PLR 200720008: Business trust gets more time to elect corporate tax status

Plain-English summary

A business trust intended to be treated as a corporation for federal tax purposes from the date it was organized. It missed the deadline to file Form 8832 because of inadvertence. The IRS found that the trust met the requirements for discretionary filing relief under Treas. Reg. § 301.9100-3. It granted 60 days from the ruling date to file Form 8832 electing corporate classification from the organization date, with a copy of the ruling attached. The IRS did not address other tax consequences.

Ruling snapshot

• Question: May the business trust elect corporate tax classification after the ordinary filing deadline?
• Outcome: Approved; it has 60 days to file Form 8832 with the ruling.
• 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: 200720008
Third Party Communication: None
Release Date: 5/18/2007
Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 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:B03
PLR-136482-06
Date: February 7, 2007

LEGEND

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

Date 1 = ---------------------------

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

This letter responds to a letter dated July 18, 2006, and subsequent correspondence, written on behalf of X by its authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to elect to be classified as an association taxable as a corporation under § 301.7701-3.

FACTS

The information submitted states that X was organized as a business trust under the laws of State on Date 1. X intended to be treated as an association taxable as a corporation for federal tax purposes, effective Date 1. However, due to inadvertence, Form 8832, Entity Classification Election, was not timely filed.
PLR-136482-06
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LAW AND ANALYSIS

Section 301.7701-2(a) provides that the term “business entity ” is any entity recognized for federal tax purposes that is not properly characterized as a trust under § 301.7701-4.

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. 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. An eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(1) provides that except as provided in § 301.7701-3(b)(3), unless the entity elects otherwise, a domestic eligible entity is a partnership if it has two or more members; or, 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 Form 8832 with the service center designated on 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 such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not 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 310.9100-3 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.
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Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.

CONCLUSION

Based solely on the information 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 treated as an association taxable as a corporation for federal tax purposes, effective Date 1. A copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code.

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

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

/s/

William P. O’Shea
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)

Copy of this letter
Copy for § 6100 purposes