PLR 1032019: LLC granted extra time to elect corporate tax classification

Plain-English summary

The taxpayer was a limited liability company that intended to elect classification as a corporation for federal tax purposes but inadvertently failed to file Form 8832. The IRS explained the entity-classification rules and the standards for granting relief from a missed regulatory election. It found that the requirements for relief were satisfied. The LLC received 120 days from the date of the letter to file Form 8832 with an effective date stated in the ruling. It also had to file an income tax return consistent with corporate treatment within the same 120-day period.

Ruling snapshot

• Question: May an LLC receive additional time to file Form 8832 and elect corporate classification?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201032019 Third Party Communication: None
Release Date: 8/13/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.31-00 --------------------, ID No. -------------
Telephone Number:
---------------------
------------------------------------- Refer Reply To:
-------------------- CC:PSI:B02
------------------------- PLR-147610-09
------------------------------------ Date: March 23, 2010

Legend

X: ---------------------

State: ---------
Date 1: ----------
Year: -------

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

      This responds to a letter dated August 21, 2009, and subsequent correspondence submitted on behalf of X, requesting that the Service grant X an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an entity classification election.

     The facts submitted and representations made are summarized as follows. X is a limited liability company formed on Date 1 of Year under the laws of State. X inadvertently failed to file a Form 8832, Entity Classification Election, electing to treat X as a corporation for federal tax purposes effective Date 1 of Year.

   Section 301.7701-2(a) generally provides that a business entity is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code.

   Section 301.7701-3(a) provides that an eligible entity with at least two members may elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or as 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(a) further provides that so long as a business entity is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity), it may elect its classification for federal tax purposes.

   Section 301.7701-3(c) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b) by filing Form 8832, Entity Classification Election. The effective date of the election cannot be more than seventy-five (75) days prior to the date the form is filed and cannot be more than twelve (12) months after the date on which the election is filed.

   Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no 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 the term “regulatory election” as an election whose due date is prescribed by a regulation published in the Federal Register or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

    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 the election. Section 301.9100-2 provides the rules governing automatic extensions 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. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

    Based solely on the information 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 120 days from the date of this letter to file a Form 8832 with the appropriate service center to elect to be treated as a corporation for federal tax purposes effective Date 1 of Year. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose. In addition, this ruling is conditioned upon X filing an income tax return consistent with treatment as a corporation for Year within 120 days following the date of this letter. A copy of this letter should be attached to the return.

   Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code.

  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.

   Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

                                           Sincerely,

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

                                           By:_________________________
                                           Bradford R. Poston
                                           Senior Counsel, Branch 2
                                           Office of the Associate Chief Counsel
                                           (Passthroughs & Special Industries)

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

cc: