LLC received 120 days for late corporate classification election

Plain-English summary

After a sequence of acquisitions, name changes, a merger, conversion into a single-member LLC, ownership transfers, and an upstream liquidation, the taxpayer intended to be classified as an association taxable as a corporation. It inadvertently failed to file Form 8832 on time but represented that its returns were consistent with the requested classification, no hindsight was involved, and relief would not prejudice the government. The IRS concluded that the section 301.9100-3 standards were satisfied and granted 120 days to file the entity-classification election with the requested effective date.

Ruling snapshot

• Question: Could the LLC make a late election to be treated as an association taxable as a corporation?
• Outcome: Approved for 120 days, conditioned on filing a properly executed Form 8832.
• 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: 201928011                                               Third Party Communication: None
Release Date: 7/12/2019                                         Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
              9100.31-00                                        Person To Contact:
                                                                --------------, ID No. -----------------
---------------------------------------- --------------         Telephone Number:
-------------------------------------------                     ---------------------
-----------------------                                         Refer Reply To:
--------------------------------------                          CC:PSI:B01
                                                                PLR-128138-18
                                                                Date:
                                                                March 28, 2019




Legend

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

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

Z        =        ---------------------------------

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

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

C        =        -------------------------------------------

P1       =        -----------------------------------------------

P2       =         -----------------------------------------------------------
-----------------------------------------

P3       =        ---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------

S1                 -------------------------------------------------------------------------------
-----------------------------------------

S2       =        ----------------------------------------------------------------------------

PLR-128138-18                                2

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

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

D3      =       ---------------------

D4      =       --------------------------

D5      =       ---------------------

D6      =        ---------------------

D7      =        -------------------------

Year1 =         ------

Year2 =         ------

Year3 =         ------

Year4 =         ------

State1 =        -----------

State2 =        ------------



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

This is in response to a letter dated September 14, 2018, and supplemental information,
filed 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 an association taxable as a corporation for federal tax purposes.

FACTS

According to the information submitted, Y was formed under the laws of State1 on D1
under former name A. In Year1, A changed its name to B. In Year2, P1 acquired B and
Z. On D2, B changed its name to C. On D3, C changed its name to Y and at the same
time Z changed its name to S1 and P1 merged into P2, a newly formed entity, with P2
surviving the merger.

PLR-128138-18                                  3

On D4, S2 was formed under the laws of State2. On D5, Y was merged into S2 with S2
surviving the merger in a transaction under § 368(a)(1). Immediately following the
merger, S2 was converted into a single member LLC under the laws of State2 and
changed its name to X retaining the EIN of Y. On D5, immediately following the
conversion, P2 transferred 100% of X to S1. Immediately thereafter, S1 transferred
100% of X to P3, a newly formed entity. After the D5 transactions, P2 owned 100% of
S1 and P3 owned 100% of X. On D6, P3 was liquidated into S1 in a transaction under
§ 332. After the liquidation, P2 owned 100% of S1 and S1 owned 100% of X. X
represents that although it should have been treated as a disregarded entity for tax
purposes, X was included on P2’s consolidated returns for Year3 and thereafter.

Following the liquidation on D6, X intended to be treated as an association taxable as a
corporation for federal tax purposes effective D7. However, X inadvertently failed to
timely file Form 8832, Entity Classification Election, to be treated as an association
taxable as a corporation for federal tax purposes. X represents that it has filed its
federal income tax returns consistent with the relief requested for Year4 and thereafter;
that no hindsight is involved, and that the interests of the government will not be
prejudiced if relief is granted.

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 (and thus a corporation
under § 301.7701-2(b)(2)) or a partnership.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to classified other
than as provided under § 301.7701-3(b) by filing Form 8832 with the service center
designated on the form. 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 301.7701-3(c)(2)(i) provides that such an election must be signed by either (A)
each member of the electing entity who is an owner at the time the election is filed; or
(B) any officer, manager, or member of the electing entity who is authorized (under local
law or the entity’s organization documents) to make the election and who represents to
having such authorization under penalties of perjury. Section 301.7701-3(c)(2)(iii)
provides that if an election is to have a retroactive effective date, each person who was
an owner between the date the election is to be effective and the date the election is

PLR-128138-18                                 4

filed, and who is not an owner at the time the election is filled, must also sign the
election.

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
extension of time of 120 days from the date of this letter to make an election to be
treated as an association taxable as a corporation for federal tax purposes effective D7.
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 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.

PLR-128138-18                                  5

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,



                                       Holly Porter
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



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



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