Entity Classification Under Treasury Regulations

Treasury Regulation §301.7701 provides the framework for determining how business entities are classified for federal tax purposes.

However, if an entity wants to change its classification or affirmatively elect a specific tax treatment, it must file Form 8832 (Entity Classification Election) with the IRS within the required timeframe.

Late Election Relief Under Treasury Regulation §301.9100

When an entity fails to file Form 8832 on time, it may seek relief under Treasury Regulation §301.9100, which provides the IRS the authority to grant extensions for missed elections if the taxpayer demonstrates:

• Reasonable cause for missing the deadline, and
• That they acted in good faith in attempting to comply with the tax rules.

Extensions Granted for Entity Classification Elections

The IRS recently (on 31^st Jan 2025) has issued private letter rulings (PLRs) under Treasury Regulations §301.7701 and §301.9100, granting case-specific extensions for taxpayers to make critical entity classification elections. These rulings provide relief for late filings of Form 8832 and ensure compliance with federal tax regulations.

Key highlights include:

• PLR 202505010: The IRS granted taxpayers a 120-day extension from the date of the ruling for the specified taxpayers to elect classification as partnerships or disregarded entities.
• PLR 202505003: The IRS provided a 120-day extension from the ruling date for the taxpayer to file Form 8832, electing corporate tax treatment effective from the entity’s formation date.
• PLR 202505019: IRS granted a 60-day extension from the ruling date for the taxpayer to file Form 8832 for a disregarded entity election and 60 days to submit all required federal income tax and information returns.

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