LLC receives 120 days to elect corporate classification

Plain-English summary

A single-owner limited liability company intended to be classified as an association taxable as a corporation but did not timely file Form 8832. The company represented that its federal tax and information returns had consistently treated it as an association from the requested effective date. It also represented that it acted reasonably and in good faith, that relief would not prejudice the government, and that it was not using hindsight. The IRS concluded that the regulatory-relief requirements were satisfied and granted 120 days to file Form 8832 with the requested effective date.

Ruling snapshot

• Question: May the limited liability company make a late election to be classified as an association taxable as a corporation?
• Outcome: Approved, with 120 days to file Form 8832 with the appropriate service center
• Key authorities: Treas. Reg. §§ 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: 201603022
Third Party Communication: None
Release Date: 1/15/2016
Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
Person To Contact:
-----------------------, ID No. -------------- -------------------------------------------- Telephone Number:
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Refer Reply To:
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CC:PSI:B01
PLR-128264-15
Date:
September 29, 2015

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

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

State = -------

Country = -----------------

Date 1 = -----------------
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Date 2 =

Dear----------------

This letter responds to a letter dated August 25, 2015, and subsequent correspondence, written 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 classified as an association taxable as a corporation for federal tax purposes.

FACTS

The information submitted provides that X is a limited liability company that was formed on Date 1 under the laws of State. X is wholly owned by Y, a Country company. Y acquired its interest in X on Date 2. Y intended X to be classified as an association for federal tax purposes. However, X failed to timely file Form 8832, Entity Classification Election, to be classified as an association for federal tax purposes, effective Date 2. X
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2

represents that all U.S. tax and information returns have been filed consistent with X being treated as an association effective Date 2. Further, X represents that it has acted reasonably and in good faith, that granting relief will not prejudice the interests of the government, and that it is not using hindsight in making the election.

LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, 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) provides that, except as provided in § 301.7701-3(b)(3), unless the entity elects otherwise, a domestic eligible entity is: (i) A partnership if it has two or more members; or (ii) Disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(iii) provides, in part, 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.

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 (Code) except subtitles E, G, H, and I. Section 301.9100-1(b) provides that the term “regulatory election” includes 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 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 extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2.

Section 301.9100-3(a) provides that requests for relief under § 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.
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CONCLUSION

Based on the facts submitted and representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, we grant X an extension of time of one hundred twenty (120) days from the date of this letter to elect under § 301.7701-3 to be treated as an association, effective Date 2. X must file Form 8832 within the extension period with the appropriate service center, with a copy of this letter attached.

Except for the specific ruling above, we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the Code. 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 X’s authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: Laura C. Fields
Laura C. Fields
Senior Technician Reviewer, Branch 1
(Passthroughs & Special Industries)

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