IRS granted late partnership classification election

Plain-English summary

The IRS granted a limited liability company 60 more days to file an entity classification election and be treated as a partnership for federal tax purposes. The company had two members who intended partnership classification, but the company did not timely file Form 8832. The company and its members had filed their returns consistently with partnership treatment. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied and allowed the election to be effective from the specified date.

Ruling snapshot

• Question: Could the limited liability company file its partnership classification election late and have it apply from the intended effective date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201025022 Third Party Communication: None
Release Date: 6/25/2010 Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
Person To Contact:
------------------------------ ----------------------------, ID No. --------------
------------------------------------- ---------------------------------------------------
-------------------------- Telephone Number:
-------------------------------- --------------------
Refer Reply To:
CC:PSI:1
PLR-139037-09
Date: February 19, 2010

LEGEND

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

A = -----------------

B = --------------

Date = --------------------

State = -------

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

   This responds to a letter dated August 7, 2009, and subsequent correspondence,

submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for X to file an entity classification election to
be classified as a partnership for federal tax purposes.

Facts

   The information submitted states that X is a limited liability company formed

under the laws of State on Date. X has two members, A and B. X is not classified as a
corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8). A and B intended for
X to be classified as a partnership, effective on Date. However, X did not timely file
Form 8832, Entity Classification Election, electing to be treated as a partnership. For all
relevant years, X, A and B filed their returns consistent with X being a partnership.
PLR-139037-09 2

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. 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)(1)(i) provides that, unless the entity elects otherwise, a

domestic eligible entity is a partnership if it has two or more members.

   Section 301.7701-3(c)(1)(i) provides that to elect to be classified other than as

provided in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification
Election, with the designated service center. Under § 301.7701-3(c)(1)(iii), this election
can be effective up to seventy-five (75) days prior to the date the form is filed or up to
twelve (12) months after the date on which the form 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 Internal
Revenue Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term
"regulatory election" as including an election whose due date is prescribed by a
regulation published in the Federal Register.

   Sections 301.9100-1 through 301.9100-3 provide the standards that 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 rules for requesting extensions of time for
regulatory 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.

Conclusion

   Based solely on the facts submitted and the representations made, we conclude

that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an
extension of time of 60 days from the date of this letter to make an election to be treated
as a partnership for federal tax purposes effective beginning Date. X must make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form.
PLR-139037-09 3

   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.

                                  Sincerely,

                                    /s/

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

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