PLR 200945030: Extension granted for a late disregarded-entity election

Plain-English summary

The IRS granted a domestic limited liability company an extension of time to elect to be treated as an entity disregarded as separate from its owner. The company had changed its classification and S corporation status but intended to be disregarded effective on a later specified date, and it inadvertently failed to timely file Form 8832. The IRS found that the requirements for relief were satisfied and granted 60 days from the ruling letter date to make the election effective on the specified date. The ruling is based only on the submitted facts and representations.

Ruling snapshot

• Question: May the company receive an extension to make a late disregarded-entity election?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through 301.9100-3; Form 8832

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200945030
Third Party Communication: None
Release Date: 11/6/2009
Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.00-00,
----------------------, ID No. -------------
Telephone Number:
9100.31-00
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Refer Reply To:
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CC:PSI:B03
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PLR-130200-09
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Date:
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August 03, 2009

LEGEND

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

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

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

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

We received a letter dated June 22, 2009, submitted on behalf of X, requesting a ruling under § 301.9100-3 of the Procedure and Administration Regulations, that X be granted an extension of time to file an election to be treated as an entity disregarded as separate from its owner under § 301.7701-3. This letter responds to your request.

FACTS

X was formed as a State limited liability company on Date 1. X elected to be treated as a corporation, effective Date 1, and elected to be treated as an S corporation, effective Date 1. X intended to be treated as an entity disregarded as separate from its owner effective Date 2. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election.

LAW AND ANALYSIS
PLR-130200-09
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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 as provided in § 301.7701-3. An eligible entity with a single owner can elect to be classified as an association (and thus a corporation under § 301.7701-2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(1) 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 made 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 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 has discretion to 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 no more than six 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 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 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
PLR-130200-09
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Based solely on the facts submitted and the representations made, we conclude that X has satisfied the requirements of § 301.9100-3. 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 entity disregarded as separate from its owner for federal tax purposes effective Date 2. The election should be made by filing a properly executed Form 8832 with the appropriate service center. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

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 Code provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter 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 by an appropriate party. While this office has not verified any of the material submitted in support of the ruling request, it is subject to verification on examination.

Sincerely,

/s/

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

Enclosures (2):

Copy of this letter
Copy for § 6110 purposes

cc: