PLR 200629020: LLC gets more time to elect partnership tax treatment

Plain-English summary

An LLC initially elected corporate tax treatment, then intended to change its classification to a partnership. It missed the deadline to file Form 8832 for the intended effective date. The IRS found that the LLC met the requirements for discretionary filing relief under Treasury Regulation sections 301.9100-1 and 301.9100-3. It gave the LLC 60 days from the ruling date to file Form 8832 for partnership treatment effective on the requested date, with a copy of the ruling attached.

Ruling snapshot

• Question: Can the LLC file a late Form 8832 to elect partnership classification from its intended effective date?
• Outcome: Approved, with 60 days to file the election.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200629020
Third Party Communication: None
Release Date: 7/21/2006
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:1
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PLR-158434-05
Date:
April 10, 2006
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Legend

LLC = -------------------------------------------
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D1 = --------------------------

D2 = --------------------------

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

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

This responds to a letter dated November 16, 2005, together with subsequent correspondence, submitted on behalf of LLC, requesting that LLC be given an extension of time under section 301.9100-3 of the Procedure and Administration Regulation to file an election to be classified as a partnership for federal tax purposes.

FACTS

According to the information submitted, LLC was formed on D1 under the laws of State. LLC elected to be treated as an association, taxable as a corporation for federal tax purposes, effective D1. On D2, LLC intended to elect to be classified as a partnership for federal tax purpose. However, the Form 8832 Entity Classification Election was not timely filed.
PLR-158434-05
2

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification. Section 301.7701-3(b)(1)(i) provides that unless a domestic eligible entity elects otherwise, the entity is a partnership if it has two or more members.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under section 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the appropriate service center. Under section 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 section 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 301.9100-1 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 301.9100-2 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 section 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 LLC has satisfied the requirements of sections 301.9100-1 and 301.9100-3 and, therefore, is granted an extension of time of sixty (60) days from the date of this letter to file a Form 8832 to elect to be treated as a partnership, effective D2. A copy of this letter should be attached to the election. A copy is enclosed for that purpose.
PLR-158434-05
3

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

Sincerely,

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

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

cc: