PLR 200943015: Sixty-day extension granted for a late entity classification election

Plain-English summary

The IRS granted a limited extension to a limited partnership that intended to elect classification as an association taxable as a corporation. The entity had failed to timely file Form 8832 for that election, although it later timely filed an election to change its classification to a disregarded entity. The IRS found that the requirements for relief under the applicable extension regulations were satisfied. It allowed the entity 60 days from the ruling date to file the election effective on the originally intended date. If the election was made within that period, the later change to disregarded-entity status would also be valid.

Ruling snapshot

• Question: May the entity receive an extension of time to file Form 8832 and elect association classification effective on its intended date?
• Outcome: Approved
• Key authorities: IRC §§ 7701 and 9100; Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-2, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200943015
Third Party Communication: None
Release Date: 10/23/2009
Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.00-00,
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Telephone Number:
9100.31-00
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Refer Reply To:
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PLR-106469-09
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July 20, 2009

LEGEND

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

Date = --------------------------
1
Date = ----------------------
2

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

This letter responds to a letter dated January 30, 2009, and subsequent correspondence, submitted on behalf of X by its authorized representative, 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 in State on Date 1 as a limited partnership. X represents that it intended to be classified as an association taxable as a corporation effective Date 1. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election, electing to treat X as an association taxable as a corporation effective Date 1. X further represents that a Form 8832 was filed timely to change X’s classification from an association taxable as a corporation to a disregarded entity effective Date 2.
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LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, 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 as provided in § 301.7701-3. 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(b)(1)(i) provides that except as provided in § 301.7701- 3(b)(3), unless the entity elects otherwise, a domestic eligible entity is (i) a partnership if it has two or more members; or (ii) disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b), or to change its classification, by filing Form 8832 with the service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides that an election under § 301.7701-3(c)(1)(i) 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 effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed. If an election specifies an effective date more than 75 days prior to the date on which the election is filed, it will be effective 75 days prior to the date it was filed.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but not more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-2 provides the standards the Commissioner will use to determine whether to grant an automatic extension of time for making certain elections. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2.
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Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of 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 §§ 301.9100-1 and 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 Date 1. The election to be classified as an association taxable as a corporation from Date 1 should be made by filing Form 8832 with the appropriate service center. A copy of this letter should be attached to the election. If X makes the election for Date 1 within 60 days of this letter, the previously filed election to be treated as a disregarded entity as of Date 2 would also be a valid classification change; therefore, X would be a disregarded entity as of Date 2.

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. Specifically, no opinion is expressed or implied regarding whether X is otherwise eligible to make the election.

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 a power of attorney on file with this office, a copy of this letter is being sent to your authorized representative.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed
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by an appropriate party. While this office has not verified any of the material submitted in support of the request for a ruling, it is subject to verification on examination.

Sincerely,

/s/

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

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

cc: