PLR 1330014 grants more time to elect partnership classification

Plain-English summary

The IRS grants an entity 120 additional days to file an election to be treated as a partnership for federal tax purposes. The entity had intended to change its classification from an association taxable as a corporation, but its Form 8832 was not timely filed. The IRS accepted the representations that the entity and its shareholders consistently intended and reported partnership treatment, that they acted reasonably and in good faith, and that relief would not prejudice the government. The election may be made effective as of the requested earlier date by filing the properly executed form and attaching a copy of the ruling.

Ruling snapshot

• Question: May the entity make a late election under § 301.7701-3(c) to be classified as a partnership?
• Outcome: Approved, a 120-day extension was granted under § 301.9100-3.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201330014 Third Party Communication: None
Release Date: 7/26/2013 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:B01
PLR-145289-12
Date:
March 13, 2013

LEGEND

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

D1 = -------------------

D2 = -------------------

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

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

This is in response to a letter dated October 12, 2012, 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
partnership for federal tax purposes.

FACTS

According to the information submitted, X was formed on D1 under the laws of State. X
elected to be treated as an association, taxable as a corporation for federal tax
purposes effective D1. On D2, X intended to elect to be classified as a partnership for
federal tax purposes. However, the Form 8832, Entity Classification Election was not
timely filed.

X represents that it and its shareholders have always intended to treat X as a
partnership and represents that it and its shareholders have filed their returns
PLR-145289-12 2

consistently with X being treated as a partnership. X represents that it acted reasonably
and in good faith, and that the interests of the government will not be prejudiced by
granting relief. X further represents that no hindsight is involved in seeking the relief
requested.

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. An eligible entity with at least two
members can elect to be classified as either an association or a partnership.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with two or more members having limited
liability may elect to be treated as a partnership pursuant to the rules of § 301.7701-
3(c). Section 301.7701-3(c) provides that an entity classification election must be filed
on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up
to 12 months after the date 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
301.9100-1(a).

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
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extension of time of 120 days from the date of this letter to make an election to be
treated as a partnership for federal tax purposes effective D2. X should 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.

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.

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

                                   Sincerely,

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



                              By: David R. Haglund
                                  David R. Haglund
                                  Branch Chief, Branch 1
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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

cc: