IRS grants an S corporation a 120-day extension to file a late QSub election for its wholly owned subsidiary

Plain-English summary

An S corporation owned all of the stock of a subsidiary and wanted that
subsidiary treated as a "qualified subchapter S subsidiary" (QSub), meaning the
subsidiary is ignored for tax purposes and its income and deductions roll up into
the parent's return. To get that treatment the parent has to file Form 8869, but
it never did, apparently by oversight. Both companies had nonetheless filed their
returns for years as if the QSub election were in place. The parent asked the IRS
for relief under the "9100" regulations, which let the Commissioner grant more
time to make a missed election when the taxpayer acted reasonably and in good
faith and granting relief will not hurt the government. The IRS agreed and gave
the parent 120 days from the date of the letter to file the QSub election, made
effective back to the date the subsidiary was formed. Anyone who forgets to file
an entity-classification-style election can use this same 9100 relief path.

Ruling snapshot

• Question: May an S corporation that inadvertently failed to file Form 8869 get more time to make a late QSub election for its subsidiary?
• Outcome: Approved (120-day extension granted)
• Key authorities: IRC § 1361(b)(3); Treas. Reg. § 1.1361-3; Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                        Department of the Treasury
                                                Washington, DC 20224

Number: 202551025                               Third Party Communication: None
Release Date: 12/19/2025                        Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.15-00,
              1361.00-00, 1361.05-00            Person To Contact:
                                                -------------------------, ID No. -----------------
--------------------------------                Telephone Number:
--------------------------------                --------------------
---------------------                           Refer Reply To:
--------------------------                      CC:PT&E:B03
------------------------------------            PLR-101587-25
                                                Date:
                                                July 25, 2025


Legend

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

Sub        =         ---------------------------------------------
                     -----------------------

State 1 =            ----------

State 2 =            --------

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

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

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


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


        This letter responds to a letter dated December 16, 2024, and subsequent
correspondence, submitted on behalf of X by its authorized representatives, requesting
relief under § 301.9100-3 of the Procedure and Administration regulations to make a late
election under § 1361(b)(3) of the Internal Revenue Code (Code) to treat Sub as a
qualified subchapter S subsidiary ("QSub").

                                           FACTS

       According to the information submitted, X was organized on Date 1, under the
laws of State 1, and elected to be treated as an S corporation effective Date 2. Sub was
incorporated under the laws of State 2 on Date 3 and has been wholly owned by X since
formation. X intended to elect to treat Sub as a QSub effective Date 3. However, due to
inadvertence, X failed to file Form 8869, Qualified Subchapter S Subsidiary Election. X
represents both it and Sub have filed tax returns and reported all tax items consistent
with the tax treatment of Sub as a QSub for all relevant years since Date 3.

                                   LAW AND ANALYSIS

       Section 1361(b)(3)(A) generally 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, if 100 percent of the stock of the corporation is owned by an S
corporation, and the S corporation elects to treat the corporation as a QSub.

        Section 1.1361-3(a) prescribes the time and manner for making an election to be
classified as a QSub.

       Section 1.1361-3(a)(4) provides that an election may be effective up to two months
and 15 days prior to the date the election is filed or not more than 12 months after the
election is filed.

     Section 1.1361-3(a)(6) provides that an extension of time to make a QSub election
may be available under the 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 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) provides that the term "regulatory election" includes 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 that the
Commissioner will use to determine whether to grant an extension of time to make an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides rules for requesting extensions of time for
regulatory elections 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 satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of relief will not prejudice the interests of the Government.

                                   CONCLUSION

       Based solely upon the information 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 election for Sub. As a result, X is granted an extension of time of 120
days from the date of this letter to elect to treat Sub as a QSub, effective Date 3. The
election should be made by filing a properly executed Form 8869 for Sub with the
appropriate service center, and a copy of this letter should be attached to the election.

       Except for the specific ruling above, we express or imply no opinion concerning the
federal tax consequences of the facts of this case under any other provision of the Code.
Specifically, we express or imply no opinion concerning whether X is a valid S
corporation, or whether Sub is eligible to be a QSub.

      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 requested ruling, it is subject to verification on examination.

      This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

      In accordance with a 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, & Estates)




                                      By: __________/s/
                                         Robert D. Alinsky
                                         Branch Chief, Branch 3
                                         Office of the Associate Chief Counsel
                                         (Passthroughs, Trusts, & Estates)

Enclosure:
Copy of this letter for § 6110 purposes
cc: -------------------------
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