Reg. 301.7701-3 Classification of Certain Business Entities

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Index Number: 7701.00-00, 9100.31-00
Number: 202006009
Release Date: 2/7/2020
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
---, ID No. ---
Telephone Number:
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Refer Reply To:
CC:PSI:B03
PLR-112384-19
Date:
November 12, 2019
LEGEND
X = ---
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State = ---
Date = ---
Year = ---
Dear ---:
This letter responds to a letter dated May 23, 2019, and subsequent correspondence, submitted on behalf of X by X’s authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to file an entity classification election under § 301.7701-3.

# FACTS

The information submitted states that X was formed as a limited liability company under the laws of State on Date. At the time of formation, X had a single member.
During Year, X gained additional members. X intended to be treated as a disregarded entity for federal tax purposes effective Date, and as a partnership when additional members joined in Year. However, X did not file Form 8832, Entity Classification Election, electing to be treated either as a disregarded entity effective on Date or as a partnership effective on the first date in Year after one or more additional members joined X in Year.
PLR-112384-19 2

# LAW

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. An eligible entity with at least two members can election 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, 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), or to change its classification, 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(f)(2) provides that an eligible entity classified as a partnership becomes disregarded as an entity separate from its owner when the entity’s membership is reduced to one member. A single member entity disregarded as an entity separate from its owner is classified as a partnership when the entity has more than one member. If an elective classification change under § 301.7701-3(c) is effective at the same time as a membership change described in § 301.7701-1(f)(2), the deemed transactions in § 301.7701-3(g) resulting from the elective change preempt the transactions that would result from the change in membership.
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 PLR-112384-19 3 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) granting 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, 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. In addition, X will be treated as a partnership beginning on the first date in Year in which one or more additional members joined X by operation of § 301.7701-3(b)(1) and § 301.7701-3(f)(2). A copy of this letter should be attached to the Form 8832.
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.
PLR-112384-19 4
In accordance with the power of attorney on file with this office, we are sending copies of this letter to X’s authorized representatives.
Enclosures (2)
Copy of this letter
Sincerely,
Associate Chief Counsel
(Passthroughs & Special Industries)
By: ____
Adrienne M. Mikolashek
Branch Chief, Branch 3
Office of Associate Chief Counsel
(Passthroughs & Special Industries)
Copy for § 6110 purposes
PLR-112384-19 5 cc: ---
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