Parent receives 120 days for two late QSub elections

Plain-English summary

An S corporation wholly owned two domestic subsidiaries and intended to elect qualified subchapter S subsidiary status for both on the date its own S election became effective. It failed to file Forms 8869 because of inadvertence. The IRS found that the parent satisfied the requirements for discretionary election relief. It granted 120 days to file properly executed Forms 8869 with the requested effective date, while expressing no opinion on whether the parent was a valid S corporation or the subsidiaries otherwise qualified as QSubs.

Ruling snapshot

• Question: Whether the parent could receive extra time to make QSub elections for two subsidiaries
• Outcome: Approved, with 120 days to file Forms 8869
• Key authorities: I.R.C. § 1361(b)(3); Treas. Reg. §§ 1.1361-3, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 201540005                                              Third Party Communication: None
 Release Date: 10/2/2015                                        Date of Communication: Not Applicable
 Index Numbers: 1361.05-00, 9100.00-00
                                                                Person To Contact:
 ------------------------------------------                     --------------------------, ID No. ----------------
 ------------------------------------------------------------   ----------------
 -----------------------                                        Telephone Number:
 ------------------------                                       --------------------
 --------------------------                                     Refer Reply To:
                                                                CC:PSI:B03
                                                                PLR-103047-15
                                                                PLR-103048-15
                                                                Date:
                                                                June 26, 2015



LEGEND

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

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

Z        =      ------------------------------
-------------------------------------

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

Date      =    -----------------------




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


         This letter responds to a letter dated December 30, 2014, and subsequent
 correspondence submitted on behalf of X by its authorized representative, requesting
 relief under § 301.9100-3 of the Procedure and Administration Regulations for X to elect
 to treat Y and Z as qualified subchapter S subsidiaries (QSubs).

                                                      FACTS
PLR-103047-15; PLR-103048-15                 2


       X, a State corporation, wholly owns Y and Z, State corporations. X elected to be
treated as an S corporation effective Date and intended to elect to treat Y and Z as
QSubs effective Date. However, due to inadvertence, X failed to file Form 8869,
“Qualified Subchapter S Subsidiary Election,” for each subsidiary.

                                           LAW

       Section 1361(b)(3)(A) of the Internal Revenue Code (Code) provides that a QSub
shall not be treated as a separate corporation, and 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 a QSub 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. Section 1.1361-3(a)(2) provides that an S
corporation makes a QSub election with respect to a subsidiary by filing a 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 procedures applicable under §§ 301.9100-1 and
301.9100-3.

       Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a
regulatory election, or a statutory election (but not more than 6 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 301.9100-2 provides an automatic extension of time for making certain
elections. Section 301.9100-3 provides extensions of time for making elections that do
not meet the requirements of § 301.9100-2.

        Section 301.9100-3(a) 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-103047-15; PLR-103048-15                 3


                                     CONCLUSION

       Based solely on the facts submitted and the representations made, we conclude
that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3 with respect to
the QSub elections for Y and Z. Accordingly, we grant X an extension of time of 120
days from the date of this letter to file properly executed Forms 8869 for Y and Z with
the appropriate service center effective Date. A copy of this letter should be attached to
the elections.

       Except as expressly provided herein, we express or imply no opinion concerning
the federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we express or imply no opinion as to whether X is
a valid S corporation or whether Y and Z are eligible to be QSubs.

      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 representatives.

       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)



                                   By:   _________________________________
                                         Mary Beth Carchia
                                         Senior Technician Reviewer, Branch 3
                                         Office of the Associate Chief Counsel
                                         (Passthroughs & Special Industries)


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