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.
- Under OBBBA the 21% C-corp rate is permanent — changing TO corporate status no longer hedges a TCJA sunset; the 60-month lock is therefore a bigger commitment.
Why This Matters for the Exam
The 60-month rule prevents tax flip-flopping. Know when it applies and the exceptions. Under OBBBA, the 21% C-corp rate and the 20% §199A QBI deduction are BOTH permanent, so a classification change in 2025 is no longer a hedge against a TCJA sunset — the 60-month lock truly is a 5-year commitment to a durable tax regime.
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 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
Expect 2-3 questions on 60-month, typically:
- 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?
What breaks the 60-month lock?
LLC elects corp on Day 1 of formation. 60-month rule applies?