PLR 200722021: Entity gets more time to elect corporate tax classification

Plain-English summary

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: 200722021
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:
---------------------------
------------------------, ID No. -------------
-------------------------------------------------
Telephone Number:
-------------------------------------
---------------------
-------------------------------
Refer Reply To:
CC:PSI:B1
PLR-149291-06
Date: February 26, 2007

Legend

X = ---------------------------
-----------------------

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

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

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

This letter responds to a letter dated October 12, 2006 submitted on behalf of X by X’s authorized representative, requesting a ruling under § 301.9100-3(a) of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be classified as a corporation for federal tax purposes.

Facts

X was formed in State on d1. X intended to make an election to be classified as an association taxable as a corporation under § 301.7701-3(b) at the time of incorporation. However, due to inadvertence, Form 8832, Entity Classification Election, was not timely filed.

Law and Analysis

Section 301.7701-1(b) provides that the classification of organizations that are recognized as separate entities is determined under § 301.7701-2, § 301.7701-3 and § 301.7701-4. Section 301.7701-3(a) provides that a business entity that is not classified
PLR-149291-06
2

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.

Section 301.7701-3(b)(1)(i) provides that, except as provided in § 301.7701- (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 a Form 8832 with the service center designated on Form 8832.

Section 301.7701-3(c)(iii) provides that 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 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under 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 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 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 elect to be classified as an association taxable as a corporation for federal income tax purposes, effective d1. 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.
PLR-149291-06
3

Except as specifically set forth herein, we express or imply no opinion 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) 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 is being sent to your authorized representatives.

Sincerely,

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

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