Source: https://www.federalregister.gov/documents/2004/07/20/04-16232/deemed-election-to-be-an-association-taxable-as-a-corporation-for-a-qualified-electing-s-corporation
Timestamp: 2017-08-22 00:47:20
Document Index: 351671948

Matched Legal Cases: ['§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301']

Federal Register :: Deemed Election To Be an Association Taxable as a Corporation for a Qualified Electing S Corporation
43317-43318 (2 pages)
TD 9139
1545-BD24
https://www.federalregister.gov/d/04-16232 https://www.federalregister.gov/d/04-16232
Rebekah A. Myers, (202) 622-3050 (not a toll free number).
Section 301.7701-3(a) provides that an eligible entity with two or more owners may elect to be classified as an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership, and an eligible entity with a single owner may elect to be classified as an association or to be disregarded as an entity separate from its owner. Section 301.7701-3(b) provides that, unless the entity elects otherwise, a domestic eligible entity is a partnership if it has two or more owners or is disregarded as an entity separate from its owner if it has a single owner. Start Printed Page 43318Section 301.7701-3(c) describes the time and place for filing an entity classification election. Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified as other than its default classification or to change its classification by filing Form 8832, “Entity Classification Election”, with the service center designated on the form.
A taxpayer whose default classification is a partnership or a disregarded entity may seek to be classified as an S corporation. In these cases, the taxpayer must elect to be classified as an association under § 301.7701-3(c)(1)(i) by filing Form 8832 and must elect to be an S corporation under section 1362(a) by filing Form 2553, “Election by a Small Business Corporation.” In some cases, an entity may timely file the Form 2553 but fail to file the Form 8832. The entity must then submit a letter ruling request for an extension of time under § 301.9100 to file a late entity classification election. The temporary regulation provides relief for these entities. In other cases, the Form 2553 and the Form 8832 are filed late, and the entity must submit a ruling request under § 301.9100 to file a late entity classification election and under section 1362(b)(5) to file a late S corporation election. Rev. Proc. 2004-48, I.R.B. 2004-32, provides relief for these entities.
Requiring eligible entities to file two elections in order to be classified as S corporations creates a burden on those entities and on the Internal Revenue Service (IRS). The temporary regulation simplifies these paperwork requirements by eliminating, in certain cases, the requirement that the entity elect to be classified as an association. Instead, an eligible entity that makes a timely and valid election to be classified as an S corporation will be deemed to have elected to be classified as an association taxable as a corporation.
The temporary regulation amends § 301.7701-3(c)(1)(v) to provide that, if an eligible entity makes a timely and valid election to be an S corporation under section 1362(a)(1), it is treated as having made an election to be classified as an association under § 301.7701-3. However, if the eligible entity's election is not timely and valid, the default classification rules provided in § 301.7701-3(b) will apply to the entity unless the Service provides late S corporation election relief or inadvertent invalid election relief. If the late or invalid election is not perfected, the default rules will maintain the passthrough taxation treatment by classifying the entity as a partnership or a disregarded entity.
The regulations apply to elections to be an S corporation filed on or after July 20, 2004. However, eligible entities that timely filed S elections before July 20, 2004, may also rely on the provisions of the regulation.
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore a regulatory assessment is not required. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the Special Analysis section of the preamble to the Notice of proposed rulemaking on this subject published elsewhere in this issue of the Federal Register.
The principal author of this regulation is Rebekah A. Myers, Office of Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and Treasury Department participated in their development.
Estate and excise taxes
(C) S corporations. [Reserved] For further guidance, see § 301.7701-3T(c)(1)(v)(C).
(3) Deemed elections for S corporations. [Reserved] For further guidance, see § 301.7701-3T(h)(3).
§ 301.7701-3T
Classification of certain business entities (temporary).
(a) through (c)(1)(v)(B) [Reserved] For further guidance, see § 301.7701-3(a) through (c)(1)(v)(B).
(c)(1)(v) (C) S corporations. An eligible entity that timely elects to be an S corporation under section 1362(a)(1) is treated as having made an election under this section to be classified as an association, provided that (as of the effective date of the election under section 1362(a)(1)) the entity meets all other requirements to qualify as a small business corporation under section 1361(b). Subject to § 301.7701-3(c)(1)(iv), the deemed election to be classified as an association will apply as of the effective date of the S corporation election and will remain in effect until the entity makes a valid election, under § 301.7701-3(c)(1)(i), to be classified as other than an association.
(c)(2) through (h)(2)(iii) [Reserved] For further guidance, see § 301.7701-3(c)(2) through (h)(2)(iii).
(3) Deemed elections for S corporations. Paragraph (c)(1)(v)(C) of this section applies to timely S corporation elections under section 1362(a) filed on or after July 20, 2004. Eligible entities that filed timely S elections before July 20, 2004, may also rely on the provisions of the regulation.
Approved: July 6, 2004.
[FR Doc. 04-16232 Filed 7-19-04; 8:45 am]