LLC received 120 days to correct a mistaken corporate election

Plain-English summary

A domestic single-member limited liability company intended to be disregarded for federal tax purposes and filed returns consistently with that treatment. It mistakenly submitted Form 8832 electing association status, which would make it taxable as a corporation. The IRS accepted the entity's representations that it acted reasonably and in good faith and that relief would not prejudice the government. It gave the entity 120 days to file a properly executed Form 8832 electing disregarded-entity status from the intended effective date.

Ruling snapshot

• Question: May the single-member LLC make a late election to be disregarded after mistakenly electing corporate classification?
• Outcome: approved, with 120 days to file a corrected 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: 201937007                                              Third Party Communication: None
Release Date: 9/13/2019                                        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-131681-18
                                                               Date:
                                                               May 24, 2019

LEGEND

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

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

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

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

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


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

      This responds to a letter dated October 12, 2018, submitted 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 classify X as a
disregarded entity for federal tax purposes.

FACTS

       According to the information submitted, X was organized under the laws of State
as a limited liability company on Date 1. X represents that A, its sole member, intended
X to be classified as a disregarded entity for federal tax purposes effective Date 2.
Taxpayer further represents that it has filed its federal tax returns consistent with being
PLR-131681-18                                  2

classified as a disregarded entity. However, X mistakenly filed a Form 8832, Entity
Classification Election, to be classified as an association taxable as a corporation.

       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 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 it elects otherwise, a domestic
eligible 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
regulation published in the Federal Register, or 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.
PLR-131681-18                                  3


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 disregarded entity for federal tax purposes effective Date 2. X should 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.

       The ruling contained in this letter is based upon information and representations
submitted by the taxpayer an accompanied by a penalty of perjury statement executed
by the appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification or examination.

       Except as specifically set forth above, we express no opinion concerning the
federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code.

      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 representatives.

                                           Sincerely,

                                           Holly Porter
                                           Associate Chief Counsel
                                           (Passthroughs & Special Industries)


                                    By:    Joy C. Spies
                                           Joy C. Spies
                                           Senior Technician Reviewer, 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: