PLR 200413006: Partnership receives time to elect corporate tax classification

Plain-English summary

An S corporation's successor converted into a limited partnership and intended to be taxed as a corporation from the conversion date. It failed to file the entity classification election on time. The IRS granted 60 days from the letter date to file Form 8832 with that effective date. The ruling addressed the late classification election and expressly did not decide whether the successor qualified as a small business corporation.

Ruling snapshot

• Question: Could the limited partnership file a late election to be taxed as a corporation from its conversion date?
• Outcome: Approved, conditioned on filing Form 8832 within 60 days.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-1, 301.9100-3; IRC § 1361(b) (eligibility reserved).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200413006
Release Date: 03/26/2004
Index Number: 7701.00-00, 9100.00-00

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Person To Contact:
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-----------, ID No. -------------
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Telephone Number:
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Refer Reply To:
CC:PSI:B01 – PLR-144341-03
Date:
Dec 11 2003

Legend:

X = ------------------------
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D = -------------------

State = ---------

Dear -------------

This letter responds to the letter dated July 17, 2003 and related correspondence, written on behalf of X, requesting an extension of time under ' 301.9100-1 and ' 301.9100-3 of the Procedure and Administration Regulations to file an entity classification election under § 301.7701-3(c).

FACTS

The information submitted discloses that, on D, a predecessor S corporation converted to X, a State limited partnership. X intended to elect to be treated as an association taxable as a corporation for federal tax purposes as of D. However, X inadvertently failed to file the proper election.

LAW AND ANALYSIS

Section 301.7701-3(a) 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 2

elect its classification for federal tax purposes. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification.

Section 301.7701-3(b)(1)(i) provides that unless a domestic eligible entity elects otherwise, the 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 Form 8832, Entity Classification Election, 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. The date specified on Form 8832 cannot be more than 75 days prior to 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 E, G, H, and I. Section 301.9100-1(b) defines the term "regulatory election" as including an election whose deadline is prescribed by a regulation published in the Internal Revenue Bulletin.

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 § 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.

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that X has satisfied the requirements of '' 301.9100-1 and 301.9100-3 and, therefore, it is granted an extension of time of sixty (60) days from the date of this letter to file a Form 8832 to elect to be treated as an association taxable as a corporation, effective D. 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 tax consequences of the facts described above under any other provision of the Internal Revenue Code. Specifically, we express no opinion as to whether or not X would qualify as a small business corporation as defined in § 1361(b).
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This ruling is directed only to the taxpayer 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 mailed to your authorized representative.

Sincerely,

/s/ Heather C. Maloy

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

Enclosures (2)

Copy of this letter
Copy for ' 6110 purposes

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