LLC receives more time to elect partnership classification

Plain-English summary

A two-owner limited liability company intended to be treated as a partnership but failed to file Form 8832 on time. The company and both owners had filed their returns consistently with partnership treatment. Based on representations that the company acted reasonably and in good faith and that relief would not prejudice the government, the IRS granted a 120-day extension. The company must file a properly executed Form 8832 to make the classification election effective on the requested date.

Ruling snapshot

• Question: May the LLC receive extra time to elect partnership classification for federal tax purposes?
• Outcome: Approved, with Form 8832 due within 120 days of the ruling.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201516060 Third Party Communication: None
Release Date: 4/17/2015 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
----------------------------------- ---------------------------, ID No. ------------
------------------------------- Telephone Number:
---------------------------------- --------------------
-------------------------------------- Refer Reply To:
CC:PSI:B01
PLR-140152-14
Date:
December 05, 2014

LEGEND

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

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

Date = ----------------

A = ---------------------------------------

B = ---------------------------------

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

    This responds to a letter dated October 22, 2014, and subsequent

correspondence, submitted on behalf of X, requesting an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations for X to file an entity
classification election to be classified as a partnership for federal tax purposes.

FACTS

   The information submitted states that X is a limited liability company formed

under the laws of State on Date. X has two owners, A and B. X is not classified as a
corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8). A and B intended for
X to be classified as a partnership, effective on Date. However, X did not timely file
Form 8832, Entity Classification Election, electing to be treated as a partnership. For all
relevant years, X, A, and B filed their returns consistent with X being a partnership.
PLR-140152-14 2

   X represents that it acted reasonably and in good faith. X also represents that

granting the relief requested will not prejudice the interests of the government.

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. Elections are necessary only when an
eligible entity does not want to be classified under the default classification or when an
eligible entity chooses to change its classification.

 Section 301.7701-3(b)(1)(i) 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)(1)(i) provides that to elect to be classified other than as

provided in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification
Election, with the designated service center. Under § 301.7701-3(c)(1)(iii), this election
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.

   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 301.9100-2 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
extension of time of 120 days from the date of this letter to make an election to be
PLR-140152-14 3

treated as a partnership for federal tax purposes effective Date. X must 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 specifically set forth above, we do not express or imply any 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) of

the Code 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 X’s authorized representative.

                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)




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

Enclosures (2)

   Copy of this letter
   Copy of this letter for section 6110 purposes

cc: