PLR 200722016: Entity gets more time to elect corporate tax classification

Plain-English summary

Members of an entity intended to elect treatment as a corporation when it was formed, but its Form 8832 was not filed on time. The IRS found that the entity met the standards for an extension of time under the election relief regulations. It gave the entity 60 days from the letter date to file Form 8832, electing corporate classification effective on its formation date. A copy of the letter must be attached to the election. The IRS gave no opinion on other federal tax consequences.

Ruling snapshot

• Question: Could the entity file a late election to be taxed as a corporation from formation?
• Outcome: Yes, if it files Form 8832 within 60 days.
• 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: 200722016
Third Party Communication: None
Release Date: 6/1/2007
Date of Communication: Not Applicable
Index Number: 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-149535-06
Date: February 21, 2007
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X = -------------------------------
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P = --------------------------------------------------------------------

Members = --------------------
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State = -----------

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

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

This letter responds to a letter dated October 12, 2006, and subsequent correspondence, submitted 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 an association taxable as a corporation under § 301.7701-3 effective d1.

FACTS

According to the information submitted, X was formed on d1 as a P under the laws of State. The Members of X intended that X be treated as an association taxable
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as a corporation for federal tax purposes effective d1. However, due to inadvertence, X failed to file timely a Form 8832, Entity Classification Election.

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.

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 (i) a partnership if it has two or more members; or (ii) 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 under § 301.7701-3(b), or to change its classification, 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 301.9100-3 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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in § 301.9100-3(e)) 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
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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 to elect to be classified as an association taxable as a corporation for federal tax purposes effective d1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

Except as expressly set forth above, no opinion is expressed or implied concerning the federal tax consequences of the facts discussed 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.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

Sincerely,

/s/

WILLIAM P. O'SHEA
Associate Chief Counsel
(Passthroughs & Special Industries)

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