LLC receives 180 days to file a late partnership classification election

Plain-English summary

A limited liability company intended to be taxed as a partnership from a redacted effective date, but it did not timely file the required entity classification election. It later elected corporate status and timely elected S corporation status from a second redacted date, while the company and its owners had consistently filed earlier returns as a partnership. The IRS found that the company acted reasonably and in good faith and that relief would not prejudice the government's interests. It granted 180 days from the letter date to file Form 8832 electing partnership treatment for the intervening period.

Ruling snapshot

• Question: Could the LLC file a late Form 8832 to be treated as a partnership until its later corporate and S corporation elections became effective?
• Outcome: approved
• Key authorities: IRC § 1362(a); 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

Number: 201731011 Third Party Communication: None
Release Date: 8/4/2017 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:B03
PLR-137865-16
Date:
May 08, 2017

Legend

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

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

Date1 = ---------------------

Date2 = -----------------------

Date3 = ----------------------

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

     This letter responds to a letter dated October 18, 2016, 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.

     X was formed as a limited liability company under the laws of State on Date1. X

represents that it intended to be treated as a partnership for federal tax purposes
effective Date2. The information submitted further provides that X subsequently filed an
entity classification election to be taxed as an association taxable as a corporation and
also timely filed an election under § 1362(a) to be taxed as an S corporation, effective
Date3. X requests relief to file a late entity classification to be treated as a partnership
for federal tax purposes, effective Date2 (and continuing as such until Date3). X
represents that X and its owners have filed tax returns for all of the relevant tax years
consistent with the income tax treatment of X as a partnership.
PLR-137865-16 2

    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.

  Section 301.7701-3(b)(1) provides that, unless the entity elects otherwise, a

domestic eligible entity is classified as a partnership if it has two or more members or 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) 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 301.9100-1(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 reasonably 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 X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a
result, X is granted an extension of time of 180 days from the date of this letter to file a
Form 8832 with the appropriate service center and elect to be treated as a partnership
for federal tax purposes, effective Date2 (and which will remain effective as such until
Date3). A copy of this letter should be attached to the Form 8832. A copy is enclosed
for that purpose.
PLR-137865-16 3

   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. In addition, § 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.

   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.

  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 a sending

a copy of this letter to X’s authorized representative.

                                   Sincerely,


                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)


                              By: __________________________
                                  Holly Porter
                                  Branch Chief, Branch 3
                                  Office of Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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

cc: