PLR 200737031: LLC gets more time to elect corporate tax treatment

Plain-English summary

An LLC intended to be treated as a corporation for federal tax purposes from its formation date but missed the election deadline. It represented that allowing a late election would not prejudice the government and that the request did not rely on hindsight. Based on those facts, the IRS gave it 60 days from the ruling date to file Form 8832 with the intended effective date. The ruling did not decide any other federal tax consequences.

Ruling snapshot

• Question: Could the LLC file a late election for corporate tax classification effective from formation?
• Outcome: Approved. The IRS granted a 60-day extension to file Form 8832.
• 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: 200737031
Third Party Communication: None
Release Date: 9/14/2007
Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-114750-07
Date: June 6, 2007

Legend:

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

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

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

This letter responds to a request, dated March 12, 2007, written on behalf of X, requesting a written determination granting X an extension of time pursuant to section 301.9100-3 of the Procedure and Administration Regulations to file an election to be treated as a corporation for federal tax purposes under section 301.7701-3(c).

Facts

According to the information submitted, on Date 1, X formed a limited liability company (“LLC”) under the laws of State. It was always the intention to treat X as a corporation from Date 1. However, X failed to file the election timely. X represents that a favorable ruling will not prejudice the interests of the Government, nor is the taxpayer using hindsight in requesting this extension.

Law and Analysis

Section 301.7701-3(a) provides, in part, that a business entity that is not classified as a corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible party) can elect its classification for federal tax purposes as provided in this section.
PLR-114750-07
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Section 301.7701-3(b)(1)(ii) provides, in part, that unless a domestic eligible entity elects otherwise, it is disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to be classified other than as provided under section 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the applicable service center.

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under section 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.

Under section 301.9100-1(c), 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, if the taxpayer demonstrates to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting the relief will not prejudice the interests of the government.

Section 301.9100-2 and 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 section 301.9100-2. Requests for relief under section 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.

Conclusion

Based solely on the facts and representations submitted, we conclude that the requirements of sections 301.7701 and 301.9100-3 have been satisfied. Accordingly, X is granted an extension of time of 60 days from the date of this written determination to file Form 8832, effective on Date 1, with the appropriate service center. A copy of this letter should be attached to the election. A copy is enclosed for such a purpose.

Except as specifically set forth above, we express no opinion concerning the federal income tax consequences of the facts described above under any other provision of the Code.
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This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

Sincerely,

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

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