PLR 200112060: Sixty-day extension granted for subsidiary election

Plain-English summary

An S corporation intended to elect qualified subchapter S subsidiary treatment for its wholly owned subsidiary but missed the filing deadline. The IRS found that the requirements for relief under Treasury Regulations §§ 301.9100-1 and 301.9100-3 were met. It gave the corporation 60 days from the ruling date to file Form 8869, with the election effective on the redacted formation date. The ruling does not decide whether the parent is a valid S corporation or whether the subsidiary qualifies as a QSub.

Ruling snapshot

• Question: May the parent corporation file its QSub election late?
• Outcome: Approved; Form 8869 must be filed within 60 days of the ruling.
• Key authorities: IRC § 1361(b)(3)(B); Treas. Reg. §§ 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200112060
Washington, DC 20224
Release Date: 3/23/2001
Index Number: 9100.00-00,
Person to Contact:
1361.05-00
Telephone Number:

Refer Reply To:
CC:PSI:BO1-PLR-123487-00
Date:
December 22, 2000

X =

W =

Date 1 =

This letter responds to your letter written on behalf of X, requesting a ruling that X be granted an extension of time in which to elect to treat its subsidiary W as a qualified subchapter S subsidiary (QSub).

FACTS

According to the information submitted, 0n Date 1 X incorporated W, a wholly owned subsidiary. From its inception X intended to have W treated as a QSub, but it inadvertently failed to timely file a QSub election for W.

LAW AND ANALYSIS

Section 1361(b)(3)(B) defines the term “qualified subchapter S subsidiary” as a domestic corporation which is not an ineligible corporation as defined in section 1361(b)(2), if (1) an S corporation holds 100 percent of the stock of the corporation, and (2) that S corporation elects to treat the subsidiary as a QSub. The election is made by filing Form 8869.

Under section 301.9100-1(c) of the Procedure and Administration Regulations, the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H and I, if the taxpayer demonstrates to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting the relief will not prejudice the interests of the government. Section 301.9100-1(b) defines the term “regulatory election” as including an election whose deadline is prescribed by a notice published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an

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election. Section 310.9100-2 provides automatic extensions of time for making certain elections, but does not apply to QSub elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of section 301.9100-2. Requests for relief under section 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.

CONCLUSIONS

Based solely on the facts submitted and the representations made, the requirements of sections 301.9100-1 and 301.9100-3 have been satisfied. As a result, X is granted an extension of time of sixty (60) days from the date of this letter to make an election to treat W as a QSub effective Date 1. X should submit a properly completed Form 8869 to the relevant service center. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether X is a valid S corporation or whether its subsidiary W is a valid QSub for federal tax purposes.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office a copy of this letter is being sent to the first and second listed authorized representatives.

Sincerely yours,
/s/Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)
Copy of this letter
Copy for section 6110 purposes