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Apex LLC makes a classification change on Form 8832 under the 'check the box' regulations.

Which of the following statements are correct?

A) An 180-day waiting period is required.
B) The Apex LLC is not terminated for tax purposes.
C) A transfer of both assets and liabilities will be considered to have occurred.
D) Both "the Apex LLC is not terminated for tax purposes" AND "a transfer of both assets and liabilities will be considered to have occurred."

Answer :

When a limited liability company (LLC), such as Apex LLC, decides to make a classification change using Form 8832, it is engaging with the IRS's 'check-the-box' regulations. These regulations allow an LLC to elect how it wants to be classified for federal tax purposes. The options typically include being taxed as a corporation, partnership, or disregarded entity.

Let's evaluate the statements given:

A) An 180-day waiting period is required.

This statement is incorrect. The IRS generally allows an entity to make changes with an effective date that is retroactively up to 75 days before or within 12 months after the filing date. Therefore, there is no specific 180-day waiting period required for a change.

B) The 'Apex' LLC is not terminated for tax purposes.

This statement is correct. Changing its classification does not terminate the LLC. Instead, it simply alters how the LLC is regarded for tax purposes. The legal entity continues to exist without dissolution.

C) A transfer of both assets and liabilities will be considered to have occurred.

This statement is correct. When an LLC changes classification, especially from a disregarded entity to a corporation or another form, the IRS may consider it as if the LLC had transferred its assets and liabilities to a newly formed entity. This is a deemed transaction for tax purposes, even though no actual transfer might occur.

D) Both 'the "Apex" LLC is not terminated for tax purposes' AND 'a transfer of both assets and liabilities will be considered to have occurred.'

This response is also correct as it combines the individual correctness of statements B and C.

Chosen Multiple Choice Option: D) Both 'the "Apex" LLC is not terminated for tax purposes' AND 'a transfer of both assets and liabilities will be considered to have occurred.'

In conclusion, when Apex LLC files Form 8832, it is making a classification change that affects its tax treatment, but not its legal standing. Additionally, this can result in deemed transfers for tax purposes, even if no physical transfer takes place.

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