PLR 1325008: IRS grants more time to make a qualified subchapter S subsidiary election

Plain-English summary

An S corporation acquired all of the stock of another corporation but did not timely file Form 8869 to elect qualified subchapter S subsidiary status for the subsidiary. The IRS concluded that the taxpayer acted within the standards for relief under section 301.9100-3. It granted 120 additional days from the date of the letter to make the election effective as of the acquisition date. The relief was conditioned on filing required federal income tax returns consistent with the requested treatment.

Ruling snapshot

• Question: Could the S corporation receive an extension of time to elect to treat its wholly owned subsidiary as a QSub?
• Outcome: Approved
• Key authorities: IRC § 1361(b)(3); Treas. Reg. §§ 1.1361-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201325008 Third Party Communication: None
Release Date: 6/21/2013 Date of Communication: Not Applicable
Index Number: 1361.00-00, 1361.05-00,
9100.00-00 Person To Contact:
-----------------------, ID No. -------------------
--------------------------------------- ---------------------------------------------------
----------------------------- Telephone Number:
------------------------------------------ --------------------
------------------------------------------------ Refer Reply To:
CC:PSI:B03
PLR-147285-12
Date:
March 22, 2013

X = --------------------------------------------------------------------------------------------------------------------
------

Y = --------------------------------------------------------------------------------------------------------------------
------

State = ------------

Date 1 = ------------------

Date 2 = --------------------

Year = -------

Dear ----------------:

  This letter responds to a letter dated October 1, 2012, and subsequent

correspondence, submitted on behalf of X by its authorized representative, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations for X to elect to treat Y as a qualified subchapter S subsidiary (QSub) under
§ 1361(b)(3) of the Internal Revenue Code (Code).

                                                 FACTS

   According to the information submitted, X was incorporated under the laws of

State and elected to be an S corporation effective Date 1. On Date 2, X acquired all of
the stock of Y. X failed to timely file Form 8869, Qualified Subchapter S Subsidiary
Election.
PLR-147285-12 2

                              LAW AND ANALYSIS

   Section 1361(b)(3)(A) provides that except as provided in regulations prescribed

by the Secretary, for purposes of Title 26 (i) a corporation which is a QSub shall not be
treated as a separate corporation, and (ii) all assets, liabilities, and items of income,
deduction, and credit of a QSub shall be treated as assets, liabilities, and such items (as
the case may be) of the S corporation.

   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 § 1361(b)(2)),
if 100 percent of the stock of the corporation is held by an S corporation, and the S
corporation elects to treat the corporation as a QSub.

    Section 1.1361-3(a) of the Income Tax Regulations provides the time and

manner of making a QSub election. A taxpayer makes a QSub election for a subsidiary
by filing Form 8869 with the appropriate service center.

   Section 1.1361-3(a)(4) provides that a QSub election cannot be effective more

than two months and 15 days prior to the date of filing.

   Section 1.1361-3(a)(6) provides that an extension of time to make a QSub

election may be available under §§ 301.9100-1 and 301.9100-3.

   Section 301.9100-1(c) provides that 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. Section 301.9100-1(b) defines a regulatory
election to include an election whose due date is prescribed by a regulation published in
the Federal Register.

   Section 301.9100-2 provides the rules governing automatic extensions of time for

making certain elections. Section 301.9100-3 provides the standards the Commissioner
will use to determine whether to grant an extension of time for regulatory elections that
do not meet the requirements of § 301.9100-2.

   Section 301.9100-3 provides that requests for relief subject to § 301.9100-3 will be

granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the Government.
PLR-147285-12 3

                                  CONCLUSION

    Based solely on the facts submitted and representations made, we conclude that

X has satisfied the requirements of § 301.9100-3. Accordingly, X is granted an
extension of time of one hundred twenty (120) days from the date of this letter to elect to
treat Y as a QSub effective Date 2. The election should be made for the subsidiary by
filing Form 8869 with the appropriate service center. A copy of this letter should be
attached to the election.

   This ruling is contingent upon the filing within 120 days of this letter any and all

required Federal income tax returns from Year to the present consistent with the
requested relief.

   Except as specifically set forth above, we express or imply no opinion concerning

the federal tax consequences of the facts described above under any other provision of
the Code. Specifically, we express or imply no opinion concerning whether X is a valid
S corporation or whether Y is eligible to be a QSub.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the

Code provides that it may not be used or cited as precedent.

  In accordance with the Power of Attorney on file with this office, we are sending a

copy of this letter to your authorized representative.

   The ruling contained in this letter is based upon information and representations

submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.

                                   Sincerely,
                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)


                                   ____________________________
                                   Richard T. Probst
                                   Senior Technician Reviewer, Branch 3
                                   Office of Associate Chief Counsel
                                   (Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter