PLR 9938017: Extension to elect corporate tax classification

Plain-English summary

A limited partnership wanted to be taxed as a corporation from an earlier date, but it missed the deadline for choosing that effective date on Form 8832. Its filed form instead used a later effective date, and its counsel did not understand the consequences of that difference. The IRS found that the entity met the requirements for relief under the regulatory election extension rules. It gave the entity 60 days from the letter to file Form 8832 electing corporate classification as of the originally intended date.

Ruling snapshot

• Question: May the partnership make a late election to be classified as a corporation from its intended effective date?
• Outcome: Approved, with 60 days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Index Number: 9100.00-00; 7701.00-00 Washington, DC 20224

Number: 199938017
Person to Contact:
Release Date: 9/24/1999
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:Br.1-PLR-106588-99
Date:
June 24, 1999

Legend

X
=

STATE =

D1
=

D2
=

D3
=

This responds to your letter dated March 29, 1999, written on behalf of X, requesting a ruling that X be given an extension of time to elect to be taxed as a corporation for federal tax purposes for its taxable year beginning D1.

FACTS

X is a limited partnership formed under the laws of STATE on D2. X intended to elect to be taxed as a corporation for federal tax purposes as of D1, but failed to file an entity classification election form (Form 8832) within 75 days of that date. The Form 8832 filed on behalf of X designated D3, approximately 75 days prior to the date it was filed, as the effective date. X’s counsel did not understand the ramifications of X electing to be taxed as a corporation on D3 instead of D1.

LAW AND ANALYSIS

Section 301.7701-3(a) of the Administration and Procedure Regulations provides that a business entity that is not classified as a corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an "eligible entity") can elect its classification for federal tax purposes. A "business entity" is any entity recognized for federal tax purposes that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Code. Section 301.7701-2(a). An eligible entity with more than one owner 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(b)(1)(i) provides that unless a domestic eligible entity elects otherwise, the entity is a partnership if it has two or more members.

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. Section 301.7701-3(c)(1)(i). An election can be effective on the date specified on the Form 8832 or on the date filed if no such date is specified. The effective date specified on the Form 8832 cannot be more than 75 days prior to the date the election is filed. Section 301.7701-3(c)(2)(iii).

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in § 301.9100-3 to make a regulatory election. 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 a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

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. Section 301.9100- 3(a).

CONCLUSIONS

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of 60 days from the date of this letter to elect to treat itself as a corporation for federal tax purposes as of D1 by filing Form 8832 with the applicable service center.

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.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury

statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X.

Sincerely,

Signed/Paul F. Kugler
Paul F. Kugler
Assistant Chief Counsel
(Passthroughs and Special Industries)

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