Single-owner entity receives late disregarded-entity election

Plain-English summary

A single-owner eligible entity intended to be treated as disregarded for federal tax purposes but did not file the required Form 8832. The IRS concluded that the entity satisfied the standards for discretionary extension relief. It granted 120 days from the ruling to file the election with the requested effective date. The relief is conditioned on the entity and its owners filing all required original or amended returns consistent with that treatment within the same period.

Ruling snapshot

• Question: Could the eligible entity receive more time to elect disregarded-entity treatment effective on the requested date?
• Outcome: Approved, with 120 days to file Form 8832 and all required consistent returns.
• 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

                                                         Third Party Communication: None
Number: 201611018                                        Date of Communication: Not Applicable
Release Date: 3/11/2016
                                                         Person To Contact:
Index Number: 7701.00-00, 9100.00-00,                    ------------------------, ID No. -------------------
              9100.31-00                                 ----------------------------------------------------
                                                         Telephone Number:
------------------------------------                     ---------------------
------------------                                       Refer Reply To:

-----------------------------------                      CC:PSI:B03
--------------------------------                         PLR-117245-15
                                                         Date:
                                                         September 28, 2015

Legend

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

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

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

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

Date              =        -------------------------

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

This letter responds to a letter dated May 13, 2015, and subsequent
correspondence submitted on behalf of X, requesting an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations for X to file an entity
classification election.

The information submitted states that X was formed under the laws of Y on Date.
At the time of formation, X was entirely owned by A, a citizen of Z. X represents that it
is an entity eligible to be treated as a disregarded entity for federal tax purposes,
effective on Date. However, an entity classification election to treat X as a disregarded
entity was not filed at that time.

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. Elections are necessary only when an
eligible entity does not want to be classified under the default classification or when an
eligible entity chooses to change its classification.

PLR-117245-15                                 2

Section 301.7701-3(b) (1)(1)(ii) provides that, unless the entity 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 that an eligible entity may elect to be
classified other than as provided under § 301.7701-3(b)(2) by filing Form 8832 with the
appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective
on the date specified by the entity on Form 8832 or on the date filed if no such date is
specified. The date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election is filed and no more than 12 months after the date the
election is filed.

Section 301.7701-3(c)(2)(i) provides, in general, that an election made under
§ 301.7701-3(c)(1)(i) must be signed by (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 organizational
documents) to make the election and who represents to having such authorization
under penalties of perjury.

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) 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 the
election. Section 301.9100-2 provides the rules governing automatic extension 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 a taxpayer provides evidence to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonable and in good
faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the information submitted and the representations made, we
conclude that the requirements of §§ 301.9100-1 and 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 and elect to be treated as a
disregarded entity for federal tax purposes, effective Date. A copy of this letter should
be attached to the Form 8832. A copy is enclosed for that purpose.

PLR-117245-15                                   3

This ruling is contingent on X and its owners filing within 120 days from the date
of this letter all income tax, withholding tax, and information returns (including amended
returns) that would have been required to be filed under the Internal Revenue Code, for
all taxable years affected by this grant of relief, consistent with this relief, effective Date.
A copy of this letter should be attached to each such return.

Except as specifically set forth above, no opinion is expressed concerning the
federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code and the regulations thereunder. Specifically, we express no
opinion concerning the assessment of any interest, additions to tax, additional amounts,
or penalties for failure to file a timely income tax or information return. For example, we
express no opinion as to whether X or any affected taxpayers are entitled to relief from
any penalty on the basis that any taxpayer had reasonable cause for failure to timely file
any income tax or information returns. Moreover, § 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.

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 an 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.

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,

                                        Associate Chief Counsel
                                        (Passthroughs & Special Industries


                                     By: __________________________
                                        Bradford R. Poston
                                        Senior Counsel, Branch 3
                                        Office of Associate Chief Counsel
                                        (Passthroughs & Special Industries)

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