PLR 200222010: LLC receives more time to elect corporate tax classification

Plain-English summary

A domestic LLC with one foreign corporate owner intended from inception to be treated as a corporation for federal tax purposes, but it failed to file Form 8832 on time. Under the default classification rule, a single owner domestic eligible entity is disregarded unless it elects otherwise. The IRS found that the LLC qualified for discretionary election relief under the 9100 regulations. It gave the LLC 60 days from the letter date to file Form 8832, with the election effective from its formation date.

Ruling snapshot

• Question: Could the LLC file a late election to be taxed as a corporation from formation?
• Outcome: Approved: file Form 8832 within 60 days, effective from the redacted formation date.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200222010
Washington, DC 20224
Release Date: 5/31/2002
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B1-PLR-163695-01
Date:
February 25, 2002

LEGEND:
X
=
Z
=

State =
Country =
Date 1 =

Dear
:

This letter responds to a letter dated November 8, 2001, submitted on behalf of Z, requesting a ruling that it be granted an extension of time pursuant to section 301.9100-3 of the Procedure and Administration Regulations in which to elect to be treated as an association taxable as a corporation for federal tax purposes under section 301.7701-3(c).

FACTS

According to the information submitted, Z was validly formed as an LLC under State law on Date 1. X, a privately held joint stock company organized under the laws of Country, has been the sole shareholder of Z since its inception. Z, and its shareholder, intended from inception to elect to classify Z as an association taxable as a corporation for federal tax purposes. However, Z inadvertently failed to timely file a Form 8832, Entity Classification Election.

LAW AND ANALYSIS

Section 301.7701-3(a) provides 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. A "business entity" is an entity recognized for federal tax purposes that is not properly classified as a trust under section 301.7701-4 or otherwise subject to special treatment under the Code. Section 301.7701-2(a). An eligible entity with a single owner can elect either to be classified as

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an association (and thus a corporation under section 301.7701- 2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(1)(ii) provides that unless a domestic eligible entity elects otherwise, the entity is disregarded as an entity separate from its owner if it has a single owner.

To elect to be classified other than as provided in section 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 can be effective on the date specified on the Form 8832 or on the date filed if no such date specified. The effective date specified on the 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) provides that the Commissioner has discretion to grant a reasonable extension of time to make an election.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-1(a).

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 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. Section 301.9100-3(a).

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that Z has satisfied the requirements of sections 301.9100-1 and 301.9100-3. As a result, Z 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 effective date of the election will be Date 1. 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. A copy is enclosed for that purpose.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

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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.

In accordance with the 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 purposes

cc: