CCA 200946050: Sole owner not personally liable for prior partnership-period employment taxes

Number

200946050

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

LLC Employment Tax Liability

Topics

Procedure, penalties, and administration

Code sections

§ 6331, § 7701, § 6110

Ruling dated

July 17, 2009

Publicly released

November 13, 2009

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

This Chief Counsel advice concludes that the sole owner of an LLC cannot be held personally liable for employment taxes incurred while the LLC had multiple members and was treated as a partnership for federal tax purposes. The LLC later became a disregarded entity, but the change in classification did not apply to the earlier taxable periods. The advice relies on the entity-classification rule in Treas. Reg. § 301.7701-2(c)(iii). It is general advice about the stated facts and does not address other issues.

Ruling snapshot

Question: Can the sole owner be personally liable for employment taxes incurred while the LLC was a partnership?
Outcome: Advice given
Key authorities: IRC § 6331; Treas. Reg. § 301.7701-2(c)(iii)

Full text (IRS public release)

ID: CCA_2009071712262240 Number: 200946050
Office: --------------
Release Date: 11/13/2009

UILC: 6331.00-00

From: ----------------------
Sent: Friday, July 17, 2009 12:26:23 PM
To: --------------------------
Cc: ---------------------
Subject: LLC Liability, -----------------

This is to advise you that I’ve reviewed your memo to the --------------------------------------------- concerning the personal tax liability of a owner of an LLC. I concur with your conclusion that the sole owner cannot be held personally liable for the employment taxes incurred by the LLC while it was a multi-member LLC treated as a partnership for federal tax purposes.

In particular, I agree that this question of liability is governed by Treas. Reg. 301.7701-2(c)(iii). Under that regulation, a single-member LLC is not disregarded for the purposes of federal tax liabilities incurred during taxable periods in which the entity was not disregarded. Although the LLC here is currently a disregarded entity, it was not at the time the employment tax liabilities were incurred.

---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
------------------------------------------------------

If you have any questions about my comments or edits please give me a call.

Thanks--
------------

--------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
----------
ATTACHMENT: [redacted]

What does the Code say today, for your facts?

This advice was written for IRS staff and cannot be cited. Ezel checks the current Internal Revenue Code and IRS guidance against your situation, with citations.

Opens in Ezel Pro.

Checks the law as it stands today, not only this page
Cites every source it relies on, so you can verify it
Chat, drafting and research in one workspace