PLR 200334027: Extension granted for subsidiary S election

Plain-English summary

An S corporation acquired a company that owned another corporation. It intended to elect qualified subchapter S subsidiary status for the lower-tier company effective on the acquisition date, but the election was not filed on time. The IRS concluded that the parent met the regulatory requirements for filing relief. It gave the parent 60 days from the letter's date to submit Form 8869 for the subsidiary, effective on the requested date. The IRS did not rule on other federal tax consequences.

Ruling snapshot

• Question: Could the S corporation file a late qualified subchapter S subsidiary election for the lower-tier company?
• Outcome: Approved: 60 additional days to file Form 8869.
• Key authorities: IRC § 1361(b)(3); Treas. Reg. §§ 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200334027
Washington, DC 20224
Release Date: 8/22/2003
Index Number: 1361.00-00; 9100.00-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:1-PLR-104140-03
Date:
May 16 2003

Legend:

P
=

Q1
=

Q2
=

D1
=

D2
=

State =

Dear
:

This responds to a letter dated January 8, 2003, together with subsequent correspondence, requesting a ruling under section 301.9100-(3)(a) of the Procedure and Administration Regulations that P be granted an extension of time to file an election to treat Q2 as a qualified subchapter S subsidiary under section 1361(b)(3) of the Internal Revenue Code, effective D2.

FACTS

According to the information submitted, P was incorporated on D1 under the laws of State. P elected subchapter S status, effective, D1. On D2, P acquired 100 percent of Q1. On D2, Q1 owned 100 percent of the stock of Q2. P intended to elect to treat Q2 as qualified S subsidiary, effective D2, but P and Q2 inadvertently failed to file a timely election.
PLR-104140-03
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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 qualified subchapter S subsidiary. The election is made by filing Form 8869, Qualified Subchapter S Subsidiary Election.

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 as an election with a due date prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement 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 election. See section 301.9100-1(a). Further, section 301.9100-2 provides automatic extensions of time for making certain elections, and 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. See section 301.9100- 3(a).

CONCLUSIONS

Based solely on the facts and representations submitted, we conclude that the requirements of sections 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, P is granted an extension of time of sixty (60) days from the date of this letter to make an election to treat its wholly-owned subsidiary Q2 as a qualified subchapter S corporation, effective D2. P should submit the properly completed Form 8869 to the appropriate service center. A copy of this letter should be attached to the election. A copy is enclosed for this 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.

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.
PLR-104140-03
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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,

Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries)

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