PLR 200210020: Entity receives extension to elect corporate classification

Plain-English summary

A domestic entity with more than one member intended to be taxed as a C corporation but inadvertently missed the entity classification election. Without an election, the regulation would classify it as a partnership. The IRS found that the entity met the standards for late election relief and gave it 60 days from the ruling date to file Form 8832, effective on its requested date. The ruling did not decide whether the entity otherwise qualified to make the election.

Ruling snapshot

• Question: Could the entity file a late election for corporate tax classification?
• Outcome: Approved: 60 days to file Form 8832 for the requested effective date.
• 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: 200210020
Washington, DC 20224
Release Date: 3/8/2002
Index Number: 9100.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B1-PLR-154777-01
Date:
November 29, 2001

Legend

X =

D1 =
D2 =
State =

This responds to your letter dated, October 1, 2001 in which you requested relief under § 301.9100-1(c) of the Procedure and Administration Regulations for X to file an election under § 301.7701-3(c) to be treated as a C corporation for federal tax purposes.

Facts

According to the information submitted, X, an eligible entity with more than one member, was organized during D1 under the laws of State. X intended at all times to be treated as a C corporation for federal tax purposes, effective D2. Inadvertently, X did not file an election to be treated as a corporation.

Law and Analysis

Section 301.7701-3(b) provides that a business entity that is not classified as a corporation under § 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 an 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 Internal Revenue Code. Section 301.7701-2(a). An eligible entity with at least two members can elect either to be classified as an association (and thus a corporation under § 301.7701- 2(b)(2)) or as a partnership.

Section 301.7701-3(b)(1)(ii) 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 will be effective on the date specified

CC:PSI:B1-PLR-154777-01
2

on the Form 8832 or on the date filed if no such date is specified. The effective date specified on 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) allows the Commissioner to grant a reasonable extension of time for making a regulatory election under the rules set forth in §§ 301.9100-2 and 301.9100-3. Section 301.9100-1(b) defines a regulatory election as an election having a due date 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 automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions for 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).

Conclusion

Based solely on the facts submitted and the representations made, the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an extension of time of sixty (60) days from the date of this letter to elect to be treated as a corporation effective as of D2. The election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the election.

Except as expressly set forth above, no opinion is expressed or implied concerning the tax consequences of the transactions described above under any other provision of the Internal Revenue Code. Specifically, no opinion is expressed concerning whether X is an eligible entity.

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

Pursuant to Power of Attorney on file with this office, a copy of this letter is being sent to the taxpayer.

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