PLR 200145030: Extension granted for a subsidiary's missed QSub election

Plain-English summary

An S corporation acquired all of a subsidiary's stock and intended to treat it as a qualified subchapter S subsidiary from the acquisition date. It missed the deadline to file Form 8869. The IRS found that the corporation met the requirements for an extension under the election relief regulations. It granted 60 days from the letter to file the election with the intended effective date. The IRS did not decide whether the parent was a valid S corporation or the subsidiary otherwise qualified as a QSub.

Ruling snapshot

• Question: Can the parent file its QSub election late and use the original acquisition date?
• Outcome: Yes. The parent received 60 days to file Form 8869 with that effective date.
• Key authorities: IRC § 1361(b)(3)(B); Treas. Reg. §§ 1.1361-3(a)(4), 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200145030
Washington, DC 20224
Release Date: 11/9/2001
Index Number: 9100.00-00; 1361.05-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B1-PLR-126754-01
Date:
August 9, 2001

Legend:

X =

Y =

D1 =

This responds to the letter dated May 7, 2001, together with subsequent correspondence, submitted on behalf of X, requesting an extension of time under § 301.9100-1 of the Procedure and Administration Regulations to elect to treat Y as a qualified subchapter S subsidiary (QSub) for federal tax purposes.

FACTS

According to the information submitted, X was incorporated on D1, and elected subchapter S status, effective D1. Also on D1, X acquired 100 percent of the stock of Y. X intended to treat Y as a QSub, effective D1, but inadvertently failed to timely file the election.

LAW AND ANALYSIS

Section 1361(b)(3)(B) of the Internal Revenue Code defines a QSub as a domestic corporation that is not an ineligible corporation, if 100 percent of the stock of the corporation is owned by an S corporation, and the S corporation elects to treat the corporation as a QSub.

A taxpayer makes a QSub election with respect to a subsidiary by filing a Form 8869, Qualified Subchapter S Subsidiary Election, with the appropriate service center.

Section 1.1361-3(a)(4) of the Income Tax Regulations provides that the election will be effective on the date specified on the election form or on the date the election is filed if no date is specified. The effective date specified on the election cannot be more than two months and 15 days prior to the date of filing and cannot be more than 12 months after the date of filing.
PLR-126754-01
2

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in § 301.9100-3 to make a regulatory election. Section 301.9100-1(b) defines a regulatory election to mean an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

Requests for relief under § 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. Section 301.9100-3(a).

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly, X is granted an extension of time of sixty (60) days from the date of this letter to elect to treat Y as a QSub, effective D1. The election should be made by filing Form 8869 with the appropriate service center. A copy of this letter should be attached to the election.

Except as specifically set forth above, no opinion is expressed 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 Y is a valid QSub.

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

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

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

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