PLR 1221005: IRS grants more time to elect corporate tax classification

Plain-English summary

The IRS granted a limited liability company 120 additional days to file Form 8832 and elect to be treated as a corporation for federal tax purposes. The company had intended to be classified as a corporation so that a stock purchase would qualify as a qualified stock purchase under IRC § 338(d)(3), but the election was not timely filed. The IRS found that the taxpayer satisfied the reasonable-cause and good-faith requirements for late-election relief and that granting relief would not prejudice the government. The ruling required the company to attach a copy of the letter to the Form 8832 and did not decide whether the stock purchase actually qualified under § 338(d)(3).

Ruling snapshot

• Question: Could the LLC receive extra time to file Form 8832 and elect corporate classification for federal tax purposes?
• Outcome: Approved
• Key authorities: IRC §§ 338(d)(3) and 6110; 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

                                                        Third Party Communication: None
                                                         Date of Communication: Not Applicable

Number: 201221005 Person To Contact:
Release Date: 5/25/2012 ---------------------------, ID No. -------------
Telephone Number:
Index Numbers: 7701.00-00; 9100.31-00 ---------------------
Refer Reply To:
-------------------------- CC:PSI:B01
------------------------------------- PLR-138189-11

------------------------------ February 10, 2012

LEGEND

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

D = -----------------------

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

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

This is in response to a letter dated September 13, 2011, submitted on behalf of X,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to file an election under § 301.7701-3(c) to be treated as a
corporation for federal tax purposes.

FACTS

According to the information submitted, X was formed on D as a limited liability
company under the laws of State. The parties conducted a transaction that included a
stock purchase. The parties intended that the stock purchase constitute a qualified
stock purchase (QSP) within the meaning of § 338(d)(3). To achieve this intended
result, it was necessary that X be classified as a corporation for federal tax purposes.
However, the Form 8832, Entity Classification Election, was not timely filed with the
appropriate service center.

LAW AND ANALYSIS
PLR-138189-11 2

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. An eligible entity with a single owner can
elect to be classified as an association taxable as a corporation or to be disregarded as
an entity separate from its owner.

Section 301.7701-3(b) provides a default classification for an eligible entity that does not
make an election. Under § 301.7701-3(b)(1)(i), a domestic eligible entity that does not
otherwise elect will be considered as a disregarded entity if it has a single owner.

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

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 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 an 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 an election. 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. 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 X
has satisfied the requirements of § 301.9100-3. As a result, X is granted an extension
of time of 120 days from the date of this letter to file a properly executed Form 8832 with
PLR-138189-11 3

the appropriate service center, electing to be treated as an association taxable as a
corporation for federal tax purposes effective D. A copy of this letter should be attached
to the election.

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. In particular, no opinion is expressed as to whether the stock purchase is a
QSP within the meaning of § 338(d)(3).

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                               Sincerely,

                                               Joy C. Spies
                                               Joy C. Spies
                                               Acting Senior Technician Reviewer
                                               Branch 1
                                               Office of the Associate Chief Counsel
                                               (Passthroughs & Special Industries)

Enclosures (2)

Copy of this letter
Copy for § 6110 purposes