PLR 200515003: Converted entity gets time to elect corporate tax classification

Plain-English summary

A wholly owned subsidiary converted into a new entity whose default federal tax classification was disregarded. The new entity sought to elect treatment as an association taxable as a corporation effective on its conversion date, but needed more time to file Form 8832. The IRS concluded that it met the late election relief standards under Treas. Reg. § 301.9100-3. It granted 60 days from the letter date to file the form with the requested effective date. The ruling does not address other federal tax consequences of the conversion.

Ruling snapshot

• Question: Could the converted entity file a late Form 8832 electing corporate tax classification from its conversion date?
• Outcome: Approved, with a 60-day filing deadline.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200515003
Release Date: 4/15/2005
Index Number: 7701.00-00, 9100.00-00

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Person To Contact:
------------------------------------------------------------ -----------, ID No. -------------
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Telephone Number:
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Refer Reply To:
CC:PSI:B01 – PLR-126207-04
Date:
November 23 2004

Legend:

X = ------------------
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Y = --------------------
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P = --------------------------------
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D = --------------------------

Z = ----------------------------
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Dear --------------:

This letter responds to the letter dated April 30, 2004, and related correspondence, requesting an extension of time, pursuant to § 301.9100-3 of the Procedure and Administration Regulations, to file Form 8832, Entity Classification Election, to elect to treat X as an association taxable as a corporation for federal tax purposes.

FACTS

The information submitted discloses that Y is a first-tier wholly-owned subsidiary of P. Prior to D, Z was a wholly-owned subsidiary of Y and a predecessor of X. On D,

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Z converted to X. X’s default classification is a disregarded entity. X now requests for an extension of time to make a check-the-box election to be treated as an association taxable as a corporation, effective D.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity 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)(ii) provides that, except as provided in § 301.7701- 3(b)(3), unless an entity 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 under ' 301.7701-3(b) by filing 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. The date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed.

Under § 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 Federal Register.

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 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

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treated as an association taxable as a corporation, effective D. The election should be filed with the appropriate service center. A copy of this letter should be attached to the election. A copy of this letter is attached for this purpose.

Except as specifically set forth above, we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the 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.

In accordance with the Power of Attorney on file with this office, copies of this letter are being mailed to X’s authorized representatives.

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

cc--: