Penalties—Husband-wife LLC Wasn't a Disregarded Entity - Rogers Wood Hill Starman & Gustason

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Penalties—Husband-wife LLC Wasn’t a Disregarded Entity

Posted by Kim Chen on June 3rd, 2018

The petitioner was an LLC wholly owned by a husband and wife. Its 2010 and 2011 tax returns (Form 1065, which were filed late, stated that the election to be covered under TEFRA unified audit procedures was still in existence and in force. In 2014, the IRS attempted to collect unpaid income tax liabilities and late filing penalties by sending a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The LLC timely submitted a Form 12153 (Request for a Collection Due Process or Equivalent Hearing), claiming that it was a disregarded single-member LLC, not a partnership. The Tax Court disagreed, holding that an LLC may not file a partnership tax return and then disclaim its validity by adopting another entity type. Also, there was no evidence of a qualified joint venture election under IRC Sec. 761(f). Therefore, the LLC was liable for the late filing penalties. Argosy Technologies, LLC , TC Memo 2018-35 (Tax Ct.).