PLR 200518039: Acquired LLC received time to elect corporate classification

Plain-English summary

An entity bought all membership interests in an LLC that had previously been taxed as a partnership. The buyer intended the LLC to elect corporate classification from the acquisition date, but Form 8832 was not filed on time. The IRS found that the requirements for discretionary late election relief were met. It granted the LLC 60 days from the letter date to file Form 8832, effective from the acquisition date, with a copy of the ruling attached.

Ruling snapshot

• Question: Could the LLC make a late election to be taxed as a corporation from its acquisition date?
• Outcome: Approved: a 60-day extension to file Form 8832.
• 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: 200518039
Third Party Communication: None
Release Date: 5/6/2005
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:B03
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PLR-149172-04
Date:
January 07, 2005
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LEGEND

X = ------------------------------------------------------------------------------------------------------
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Y = ------------------------------------------------------------------------------------------------------
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Entity = ---------------------------------------

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

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

This letter responds to a letter dated September 16, 2004, and subsequent correspondence from your authorized representative on behalf of X, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations, for Y to be classified as an association taxable as a corporation for federal tax purposes.

FACTS

According to the information submitted, X is an Entity. X purchased all of the membership interests in Y, a limited liability company, effective D1. Prior to D1, Y was classified as a partnership for federal tax purposes. X intended to elect to treat Y as an association taxable as a corporation effective D1. However, due to inadvertence, Form 8832, Entity Classification Election, was not filed timely.
PLR-149172-04
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LAW AND ANALYSIS

Section 301.7701-3(b)(1) provides guidance on the classification of a domestic eligible entity for federal tax purposes. Under § 301.7701-3(b)(1), unless it elects otherwise, a domestic eligible entity is (i) a partnership if it has two or more members; or (ii) 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 with the service center designated on Form 8832.

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 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) granting relief will not prejudice the interests of the Government.

CONCLUSIONS

Based on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, Y is granted an extension of time of 60 days from the date of this letter to file Form 8832 and elect to be classified as an association taxable as a corporation for federal tax purposes effective
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D1. 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’s authorized representative.

Sincerely,
/s/

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

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

cc: