11.6 Changing Status: The 60-Month Rule
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 2025, Rev. Proc. 2025-1): $43,700 (standard), $7,600 (<$1M), $3,800 (<$250k) — verify current Rev. Proc.
S-Corp termination: 5-year prohibition on re-election (§1362(g)).
Applies to Form 8832 changes, not initial elections.
The TCJA 21% C-corporation rate has no scheduled sunset. OBBBA made QBI permanent; the 60-month classification rule still matters.
Why This Matters for the Exam
The 60-month rule prevents tax flip-flopping. Know when it applies and the exceptions. The 21% corporate rate was already permanent under TCJA. OBBBA made the Section 199A QBI deduction permanent. The 60-month classification rule remains relevant to entity choice.
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 2025 — Rev. Proc. 2025-1; figures approximate, verify current Rev. Proc.)
| Gross Income | Fee |
|---|---|
| Standard | ~$43,700 |
| <$1 million | ~$7,600 |
| <$250,000 | ~$3,800 |
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, 2025 (change from default). Wants to return to partnership Jan 1, 2027. No ownership change.
- 60-month period: Ends Jan 1, 2030.
- Jan 1, 2027: Only 2 years elapsed.
- Result: Locked out — cannot change without >50% ownership change or PLR.
On the Exam
Question types to practice on 60-month:
- Lock Questions: "Elected corp 2025, want partnership 2027 — 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 available with fee. S-Corp = 5-year re-election prohibition.
LLC elected C-Corp Jan 1, 2025 (from default). Wants partnership Jan 1, 2027. No ownership change. Allowed?
No, 60-month rule
Yes, anytime
Yes, with PLR fee only
No, corps cannot become partnerships
What breaks the 60-month lock?
Paying fee
50% ownership change
Filing amended return
3 years elapsed
LLC elects corp on Day 1 of formation. 60-month rule applies?
Yes, any election
No, initial election exempt
Only if assets >$10M
Only in community property
Sections you finish are checked off in the contents.