Entity may change classification within the 60-month limit

Plain-English summary

A single-owner limited liability company previously elected corporate classification, which ordinarily prevents another classification election for 60 months. A new owner later acquired all shares of the company's parent, producing a change of more than 50% in the entity's indirect ownership. The IRS consented to a new election within the 60-month period because the ownership-change exception applied. The company may file Form 8832 to become disregarded as separate from its owner on the requested effective date, but the ruling does not decide whether it is otherwise eligible for that classification.

Ruling snapshot

• Question: May the entity change from corporate to disregarded status within 60 months of its prior classification election after a qualifying ownership change?
• Outcome: Approved
• Key authorities: Treas. Reg. § 301.7701-3(c)(1)(iv); Rev. Proc. 2009-41

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202521015 Third Party Communication: None
Release Date: 5/23/2025 Date of Communication: Not Applicable
Index Number: 7701.00-00
Person To Contact:
----------------------------------- ----------------------, ID No. -----------------
--------------------------------------------------------- Telephone Number:
------------------------- --------------------
----------------------- Refer Reply To:
------------------------------------ CC:PT&E:B03
PLR-117548-24
Date:
February 27, 2025

LEGEND

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

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

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

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

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

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

    This letter responds to a letter dated September 27, 2024, submitted on behalf of

X, requesting a ruling under § 301.7701-3(c)(1)(iv) of the Procedure and Administration
Regulations. Specifically, your letter requests the Service's consent to change X's
classification from an association taxable as a corporation to a disregarded entity for
federal tax purposes effective Date 3.

                                                 FACTS

   The information submitted states that X, a State limited liability company, made

an election under § 301.7701-3(c)(1) to change its classification to an association
taxable as a corporation for federal tax purposes effective Date 1. On Date 2, a new
owner acquired all of the outstanding shares of X’s parent corporation, which included
X. X represents that as of Date 2, it had a change in ownership of more than fifty
percent that would satisfy the requirements of § 301.7701-3(c)(1)(iv).

PLR-117548-24 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 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. 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 (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 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, Entity
Classification Election, with the service center designated on Form 8832.

    Section 301.7701-3(c)(1)(iii) provides 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 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(c)(1)(iv) provides that, if an eligible entity makes an election

under § 301.7701-3(c)(1)(i) to change its classification, the entity cannot change its
classification by election again during the sixty months succeeding the effective date of
the election. However, the Commissioner may permit the entity to change its
classification by election within the sixty months if more than fifty percent of the
ownership interests in the entity as of the effective date of the subsequent election are
owned by persons that did not own any interests in the entity on the filing date or on the
effective date of the entity's prior election.

                                   CONCLUSION

   Based solely on the information submitted and the representations made, we

consent to X changing its entity classification to a disregarded entity for federal tax
purposes effective Date 3 under § 301.7701-3(c)(1)(iv). Accordingly, X should file Form
8832 pursuant to Rev. Proc. 2009-41, 2009-39 I.R.B. 439, with the appropriate service
center to elect to be disregarded as an entity separate from its owner effective Date 3
and attach a copy of this letter to its Form 8832.

PLR-117548-24 3

    Except as expressly provided herein, we express or imply no opinion concerning

the federal tax consequences of any transaction or item discussed or referenced in this
letter. Specifically, we express or imply no opinion regarding whether X 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.

  This ruling is directed only to the taxpayer requesting it. According to

§ 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.

    Pursuant to a power of attorney on file with this office, we are sending a copy of

this letter to X's authorized representatives.

                                             Sincerely,


                                             Mary Beth Carchia
                                             Senior Technician Reviewer, Branch 3
                                             Office of Associate Chief Counsel
                                             (Passthroughs, Trusts, and Estates)

Enclosure:
Copy of this letter for § 6110 purposes

cc: -------------------

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