PLR 201232031: IRS grants late-election relief for partnership classification

Plain-English summary

A domestic limited liability company intended to be treated as a partnership but did not timely file Form 8832. The taxpayer represented that it had filed federal tax returns consistently with that intended classification. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government. It therefore granted 120 days of additional time to file the election with an effective date tied to the company's formation date.

Ruling snapshot

• Question: Could the taxpayer receive an extension of time under Treas. Reg. § 301.9100-3 to elect partnership classification?
• Outcome: Approved.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3; IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201232031
Third Party Communication: None
Release Date: 8/10/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.31-00
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Telephone Number:
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Refer Reply To:
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CC:PSI:03
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Date:
May 02, 2012

LEGEND

X = -----------------------------------------------------------------------------------------------------
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State = --------

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

Dear --------:

This responds to a letter dated September 1, 2011 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 elect to be treated as a partnership under § 301.7701-3(c).

FACTS

The information submitted states that X formed on Date 1 as a limited liability company under the laws of State. X represents that X is a domestic entity eligible to elect to be treated as a partnership. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election, electing to treat X as a partnership effective Date 1. X represents that it has timely filed its federal tax returns consistent with X’s intended treatment as a partnership.

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 as provided in § 301.7701-3. An eligible
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entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701–2(b)(2)) or a partnership.

Section 301.7701-3(b)(1) 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)(i) provides that an eligible entity may elect to be classified other than as provided under paragraph § 301.7701-3(b), or to change its classification, by filing Form 8832, Entity Classification Election, with the service center designated on Form 8832.

Section 301.7701-3(c)(iii) provides that an election made under paragraph 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. 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. If an election specifies an effective date more than 12 months from the date on which the election is filed, it will be effective 12 months after the date it was filed.

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 301.9100-1(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.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time under the rules set forth in § 301.9100–3 to make a regulatory election, or a statutory election, under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I.

Section 301.9100-3(a) provides that a request for relief will be granted when the taxpayer provides the evidence (including affidavits described in paragraph § 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

Based solely on the information submitted and the representations made, we conclude that X has satisfied the requirements of § 301.9100-3. As a result, X is granted
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an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a partnership effective Date 1. A copy of this letter should be attached to the Form 8832. We are enclosing a copy for that purpose.

Except as expressly provided herein, we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In addition, § 301.9100-1(a) provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code Internal Review provides that it may not be used or cited as precedent.

Under a power of attorney on file with this office, we are sending a copy of this letter to X’s 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,

Associate Chief Counsel
(Passthroughs & Special Industries)

By:
Richard T. Probst
Senior Technician Reviewer, Branch 3
Office of Chief Counsel
(Passthroughs & Special Industries

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

cc: