PLR 200901006: LLC that defaulted into partnership status gets 60 days to elect corporate treatment

Plain-English summary

An LLC with more than one member is treated as a partnership unless it files Form 8832 and says otherwise. This LLC wanted corporate treatment from the day it was formed, but nobody filed the form. The default rule took over, and the check-the-box timing rule blocks a fix on the taxpayer's own: an election can only reach back 75 days from the date it is filed.

That deadline lives in a regulation, not the statute, which makes it a regulatory election and puts it inside the section 301.9100-3 relief regime. The standard there is short: the taxpayer acted reasonably and in good faith, and relief does not prejudice the Government. The IRS found both met on the facts submitted.

The result is 60 days from the date of the letter to file Form 8832 electing association status effective from the LLC's formation date, with a copy of the letter attached. The letter is bare-bones and gives no facts about why the filing was missed.

Compare [PLR 0901017](0901017.md), which grants the same association election to an entity whose default was disregarded rather than partnership status, and
[PLR 0901021](0901021.md), which runs the other direction and grants a late election to be disregarded.

Ruling snapshot

• Question: May an LLC that never filed Form 8832 elect association status
  retroactive to its formation date?
• Outcome: Approved. 60 days from the date of the letter to file Form 8832
  effective as of formation.
• Key authorities: Treas. Reg. §§ 301.7701-2(a), 301.7701-2(b), 301.7701-3(a),
  301.7701-3(b), 301.7701-3(c)(1)(i) and (iii), 301.7701-4; Treas. Reg.
  §§ 301.9100-1(b) and (c), 301.9100-2, 301.9100-3(a).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200901006 Third Party Communication: None
Release Date: 1/2/2009 Date of Communication: Not Applicable Person To Contact: Index Number: 7701.00-00, 9100.00-00, --------------------, ID No. ------------- Telephone Number: 9100.31-00
--------------------
Refer Reply To:
------------------------------ CC:PSI:B02
------------------------------------------ PLR-115416-08
----------------------------
---------------------------------------- Date:
September 17, 2008

Legend

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

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

D1 = -------------------

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

This is in response to a letter dated December 24, 2007, and subsequent correspondence submitted by X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election to be classified as an association taxable as a corporation for federal tax purposes.

FACTS

The information submitted states that X was formed as a limited liability company in State on D1. X’s default status was as a partnership for federal tax purposes. X intended to be classified as an association taxable as a corporation for federal tax purposes effective D1. However, a Form 8832, Entity Classification Election, for X to elect to be treated as an association taxable as a corporation effective D1 was not timely filed.

LAW AND ANALYSIS

Section 301.7701-2(a) generally provides that a business entity is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code.

Section 301.7701-3(a) provides that 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, and 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(a) further provides that so long as a business entity is not classified as a corporation under § 301.7701-2(b)(1), or (3)-(8) (an eligible entity), it may elect its classification for federal tax purposes.

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 a 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 on the election form. The 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 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. Section 301.9100-1(b) defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the Internal Revenue Bulletin.

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.

Section 301.9100-3(a) provides that request 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.

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an extension of sixty (60) days from the date of this letter to elect to be classified as an association taxable as a corporation for federal 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.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

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 will be sent to X’s authorized representative.

Sincerely,

Curt G. Wilson
Deputy Associate Chief Counsel
(Passthroughs and Special Industries)

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