PLR 200934035: 60-day extensions granted for corporate and S corporation elections

Plain-English summary

The IRS granted a limited liability company extra time to elect corporate classification and to make an S corporation election. The company had intended to be treated as an S corporation but did not timely file Forms 8832 and 2553. The IRS allowed 60 days from the May 19, 2009 letter date to file Form 8832 with an effective date supplied in the ruling. If the company also filed Form 2553 within that 60-day period, the IRS would treat the S election as timely made for the taxable year beginning on the specified date. The ruling expressed no opinion on other federal tax consequences.

Ruling snapshot

• Question: Could the company receive more time to elect corporate classification and make a related S corporation election?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a), 1362(b), and 1362(b)(5); Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200934035
Third Party Communication: None
Release Date: 8/21/2009
Date of Communication: Not Applicable
Index Number: 1362.00-00
Person To Contact:
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Refer Reply To:
CC:PSI:B02
PLR-151416-08
Date:
May 19, 2009

X = ------------------------------------------------------------------------------------------------------
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Date = -----------------------

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

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

This is in response to a letter dated August 26, 2008, and subsequent correspondence, submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file a Form 8832, Entity Classification Election, to treat X as an association taxable as a corporation and a ruling under § 1362(b)(5) of the Internal Revenue Code (Code).

The information submitted states that X was organized as a limited liability company under the laws of State on Date. It was intended that X elect to be an S corporation for federal tax purposes, effective Date. However, X did not timely file Form 8832, Entity Classification Election, and Form 2553, Election by a Small Business Corporation.

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), (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.
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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 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.

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
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filing a Form 8832, effective Date, 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, based solely on the facts and representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation effective Date. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective Date, with the appropriate service center within 60 days following the date of this letter, then such election will be treated as timely made for X’s taxable year beginning Date. A copy of this letter should be attached to the Form 2553.

Except as specifically set forth above, we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the Code, including whether X is, in fact, an S corporation for federal tax purposes.

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,

Curtis G. Wilson
Associate Chief Counsel
(Passthroughs & Special Industries)

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