Category: Miscellaneous Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com Background Taxpayer is a limited liability company formed in June of 1997. Taxpayer wishes to elect under the check-the-box regulations (301.7710-1 et seq) to be treated as an association taxed as a corporation. Reg. Section 310.7701-3(c) provides that such an election (on Form 8832) cannot be effective more than 75 days prior to the time the election is filed. The taxpayer wants the election to be effective as of the date of formation. No election was filed and it is now more than 75 days past the taxpayer's formation. Issue Is any relief available to this taxpayer? Answer Relief is potentially available under Section 9100. Discussion Reg. Section 301.9100-1 et seq provides a means of relief where taxpayers miss nonstatutory deadlines. In order to qualify for relief, the following facts must exist. 1. The taxpayer must take reasonable action and in good faith. Among the ways to meet this standard is to request relief before the failure to meet the deadline in question is discovered by the IRS. Reg. Section 301.9100-3(b). Meeting this standard appears to be no problem in this case. 2. Granting the request will not prejudice the interests of the government. In general, this standard is met if granting the request does not produce a lower tax liability taking into account all years affected by the election than would have been the case had the election been made in a timely way. Reg. Section 301.9100-3(c). In my experience, most applications for relief under Section 9100 in which the taxpayer intended to make and election but simply inadvertently did not do so are routinely granted. Apparently, the specific issue of inadvertently missing the 75-day rule under the check-the-box regulations has been considered. In PLR 9748023, the IRS granted permission to file Form 8832 with an effective date more than 75 days prior to the filing date. There is a significant user fee involved with the request for Section 9100 relief. Unless the taxpayer's gross income is less than $150,000, the fee is $3,650. If the taxpayer meets the low-income exception, the fee is $500. Although there can be no assurance in advance, it seems to me that the taxpayer in this case could reasonably expect a favorable result from a request for Section 9100 relief. Obviously, the issue is whether the taxpayer feels it is worth the $3,650 user fee plus the associated professional fees in order to make the request. |
