IRS grants extra time for a late corporate classification election

Plain-English summary

The IRS considered a limited liability company that converted from a corporation and intended to elect association treatment for federal tax purposes from the conversion date. The taxpayer inadvertently failed to timely file Form 8832. The IRS found that the requirements for discretionary regulatory-election relief were satisfied and granted 120 days to file the form with the requested effective date. The ruling did not determine whether the taxpayer otherwise qualified to make the election or address other federal tax consequences.

Ruling snapshot

• Question: Could the taxpayer make a late Form 8832 election to be treated as an association taxable as a corporation?
• Outcome: Approved, 120-day extension granted
• Key authorities: Treas. Reg. §§ 301.7701-2, 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: 201408013
Third Party Communication: None
Release Date: 2/21/2014
Date of Communication: Not Applicable
Index Numbers: 9100.00-00, 9100.31-00
Person To Contact:
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------------------------------------------------------------ Refer Reply To:
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CC:PSI:B03
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PLR-123722-13
Date:
October 31, 2013

LEGEND

Taxpayer = --------------------------------------------------------------------------------------------------------------------
-------------------

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

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

Y = --------------------------------------------------------------------------------------------------------------------

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

Date 2 = ---------------------------

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

This letter responds to a letter dated May 17, 2013, and additional information, submitted on behalf of Taxpayer by its authorized representative, 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 treat Taxpayer as an association taxable as a corporation for federal tax purposes.
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FACTS

Taxpayer converted from a State corporation to a State limited liability company on Date 1. Since Date 1, Taxpayer has been wholly owned by X, which has been wholly owned by Y since Date 2. Taxpayer intended to elect to be treated as an association taxable as a corporation effective Date 1. However, due to inadvertence, Taxpayer failed to timely file Form 8832, Entity Classification Election.

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 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, 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(b)(1)(ii) provides that unless a domestic eligible entity elects otherwise, the entity is disregarded as an entity separate from its owner if it has a single owner.

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

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.

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 six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code (Code), except subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by a
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regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice or announcement published in the Internal Revenue Bulletin.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of § 301.9100-2. Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in § 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 Taxpayer has satisfied the requirements of §§ 301.9100-1 and 301.9100-

3. As a result, Taxpayer is granted an extension of time of 120 days from the date of
   this letter to file a properly executed Form 8832 with the appropriate service center electing to be treated as an association taxable as a corporation effective Date 1. A copy of this letter should be attached to the Form 8832.

   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 provides that it may not be used or cited as precedent.

   Pursuant to a power of attorney on file with this office, we are sending a copy of
   

   this letter to Taxpayer’s authorized representatives.
   PLR-123722-13 4

   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: ___________________________________
                               Mary Beth Carchia
                               Senior Technician Reviewer, Branch 3
                               Office of the Associate Chief Counsel
                               (Passthroughs & Special Industries)
   

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

cc: