Key Takeaways
- 60-Month Rule: cannot change classification for 5 years after election.
- Initial election (effective Day 1): does NOT trigger 60-month lock.
- Exception: >50% ownership change.
- PLR fees (Tax Year 2024): $38,000 (standard), $6,000 (<$1M), $3,000 (<$250k).
- S-Corp termination: 5-year prohibition on re-election (§1362(g)).
- Applies to Form 8832 changes, not initial elections.
Last updated: January 2026
Changing Status: The 60-Month Rule
Why This Matters for the Exam
The 60-month rule prevents tax flip-flopping. Know when it applies and the exceptions.
Expect at least 2-3 questions on 60-month rule.
The 60-Month Rule
| Rule | Description |
|---|---|
| Lock period | 60 months (5 years) |
| After | Classification change election |
| Effect | Cannot change again during period |
Initial Election Loophole
| Scenario | 60-Month Applies? |
|---|---|
| LLC defaults to partnership, then elects corp | YES (change) |
| LLC elects corp on Day 1 (formation) | NO (initial) |
Breaking the Lock
| Exception | Description |
|---|---|
| >50% ownership change | New owners not bound |
| PLR | Request IRS permission |
PLR Fees (Tax Year 2024)
| Gross Income | Fee |
|---|---|
| Standard | $38,000 |
| <$1 million | $6,000 |
| <$250,000 | $3,000 |
S-Corp Parallel (§1362(g))
| Rule | Description |
|---|---|
| Revoke/terminate S-status | 5-year prohibition on re-election |
| Exception | IRS permission |
Real-World Scenario
Scenario: LLC elected C-Corp on Jan 1, 2024 (change from default). Wants to return to partnership Jan 1, 2026. No ownership change.
- 60-month period: Ends Jan 1, 2029.
- Jan 1, 2026: Only 2 years elapsed.
- Result: Locked out—cannot change.
On the Exam
Expect 2-3 questions on 60-month, typically:
- Lock Questions: "Elected corp 2024, want partnership 2026—allowed?"
- Exception Questions: "What breaks the 60-month lock?"
- Initial Questions: "Does Day 1 election trigger lock?"
The key is to remember: 60 months after CHANGE (not initial). Exception = >50% ownership change. PLR = $38,000 standard. S-Corp = 5-year re-election prohibition.
Test Your Knowledge
LLC elected C-Corp Jan 1, 2024 (from default). Wants partnership Jan 1, 2026. No ownership change. Allowed?
A
B
C
D
Test Your Knowledge
What breaks the 60-month lock?
A
B
C
D
Test Your Knowledge
LLC elects corp on Day 1 of formation. 60-month rule applies?
A
B
C
D