PLR 200435004: Entity receives more time to elect corporate tax status

Plain-English summary

A business entity intended to be taxed as a corporation from the date it was formed, but it did not file Form 8832 on time. It asked the IRS for more time to make the entity classification election. Based on the submitted facts and representations, the IRS found that the requirements for late-election relief were met. It gave the entity 60 days from the letter date to file Form 8832 and elect corporate treatment effective from its formation date. The letter did not decide other tax consequences.

Ruling snapshot

• Question: May the entity make a late election to be taxed as a corporation from its formation date?
• Outcome: Approved, with 60 days to file Form 8832.
• 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
Washington, DC 20224
Number: 200435004
Release Date: 8/27/04
Index Number: 1362.01-03, 9100.31-00

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Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01 – PLR-107715-04
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Date:
May 06, 2004

Legend

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

State = ------------------

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

This letter responds to your letter dated January 23, 2004 submitted on behalf of X requesting a time extension under section 301.9100-3 of the Procedure and Administration Regulations for X to elect to be treated as an association taxable as a corporation for federal tax purposes.

FACTS

According to the information submitted, X was formed on Date 1 under State law.
X intended to elect to be treated as an association taxable as a corporation effective Date 1. However, Form 8832, Entity Classification Election, inadvertently was not timely filed.

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. An eligible entity with more than one owner can elect to be classified an association.

Section 301.7701-3(b)(1) provides that an eligible entity with more than one owner will be a partnership unless it elects otherwise.

PLR-107715-04
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Section 301.7701-3(c)(1)(i) allows an eligible entity to elect to be classified other than as provided under section 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the service center designated on that Form. Section 301.7701-3(c)(1)(iii) provides that all such elections become effective on the date specified by the entity on Form 8832 or on the date filed if no effective date is specified. The specified effective date must not be earlier than 75 days prior to the filing date of Form 8832, nor later than twelve months after the filing date.

Section 301.9100-1(c) gives the Commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sections 301.9100-2 and 301.9100-3. Under section 301.9100-1(b), a regulatory election includes an election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-3 sets forth the standards which the Commissioner uses to determine whether to grant a discretionary extension of time. These standards indicate that the Commissioner will grant relief when the taxpayer provides evidence proving to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of Government.

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that X has satisfied the requirements of sections 301.9100-1 and 301.9100-3. As a result, X is granted an extension of time of 60 days from the date of this letter to file Form 8832 with the appropriate service center and elect to be treated as an association taxable as a corporation for federal tax purposes effective Date 1. A copy of this letter should be attached to the election.

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) provides that it may not be used or cited as precedent.

Sincerely,

/s/ Heather C. Maloy

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

Enclosures (2)
Copy of this letter
Copy for section 6110 purposes

cc: