PLR 200703004: Late LLC partnership election receives 60-day filing extension

Plain-English summary

A two-member LLC had elected to be taxed as a corporation and later intended to change to partnership tax treatment. It missed the Form 8832 deadline for that change. The IRS granted 60 days to file the form with the intended effective date because the regulatory relief requirements were satisfied. A copy of the ruling was to accompany the form, and other eligibility for the election was not decided.

Ruling snapshot

• Question: Can the LLC obtain more time to elect partnership classification?
• Outcome: Approved, with a 60-day filing extension.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200703004
Release Date: 1/19/2007
Index Number: 9100.31-00

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Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:3 – PLR-109756-06
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Date: October 17, 2006

X = -------------------------
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A = --------------------------------------------
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B = ----------------
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State = ---------

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

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

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

This letter responds to a letter dated January 31, 2006, and subsequent correspondence, 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 a partnership under ' 301.7701-3.

FACTS

According to the information submitted, X was formed on d1 as a limited liability company under the laws of State. X has two members, A and B. X elected to be treated as an association taxable as a corporation for federal tax purposes effective d1. On d2, X intended to elect to be classified as a partnership for federal tax purposes. However, a Form 8832, Entity Classification Election, electing to be treated as a partnership was not timely filed.
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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. Under § 301.7701-3(a), 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(b)(1) provides that, unless an 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 in ' 301.7701-3(b), or to change its classification, 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 301.7701-3(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 § 301.7701-3(c)(1)(iv).

Section 301.9100-1(c) provides that the Commissioner may 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 provides extensions 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
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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 a partnership for federal tax purposes effective d2. 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 representative.

Sincerely,

/s/

William P. O'Shea
Associate Chief Counsel
(Passthroughs and Special Industries)

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