Entity gets more time to elect partnership status

Plain-English summary

A domestic eligible entity with multiple members intended to be treated as a partnership for federal tax purposes but did not file Form 8832. It asked for an extension under the regulatory election-relief rules. Based on the submitted information and representations, the IRS concluded that the entity acted reasonably and in good faith and that granting relief would not prejudice the government's interests. The IRS gave the entity 120 days from the letter date to file Form 8832 electing partnership treatment effective as of its formation date. A copy of the ruling had to be attached to the election.

Ruling snapshot

• Question: Could the eligible entity file a late election to be classified as a partnership from its formation date?
• Outcome: Approved, with a 120-day filing period
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201501008 Third Party Communication: None
Release Date: 1/2/2015 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:B03
PLR-121517-14
Date:
September 30, 2014

                                                LEGEND

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

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

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

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

    This responds to a letter dated May 23, 2014, 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 information submitted states that X was formed as a State entity on D1

eligible to be treated as a partnership for federal tax purposes. However, Form 8832,
Entity Classification Election, electing to be treated as a partnership, was not filed for X.

  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.
PLR-121517-14 2

    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 entity classification election must be filed

on Form 8832 and can be effective up to seventy-five (75) days prior to the date the
form is filed or up to twelve (12) months after the date on which the form 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 partnership for U.S.
income tax purposes effective D1. A copy of this letter should be attached to the Form
8832. A copy is enclosed for that purpose.

    Except as expressly provided herein, we express or imply no opinion 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 a power of attorney on file with this office, we are sending a

copy of this letter to your authorized representative.
PLR-121517-14 3

   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:       __________________________________
                                 Bradford R. Poston
                                 Senior Counsel, Branch 3
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

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