PLR 200517010: Company gets more time for entity classification election

Plain-English summary

A company and its parent intended the company to be disregarded as a separate tax entity from its formation date, but inadvertently failed to file Form 8832. The IRS granted a 60-day extension under Treas. Reg. § 301.9100-3 to make an entity classification election, requiring the form and a copy of the ruling to be filed within that period. The ruling's conclusion says the election is for treatment as an entity separate from its owner, which conflicts with the request described earlier in the letter. The IRS did not decide whether the company was otherwise eligible to make the election.

Ruling snapshot

• Question: Could the company file a late entity classification election effective from formation?
• Outcome: Approved for a 60-day filing extension; the requested classification and conclusion differ.
• 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: 200517010
Release Date: 4/29/2005
Index Number: 9100.31-00

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Telephone Number:
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Refer Reply To:
CC:PSI:3 – PLR-141785-04
Date:
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January 03, 2005

Company: --------------------------------------------------------
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Parent: -----------------------------------------
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a: ----------------------------

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

This letter responds to a letter dated August 4, 2004, as well as subsequent correspondence, submitted by Company’s Director of Tax, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for Company to elect under § 301.7701-3(c) to be treated as a disregarded entity. Company represents the following facts.

Company and Parent intended that Company be disregarded as an entity separate from its owner effective a, Company’s date of formation. However, due to inadvertence, Company did not file Form 8832, Entity Classification Election.

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) may elect its classification for federal tax purposes. An eligible entity with a single owner can elect to be classified as an association (and thus a corporation under § 301.7701- 2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i)(B) provides in general that, unless it elects otherwise, a foreign eligible entity is an association if all members have limited liability. 2 PLR-141785-04

Section 301.7701-3(c)(1)(i) provides in general 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 applicable service center.

Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701- 3(c)(1)(i) 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 effective date specified on Form 8832 can not 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.

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 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 301.9100-1(a).

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. Section 301.9100- 3(a).

Based on the facts and representations submitted, Company has established that the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied. Consequently, Company is granted an extension of time of 60 days from the date of this letter for electing under § 301.7701-3 to be treated as an entity separate from its owner effective a. Company must file Form 8832 within the extension period with the appropriate service center, with a copy of this letter attached. A copy is enclosed for that purpose.

Except for the specific ruling above, we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the Code. Section 301.9100-1(a) provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election. 3 PLR-141785-04

This ruling is directed only to the taxpayer requesting it. According to § 6110(k)(3) of the Internal Revenue Code, this ruling may not be used or cited as precedent.

Sincerely,

/s/

HEATHER C. MALOY
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures: Copy of this letter
Copy for § 6110 purposes

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