PLR 200606003: Multiowner LLC given time for corporate classification election

Plain-English summary

The current members of a domestic LLC wanted it to be taxed as a corporation from the date they purchased it, but the company missed the Form 8832 election deadline. As a domestic entity with more than one member, it otherwise would be classified as a partnership under the default rules. The IRS found the requirements for late election relief under Treasury Regulation section 301.9100-3 satisfied. It granted the LLC 60 days to file Form 8832 electing corporate classification effective on the redacted purchase date, with a copy of the ruling attached.

Ruling snapshot

• Question: Could the LLC file a late election to be taxed as a corporation from its purchase date?
• 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: 200606003
Third Party Communication: None
Release Date: 2/10/2006
Date of Communication: Not Applicable
Index Number: 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:B01
PLR-117696-05
Date:
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October 25, 2005

Legend:

X -------------------------------------
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State ----------------

D1 --------------------

Dear -------------

This letter responds to your letter requesting a ruling that X be granted an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be treated as an association taxable as a corporation for federal tax purposes.

Facts

According to the information submitted, X is a limited liability company under the laws of State. X was purchased by the current members of X on D1. X intended to be treated as an association taxable as a corporation for federal tax purposes. However, X inadvertently failed to timely file the proper election.

Law and Analysis

Section 301.7701-3(b)(2) provides guidance on the classification of a domestic eligible entity for federal tax purposes. Generally, a domestic eligible entity is treated as

PLR-117696-05
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a partnership if it has two or more members, unless the entity makes an election to be classified otherwise. A domestic eligible entity with two or more members may elect to be classified as an association taxable as a corporation pursuant to the rules under ' 301.7701-3(c). Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date on which the form 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. Section 301.9100-1(b) defines the term Aregulatory election@ as including an election whose due date is prescribed by a regulation published in the Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards that 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 section 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).

Conclusion

Based solely on the facts submitted and the 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 sixty (60) days from the date of this letter to make an election to be treated as an association taxable as a corporation for federal tax purposes effective D1. X should make the election by filing a properly executed Form 8832 with the appropriate service center. A copy of this letter should be attached to the form.

Except as specifically provided herein, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the Code.

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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.

Sincerely,

Heather C. Maloy

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

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

cc: