable as a corporation. However, the election to treat X as an association taxable as a corporation was not timely made.

Section 301.7701-3(a) of the Procedure and Administration Regulations provides, in part, that a business entity that is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes as provided in § 301.7701-3. An eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(1) provides, in part, that except as provided in § 301.7701-3(b)(3), unless the entity elects -2-

otherwise, a domestic eligible entity is disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to be classified other than as provided in § 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 § 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 cannot be more that 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.

Section 301.9100-1(c) provides that the Commissioner has the 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 "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 provides 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.

In the present situation, based on the information submitted and the representations made, 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 treated as an association taxable as a corporation for federal tax purposes, effective D1, until 60 days following the date of this letter. The election should be made by following the procedure set forth in Form 8832. A copy of this letter should be attached to the election.

Except as specifically set forth above, no opinion is expressed or implied as to the federal income tax consequences of the transactions described above under any other provision of the Code.
 -3-

This ruling is directed only to the taxpayer on whose behalf it was requested. Section 6110(k)(3) 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’s authorized representative.

Sincerely yours,
PAUL F. KUGLER
Associate Chief Counsel
(Passthroughs & Special Industries)

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