PLR 200603005: Acquired LLC gets time to elect corporate tax status

Plain-English summary

A corporate group acquired an LLC and its subsidiaries and intended the LLC to be taxed as a corporation. The LLC inadvertently missed the deadline to file Form 8832. The IRS found that the requirements for late election relief were met and gave the LLC 60 days from the ruling date to file the form for the requested effective date. The ruling grants filing time only and does not decide whether the LLC otherwise qualifies to make the election.

Ruling snapshot

• Question: Could the LLC file a late election to be classified as a corporation?
• Outcome: Approved a 60-day filing extension.
• 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: 200603005
Third Party Communication: None
Release Date: 1/20/2006
Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
------------------------------------------- -------------------, ID No. -------------
--------------------------------------------------
Telephone Number:
---------------------------
--------------------
--------------
Refer Reply To:
------------------------
CC:PSI:B03
PLR-123925-04
Date: September 30, 2005
-

X = --------------------------------------------
-----------------------------------------

Y = ------------------------------
-----------------------------------------

A = --------------------------------------------
-----------------------------------------

B = ----------------------------

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

Country = ---------

d1 = ---------------------

d2 = ----------------------

d3 = ----------------------

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

This letter responds to a letter dated April 28, 2004, written on behalf of X, requesting a ruling under § 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations that X be granted an extension of time to file an election to be classified as an association taxable as a corporation under § 301.7701-3.

FACTS

PLR-123925-04
2

According to the information submitted, X was formed on or about d1 as a limited liability company under the laws of State. X owned 100 percent of A, a U.S. corporation, and 99.993 percent of B, a Country corporation. As of close of business on d2, X and its two subsidiaries were acquired by a consolidated group of corporations whose common parent is Y. Y intended X to be classified as an association taxable as a corporation for federal tax purposes. However, due to inadvertence, X failed to file timely Form 8832, Entity Classification Election.

LAW AND ANALYSIS

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) can elect its classification for federal tax purposes as provided in § 301.7701-3.

Section 301.7701-3(b)(1) provides that, 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 a Form 8832 with the service center designated on the 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 date is specified on the election form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed and cannot be more than 12 months after the date on which the election 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

PLR-123925-04
3

Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the Government.

CONCLUSION

Based on the facts submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 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 with the appropriate Service Center and elect to be classified as an association taxable as a corporation for federal tax purposes effective d3. A copy of this letter should be attached to the Form 8832.

Except as specifically set forth above, no opinion is expressed or implied concerning the federal tax consequences of the transaction described above under any other provision of the Code. Specifically, no opinion is expressed or implied as to whether X is otherwise eligible to make the election.

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 a power of attorney on file with this office, we are sending a copy of this letter to X=s authorized representatives.

Sincerely,

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

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