PLR 200839003: LLC may file late corporate classification and S elections

Plain-English summary

A state-law limited liability company intended to be treated as an S corporation from a specified date but did not timely file either its corporate classification election or its S election. The IRS found that the entity met the standards for discretionary filing relief. It granted 60 days to file Form 8832 and elect association status retroactive to the intended date. It also recognized S corporation status from that date if the entity otherwise qualifies and files Form 2553 within the same 60-day period.

Ruling snapshot

• Question: May the LLC make late corporate-classification and S corporation elections effective on the intended date?
• Outcome: Approved. It has 60 days to file Forms 8832 and 2553, subject to S corporation eligibility.
• Key authorities: IRC § 1362; 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: 200839003
Third Party Communication: None
Release Date: 9/26/2008
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03, 7701.00-00,
------------------------, ID No. -------------
Telephone Number:
9100.00-00
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Refer Reply To:
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CC:PSI:B1
------------------------------------------------- PLR-101743-08
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Date:
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June 23, 2008

Legend:

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

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

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

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

This letter responds to your letter dated August 27, 2007, submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file a late Form 8832, Entity Classification Election, to treat X as an association taxable as a corporation, and under § 1362(b)(5) of the Internal Revenue Code to file a late Form 2553, Election by a Small Business Corporation, to treat X as an S corporation.

Facts

The information submitted states that X is organized as a limited liability company under the laws of State. X intended to be treated as an S corporation for federal tax purposes effective Date 1. However, X did not timely file the Form 8832 and Form 2553.

Law and Analysis

Section 301.7701-3(a) of the Procedure and Administration Regulations provides that a business entity that is not classified as a corporation under § 301.7701-2(b)(1), (3), (4),
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(5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification.

Section 301.7701-3(b)(2)(i) provides that, except for certain existing entities described in § 301.7701-3(b)(3), unless a domestic eligible entity elects otherwise, the entity is 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) by filing Form 8832 with the appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified. The date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed.

Under § 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 E, G, H, and I. Section 301.9100-1(b) defines the term "regulatory election" as including an election whose deadline is prescribed by a regulation published in the Federal Register.

Sections 301.9100-1 through 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 § 301.9100-2. Requests for relief under § 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.

Section 1362(a) of the Code provides that a small business corporation may elect to be an S corporation.

Section 1362(b) provides the rule on when an S election will be effective. If an S election is made within the first two and one-half months of a corporation's taxable year, then the corporation will be treated as an S corporation for the year in which the election is made. If the election is made after the first two and one-half months of a corporation's taxable year, then the corporation will not be treated as an S corporation until the taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if no election is made pursuant to § 1362(a), or, if made, the election is made after the date prescribed for making such an election, and the Secretary determines there was reasonable cause for the failure to timely make the
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election, then the Secretary may treat such an election as timely made for such taxable year and effective as of the first day of that tax year.

Conclusion

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 are satisfied. As a result, X is granted an extension of time of 60 days from the date of this letter to make a corporate classification election by filing a Form 8832, effective Date 1, with the appropriate service center. A copy of this letter should be attached to the election. A copy of this letter is attached for this purpose.

Further, we conclude that X will be recognized as an S corporation effective Date 1, provided that X otherwise qualifies as a subchapter S corporation and within 60 days from the date of this letter, X submits a properly completed Form 2553, with a copy of this letter attached, to the relevant service center.

Except as specifically set forth above, no opinion is expressed or implied as to the federal income tax consequences of the transaction described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether X is, in fact, an S Corporation for federal tax purposes.

This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the 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 will be sent to your authorized representative.

Sincerely,

William P. O’Shea

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

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

cc: