S corporation receives 120 days to file a late QSub election

Plain-English summary

An S corporation acquired all the stock of another domestic corporation and intended to treat the acquired company as a qualified subchapter S subsidiary effective on the acquisition date. It failed to file Form 8869 on time because of inadvertence. The IRS found that the requirements for discretionary election relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied. It granted 120 days to file the QSub election retroactively and required both corporations to file all returns for open years consistently with that treatment. The IRS did not decide whether the parent otherwise qualified as an S corporation or the subsidiary otherwise met the QSub requirements.

Ruling snapshot

• Question: May an S corporation file a late QSub election for a wholly owned subsidiary acquired earlier?
• Outcome: Approved, with a 120-day filing period
• Key authorities: IRC § 1361(b)(3); Treas. Reg. §§ 1.1361-3(a), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202549010
Release Date: 12/5/2025
Index Number: 1361.05-00, 9100.00-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
------------------------, ID No. -----------------

Telephone Number:

Refer Reply To:
CC:PT&E:B01
PLR-105310-25

Date:
July 23, 2025

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LEGEND

X = -----------------------------------
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Y = -----------------------------------
-----------------------

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

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

Date 3 = --------------------------

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

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

This letter responds to a letter dated February 25, 2025, 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 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 is a corporation organized under the laws of
State on Date 1. X made an election to be an S corporation effective Date 1. On Date
3, X acquired all the stock of Y, a corporation organized under the laws of State on Date

2. X represents that it intended for Y to be treated as a qualified subchapter S

PLR-105310-25 2

subsidiary (QSub) effective Date 3. However, due to inadvertence, X failed to timely file
Form 8869, Qualified Subchapter S Subsidiary Election, for Y.

LAW AND ANALYSIS

Section 1361(b)(3)(A) provides that, except as provided in regulations prescribed by the
Secretary, for purposes of the Code (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) provides that the term "QSub" means any domestic corporation
which is not an ineligible corporation (as defined in § 1361(b)(2)), if (i) 100 percent of
the stock of such corporation is held by the S corporation, and (ii) the S corporation
elects to treat such corporation as a QSub.

Section 1.1361-3(a)(1) of the Income Tax Regulations provides that the corporation for
which a QSub election is made must meet all the requirements of § 1361(b)(3)(B) at the
time the election is made and for all periods for which the election is to be effective.

Section 1.1361-3(a)(4) provides that the effective date specified on the election form
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.

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 to make a regulatory election, or a statutory election (but no 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 301.9100-1(b) defines the term
"regulatory election" as 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.

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. 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 extensions that do
not meet the requirements of § 301.9100-2.

Under § 301.9100-3, a request for relief will be granted when the taxpayer provides the
evidence (including affidavits described in § 301.9100-3(e)) to establish to the

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satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and that (2) the grant of relief will not prejudice the interests of the Government.

CONCLUSION

Based solely upon the information submitted and representations made, we conclude
that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3 with respect to
the QSub election for Y. Accordingly, we grant X an extension of time of 120 days from
the date of this letter to elect to treat Y as a QSub, effective Date 3. The election should
be made by filing a properly executed Form 8869 for Y with the appropriate service
center. A copy of this letter should be attached to the Form 8869.

In addition, this ruling is contingent on X and Y filing, within 120 days from the date of
this letter, all required returns for all open years consistent with the requested relief. A
copy of this letter should be attached to any such returns.

Except as expressly provided herein, we express or imply no opinion concerning the
federal income tax consequences of the facts under any other provision of the Code.
Specifically, we express or imply no opinion on whether X met the definition of an S
corporation under § 1361(b)(1) or Y met the definition of a QSub under § 1361(b)(3).

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.

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.

Pursuant to the power of attorney on file with this office, we are sending a copy of this
letter to X's authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

Caroline E. Hay
Senior Technician Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

Enclosure:
Copy for § 6110 purposes

PLR-105310-25 4

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