PLR 200914004: A subsidiary received more time to elect corporate classification

Plain-English summary

A wholly owned domestic subsidiary changed its form of organization but inadvertently failed to elect treatment as an association taxable as a corporation from the change date. The subsidiary represented that corporate treatment had always been intended, that it acted reasonably and in good faith, and that it was not using hindsight. The IRS found the regulatory-relief requirements satisfied and no prejudice to the government. It granted 60 days from the ruling date to file Form 8832 electing corporate classification from the intended date, with a copy of the letter attached.

Ruling snapshot

• Question: Could the subsidiary make a late entity-classification election effective from the date it changed legal form?
• Outcome: Approved: the subsidiary had 60 days to file Form 8832 for the intended effective date.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200914004
Third Party Communication: None
Release Date: 4/3/2009
Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
-------------------------------------------------- --------------------, ID No. -------------
------------------------------------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-128246-08
Date:
December 16, 2008

Legend:

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

Date 1 = -------

Date 2 = --------------------------

Entity 1 = ----------------

Entity 2 = -----------------------------------

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

This letter is in response to your request, dated June 20, 2008, on behalf of X, seeking relief under §301.9100 of the Procedure and Administration Regulations to file a late election to treat X as an association taxable as a corporation.

Facts
PLR-128246-08
2

Based on the materials submitted and representations contained within, we understand the relevant facts to be as follows. X is a domestic wholly-owned subsidiary of Y. X was organized as Entity 1 in accordance with the laws of State on Date 1. On Date 2, X changed its form of organization from Entity 1 to Entity 2. X inadvertently failed to make a timely election to be treated as an association taxable as a corporation, effective Date 2.

X represents that it was its intention to elect to be treated as an association taxable as a corporation from Date 2. X represents that it has acted reasonably and in good faith, that granting relief will not prejudice the interests of the government, and that it is not using hindsight in making the 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. A "business entity" is an 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 Code. Section 301.7701-2(a). An eligible entity with a single owner can elect either to be classified either as an association (and thus a corporation under § 301.7701- 2(b)(2)) or as an entity separate from its owner.

Section 301.7701-3(b)(1)(ii) provides that unless a domestic eligible entity elects otherwise, the entity is disregarded as an entity separate from its owner if it has a single owner.

To elect to be classified other than as provided in section 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election, with the designated service center. Section 301.7701-3(c)(1)(i). An election can be effective on the date specified on the Form 8832 or on the date filed if no such date is specified. The effective date specified on the Form 8832 cannot be more than 75 days prior to the date the election is filed. Section 301.7701-3(c)(2)(iii).

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 301.9100-1(a). 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 301.9100-3(a).

Conclusion
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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 time of sixty (60) days from the date of this letter to elect to be treated as an association taxable as a corporation for federal tax purposes, effective Date 2. 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) provides that it may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office, a copy of this letter will be sent to your representative.

Sincerely,

Curt G. Wilson

Curt G. Wilson
Associate Chief Counsel
(Passthrough & Special Industries)

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

cc: