LLC gets 120 days to elect partnership classification

Plain-English summary

A multi-member limited liability company had initially elected corporate classification for federal tax purposes. It later intended to be treated as a partnership from a specified effective date but failed to file Form 8832 on time. The company represented that it acted reasonably and in good faith, was not using hindsight, and that relief would not prejudice the government's interests. The IRS granted 120 days to file Form 8832 electing partnership status retroactive to the intended date. The ruling did not address other tax consequences of the classification change.

Ruling snapshot

• Question: May the LLC file a late Form 8832 to elect partnership classification from its intended effective date?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202015001 Third Party Communication: None
Release Date: 4/10/2020 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-109713-19
Date:
October 22, 2019

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

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

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

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

This ruling is in response to your request dated April 24, 2019, submitted on behalf of X,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to elect to be treated as a partnership for federal income tax
purposes.

FACTS

The information submitted states that X was organized on Date 1 as a State limited
liability company. X made an initial election to be classified as a corporation for federal
tax purposes effective Date 1. X intended to be treated as a partnership for federal tax
purposes effective Date 2. However, X failed to timely file a Form 8832, Entity
Classification Election, to elect to be treated as a partnership effective Date 2 for federal
tax purposes.

X represents that it was its intention to elect to be treated as a partnership effective
Date 2. X further represents that it acted reasonably and in good faith, that granting
PLR-109713-19 2

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 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(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)(iv) provides that if an eligible entity makes an election under
§ 301.7701-3(c)(1)(i) to change its classification (other than an election made by an
existing entity to change its classification as of the effective date of this section), the
entity cannot change its classification by election again during the sixty months
succeeding the effective date of the election. However, the Commissioner may permit
the entity to change its classification by election within the sixty months if more than fifty
percent of the ownership interests in the entity as of the effective date of the subsequent
election are owned by persons that did not own any interests in the entity on the filing
date or on the effective date of the entity's prior election. An election by a newly formed
eligible entity that is effective on the date of formation is not considered a change for
purposes of § 301.7701-3(c)(1)(iv).

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.
PLR-109713-19 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 file a Form 8832 with the
appropriate service center to elect to be treated as a partnership for federal tax
purposes effective Date 2. A copy of this letter should be attached to the Form 8832.

Except as specifically set forth above, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

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 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 on examination.

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, we are sending a copy
of this letter to your authorized representatives.

                                  Sincerely,

                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)



                             By: Laura C. Fields
                                 Laura C. Fields
                                 Senior Technician Reviewer, Branch 1
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

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

cc: