Ezel / IRS Rulings / 200937029

CCA 200937029: Waiving the passive-income tax does not cure an S corporation election termination

Number
200937029
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Passive Investment Income; Inadvertent Terminations; Tax Imposed On Certain Passive Investment Income
Topics
S corporations
Code sections
§ 1362, § 1375
Ruling dated
July 22, 2009
Publicly released
September 11, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel advised that relief for an inadvertent termination of an S corporation election under IRC § 1362(f) and a waiver of the tax on excess net passive investment income under IRC § 1375(d) are separate determinations handled by different IRS offices. A waiver under § 1375(d) and Treas. Reg. § 1.1375-1(d) does not waive a termination under § 1362(d)(3). To cure that termination, the taxpayer must request relief under § 1362(f) and satisfy the specific requirements of Treas. Reg. § 1.1362-4 and the general requirements for private letter rulings.

Ruling snapshot

  • Question: Does a waiver of the excess passive investment income tax also cure an S corporation election termination?
  • Outcome: Advice given.
  • Key authorities: IRC §§ 1362 and 1375; Treas. Reg. §§ 1.1362-4 and 1.1375-1(d); Rev. Proc. 2009-1.

Full text (IRS public release)

ID: CCA_2009072212015721 Number: 200937029
Release Date: 9/11/2009
Office: ----------------
UILC: 1362.02-03, 1362.04-00, 1375.00- 00

From: ----------------------
Sent: Wednesday, July 22, 2009 12:01:59 PM
To: -----------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
------------------------
Subject: RE: §1362(d)(3) and §1375(d) Excess Net Passive Investment Income

Relief for inadvertent termination of an S corporation election under § 1362(f) and waiver of the tax on excess passive investment income under § 1375(d) are separate determinations under the jurisdiction of different offices of the Internal Revenue Service. A grant of waiver under § 1375(d) and § 1.1375-1(d) does not waive any termination that may have taken place under § 1362(d)(3), and to cure such a termination, the taxpayer would have to request relief under § 1362(f) by submitting a private letter ruling request which satisfies all the specific requirements of § 1.1362-4, as well as the general requirements for private letter rulings under Revenue Procedure 2009-1 (or its successors).

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