Limited partnership received more time to elect partnership status

Plain-English summary

A domestic limited partnership had previously elected corporate classification and later intended to change back to partnership status. It did not timely file Form 8832, although it and its owners reported the deemed liquidation and subsequently filed consistently as a partnership. The IRS concluded that the regulatory late-election requirements were met. It granted 120 days to file Form 8832 with the intended effective date.

Ruling snapshot

• Question: Could the limited partnership receive more time to file Form 8832 and change from corporate to partnership classification?
• 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: 202423004                                              Third Party Communication: None
 Release Date: 6/7/2024                                         Date of Communication: Not Applicable
 Index Numbers: 7701.00-00, 9100.31-00
                                                                Person To Contact:
 -----------------------------------------------------          ----------------------, ID No. -----------------
 ------------------------------------------------------------   Telephone Number:
 -------------                                                  --------------------
 -----------------------------------                            Refer Reply To:
 --------------                                                 CC:PSI:B03
 -------------------------                                      PLR-118197-23
 ------------------------------------                           Date:
                                                                March 13, 2024




LEGEND

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

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

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

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

Date 3 =         --------------------------




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

       This letter responds to a letter dated August 8, 2023, and subsequent
correspondence submitted on behalf of X by its authorized representatives, 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 partnership
for federal tax purposes.
PLR-118197-23                                 2

                                          FACTS
        According to the information submitted, X, a State limited partnership, elected to
be classified as an association taxable as a corporation effective Date 1. X intended to
elect to change its classification to a partnership effective Date 2. However, X failed to
timely file Form 8832, Entity Classification Election, electing to be classified as a
partnership effective Date 2.
        X and its owners have filed tax returns for the taxable year ended Date 3 that
take into account the deemed liquidation of X under § 301.7701-3(g)(1)(ii). Additionally,
effective Date 2, X has filed its returns as a partnership and its owners have treated X
as a partnership.
                                  LAW AND ANALYSIS
        Section 301.7701-3(a) provides, in part, 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(b)(1) provides that except as provided in § 301.7701-3(b)(3),
unless the entity elects otherwise, a domestic eligible entity is (i) a partnership if it has
two or more members; or (ii) disregarded as an entity separate from its owner if it has a
single owner.
       Section 301.7701-3(c)(1)(i) provides, in part, that, except as provided in
§ 301.7701-3(c)(1)(iv) and (v), 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)(iii) provides, in part, that an election made under
§ 301.7701-3(c)(1)(i) will be effective on the date specified by the entity on Form 8832
or on the date filed if no such date is specified on the election form. 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 on which the election
is filed.
        Section 301.7701-3(g)(1)(ii) provides that if an eligible entity classified as an
association elects under § 301.7701-3(c)(1)(i) to be classified as a partnership, the
following is deemed to occur: The association distributes all of its assets and liabilities
to its shareholders in liquidation of the association, and immediately thereafter, the
shareholders contribute all of the distributed assets and liabilities to a newly formed
partnership.
PLR-118197-23                                 3

        Section 301.7701-3(g)(3)(i) provides that an election under § 301.7701-3(c)(1)(i)
that changes the classification of an eligible entity for federal tax purposes is treated as
occurring at the start of the day for which the election is effective. Any transactions that
are deemed to occur under § 301.7701-3(g) as a result of a change in classification are
treated as occurring immediately before the close of the day before the election is
effective.
       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 not more than 6 months except in the
case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code (the
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.
        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.
        Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3
will be granted when the taxpayer provides the 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 X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a
result, we grant X 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 classified 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, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the 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 requested ruling, it is subject to verification on examination.
PLR-118197-23                                             4

      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 a power of attorney on file with this office, we are sending a
copy of this letter to X’s authorized representatives.


                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs & Special Industries)



                                              By:________________________________
                                                 Mary Beth Carchia
                                                 Senior Technician Reviewer, Branch 3
                                                 Office of Associate Chief Counsel
                                                 (Passthroughs & Special Industries)


Enclosure:
      Copy of this letter for § 6110 purposes



cc:

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