PLR 200506002: LLC given extra time to elect corporate tax treatment

Plain-English summary

A single-owner LLC intended to elect treatment as a corporation for federal tax purposes, but inadvertently missed the deadline for Form 8832. Its owner was a U.S. corporation. The IRS found that the LLC satisfied the requirements for discretionary extension relief under the Treasury regulations. It allowed the LLC 60 days from the ruling date to file Form 8832 with its requested effective date. The ruling did not address other federal tax consequences.

Ruling snapshot

• Question: Could the LLC file a late election to be taxed as a corporation?
• 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: 200506002
Third Party Communication: None
Release Date: 2/11/05
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:3
PLR-127028-04
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Date:
November 04, 2004

LEGEND

X = ------------------------------------------------------------------------------------------------------
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Y = ------------------------------------------------------------------------------------------------------
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State = ---------

D1 = --------------------------

D2 = ----------------------

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

This letter responds to your letter, dated May 13, 2004, and subsequent correspondence on behalf of X, as X’s authorized representative, requesting an extension of time under ' 301.9100-3 of the Procedure and Administration Regulations for X to file an election to be classified as an association taxable as a corporation for federal tax purposes effective D2.

FACTS

According to the information submitted, X was formed as a limited liability company under the laws of State on D1. X’s sole owner, Y, a U.S. corporation, intended to elect under ' 301.7701-3 to classify X as an association taxable as a corporation for federal tax purposes, effective D2. However, due to inadvertence, X failed to file a timely Form 8832, Entity Classification Election.
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LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, 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.

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

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided in ' 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the service center designated on the Form.

Section 301.7701-3(c)(1)(iii) provides that an election under ' 301.7701-3(c)(1)(i) will be effective on the date specified on Form 8832 or on the date filed if no such date is specified on the form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date the form is filed and cannot be more than 12 months after the date on which the form is filed.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in '' 301.9100-2 and 301.9100-3, 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. Section 301.9100-1(b) defines a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 sets forth the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of ' 301.9100-2. Under ' 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) that granting relief will not prejudice the interests of the Government.

CONCLUSIONS
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Based on the facts submitted and representations made, we conclude that the requirements of ' 301.9100-3 have been satisfied. As a result, X is granted an extension of time of 60 days from the date of this letter to file Form 8832 to elect to be classified as an association taxable as a corporation for federal tax purposes effective D2. A copy of this letter should be attached to the Form 8832. A copy is attached for that purpose.

Except as specifically set forth above, no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the Code.

This ruling is directed only to the taxpayer on whose behalf it was requested. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Under a power of attorney on file with this office, we are sending a copy of this letter to X.

Sincerely,

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

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

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