PLR 200413002: LLC gets extension to elect partnership tax treatment

Plain-English summary

A limited liability company had elected to be taxed as a corporation from formation. It later intended to change its classification to a partnership but missed the Form 8832 filing deadline. The IRS granted an extension allowing the company to file a partnership election effective on the requested date. The company had to file Form 8832 within 60 days of the ruling letter. The IRS did not address other tax consequences of the classification change.

Ruling snapshot

• Question: Could the LLC make a late election to change from corporate to partnership tax classification?
• Outcome: Approved, conditioned on filing Form 8832 within 60 days.
• 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
Washington, DC 20224
Number: 200413002
Release Date: 03/26/2004
Index Number: 7701.02-00; 9100.00-00

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Person To Contact:
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Refer Reply To:
CC:PSI:B03 – PLR-107823-03
Date:
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December 12, 2003

Legend

Taxpayer = -----------------------------------------------
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Members = ------------------------------------------------
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State = -------------

Date 1 = ------------------

Dear -----------------:

This letter responds to your letter dated January 31, 2003, and supplemental correspondence, requesting a ruling under § 301.9100-3(a) of the Procedure and Administration Regulations that Taxpayer be granted an extension of time to make an election to be treated as a partnership for federal income tax purposes.

Facts

According to the representations submitted, Taxpayer was formed as a State limited liability company and filed a Form 8832, Entity Classification Election, electing to 2
PLR-107823-03

be treated as an association effective its date of formation. Taxpayer intended to change its classification to that of a partnership effective Date 1, but failed to file a Form 8832 making that change on a timely basis.

Law and Application

Section 301.7701-2(a) generally provides that a business entity is any 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 301.7701-3(a) further provides that an eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(a) provides that so long as a business entity is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity), it may elect its classification for federal tax purposes. Section 301.7701-3(b)(1)(i) provides that, unless the entity elects otherwise, a domestic eligible entity is a partnership if it has two or more members.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b) by filing a Form 8832 with the appropriate service center. Under § 301.7701-3(c)(1)(iii), this election 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 date specified on Form 8832 cannot 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.

Section 301.7701-3(c)(1)(iv) provides in pertinent part that, if an eligible entity makes an election under § 301.7701-3(c)(1)(i) to change its classification, the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election. However, an election by a newly formed eligible entity that is effective on the date of formation is not considered a change for purposes of this paragraph.

Under § 301.9100-1(c), the Commissioner has discretion to 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.

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 301.9100-2 provides automatic extensions of time for making certain 3
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elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Section 301.9100-3(a) provides that requests for relief will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government.

Conclusion

Based on the facts represented, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, Taxpayer is granted an extension of time to file a Form 8832 electing partnership treatment effective Date 1. The Form 8832 must be filed with the appropriate service center within 60 days of the date of this letter and a copy of this letter should be attached to Form 8832. A copy is enclosed for this purpose.

Except for the specific ruling above, no opinion is expressed or implied concerning the federal income tax consequences of the facts of this case under any other provision of the Internal Revenue Code.

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 a power of attorney on file with this office, a copy of this letter is being sent to the requested tax representative.

Sincerely,

/s/
Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries)

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