PLR 200647012: LLC may file late election to switch to partnership classification

Plain-English summary

An LLC elected corporate tax classification when it was formed and later intended to elect partnership classification. It did not file Form 8832 on time for the later change. Based on the submitted facts and representations, the IRS found that the requirements for an extension were met. It gave the LLC 60 days from the ruling date to file Form 8832 electing partnership treatment from the requested date, with a copy of the letter attached.

Ruling snapshot

• Question: Could the LLC file a late election to change from corporate to partnership classification?
• Outcome: Approved; Form 8832 was due within 60 days.
• 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: 200647012
Third Party Communication: None
Release Date: 11/24/2006
Date of Communication: Not Applicable

Index Number: 9100.00-00, 7701.00-00
Person To Contact:
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Refer Reply To:
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CC:PSI:B02
PLR-118054-06

Date:
August 09, 2006

Legend

X = -----------------------
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State = ----------------

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

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

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

This is in response to a letter dated March 13, 2006, submitted on behalf of X by its authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election to be classified as a partnership for federal income tax purposes.

FACTS

The information submitted states that X was formed as a State limited liability company on D1. X elected to be treated as an association taxable as a corporation for federal tax purposes, effective D1. Effective D2, X intended to elect to be classified as a partnership for federal tax purposes. However, a Form 8832, Entity Classification Election, for X to elect to be treated as a partnership effective D2 was not timely filed.

LAW AND ANALYSIS

Section 301.7701-2(a) generally provides that a business entity is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code.

PLR-118054-06
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Section 301.7701-3(a) further provides that an eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under
§ 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(a) provides that so long as a business entity is not classified as a corporation under § 301.7701-2(b)(1), or (3)-(8) (an eligible entity), it may elect its classification for federal tax purposes. Section 301.7701-3(b)(1)(i) provides that, unless the entity elects otherwise, a domestic eligible 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 § 301.7701-3(b) by filing a Form 8832 with the appropriate service center. Under § 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 on the election form. The 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 301.7701-3(c)(1)(iv) provides in relevant part that, if an eligible entity makes an election under § 301.7701-3(c)(1)(i) to change its classification, the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election. However, an election by a newly formed eligible entity that is effective on the date of formation is not considered a change for purposes of this paragraph.

Section 301.9100-1(c) provides that 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 regulatory election as including an election with a deadline prescribed by a regulation published in the Internal Revenue Bulletin.

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 § 301.9100-2.

Section 301.9100-3(a) provides that request 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.

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CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an extension of sixty (60) days from the date of this letter to elect to be classified as a partnership for federal income tax purposes, effective D2. The election should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the election.

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(s) 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 the power of attorney on file with this office, a copy of this letter will be sent to X’s first and second authorized representatives.

Sincerely,

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

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