PLR 200922002: Domestic entity received time to elect corporate classification

Plain-English summary

A domestic entity with one owner intended to elect association status and be taxed as a corporation from a specified date. It inadvertently failed to file the entity-classification election on time. The entity represented that it acted reasonably and in good faith, was not using hindsight, and that relief would not prejudice the government. The IRS concluded that it satisfied the standards for regulatory-election relief. It granted 60 days from the ruling date to file Form 8832 with corporate treatment effective on the intended date.

Ruling snapshot

• Question: Could the domestic eligible entity receive more time to elect treatment as an association taxable as a corporation?
• Outcome: Approved: the entity received a 60-day extension to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through -3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200922002
Third Party Communication: None
Release Date: 5/29/2009
Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
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Refer Reply To:
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Date:
February 20, 2009

Legend:

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

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

Entity = --------------------------------

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

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

Facts

X is a domestic wholly-owned subsidiary of Y. X was organized as Entity in accordance with the laws of State. X inadvertently failed to make a timely election to be treated as an association taxable as a corporation.

X represents that it was its intention to elect to be treated as an association taxable as a corporation from Date 1. X represents that it has acted reasonably and in
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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

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 1. 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.
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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 authorized 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