LLC received more time to elect disregarded status after an ownership change

Plain-English summary

A limited liability company had elected S corporation status and was therefore treated as an association taxable as a corporation. A new owner later acquired all of the company's outstanding interests. The company requested to be treated as disregarded from the new owner beginning on the acquisition date but did not timely file Form 8832. The IRS found that the regulatory relief requirements were satisfied and granted 120 days to make the election effective on the acquisition date. The company and its owner must file all required federal returns for open years consistently with that treatment.

Ruling snapshot

• Question: Could the single-owner LLC receive an extension to elect disregarded-entity status effective when its new owner acquired all interests?
• Outcome: approved
• 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

Number: 202352003
                                                               Person To Contact:
Release Date: 12/29/2023
                                                               ----------------------, ID No. -----------------
Index Number: 9100.31-00                                       Telephone Number:
                                                               --------------------
-----------------------------------------------                Refer Reply To:
----------------------------------------                       CC:PSI:B01
-----------------------------------------                      PLR-106939-23
------------------------------------------------------------   Date:
----                                                           September 27, 2023




Legend

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

State     = --------

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

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

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



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

This letter responds to a letter dated February 6, 2023, and supplemental information
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 election under § 301.7701-3
to be classified as a disregarded entity for federal tax purposes.

                                                    FACTS

The information submitted states that X was formed under the laws of State as a limited
liability company on Date1. X subsequently elected to be an S corporation effective
Date2. Under § 301.7701-3(c)(1)(v)(C), X is treated as having made an election to be
classified as an association taxable as a corporation for federal tax purposes effective
Date2. On Date3, a new owner acquired all outstanding interests in X.

PLR-106939-23                                  2

                                   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 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 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. 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 effective date specified on Form
8832 cannot be more than 75 days prior to the date on which the election is filed and
cannot be 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 under the rules set forth in §§ 301.9100-2 and 301.9100-3 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 a taxpayer provides
evidence (including affidavits described in § 301.9100-3(e)) to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of relief will not prejudice the interests of the Government.

                                      CONCLUSION

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
effective Date3. A copy of this letter should be attached to the Form 8832.

PLR-106939-23                                  3

This ruling is contingent on X and its owner filing, within 120 days from the date of this
letter, all required federal income tax returns and information returns (including
amended returns) consistent with the relief granted in this letter.

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 Code.
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.

We express no opinion concerning the assessment of any interest, additions to tax,
additional amounts, or penalties for failure to file a timely tax or information return with
respect to any taxable year that may be affected by this ruling. For example, we express
no opinion as to whether a taxpayer is entitled to relief from any penalty on the basis
that the taxpayer had reasonable cause for failure to file timely any income tax or
information returns.

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 to the taxpayer requesting 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’s authorized representative.

                                       Sincerely,

                                       Holly Porter
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)

                                       Joyce C. Spies
                                       Senior Technician Reviewer, Branch 1
                                       (Passthroughs & Special Industries)

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


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