120 days granted for an S corporation to make a late QSub election for a subsidiary

Plain-English summary

An S corporation that wholly owns another corporation can elect to treat that
subsidiary as a "qualified subchapter S subsidiary" (QSub), which makes the
subsidiary disappear for tax purposes so its income and assets are treated as
the parent's. That election is made by filing Form 8869. Here, one S
corporation was formed and, as part of what it represents was an "F"
reorganization, became the 100% parent of an existing S corporation. It
intended to elect QSub treatment for the subsidiary effective that date but
never filed Form 8869 on time, even though it filed all later returns as if
the QSub election were in place. The parent asked the IRS for more time under
Treasury Regulation § 301.9100-3, which lets the IRS extend a missed
regulatory election deadline where the taxpayer acted reasonably and in good
faith and relief will not prejudice the government. The IRS granted 120 days
to file the late Form 8869. The IRS expressly gave no opinion on whether the
entities are valid S corporations or on the validity of the reorganization.

Ruling snapshot

• Question: May an S corporation that missed the deadline get an
  extension of time to make a late QSub election for its wholly owned
  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: 202614009
 Release Date: 4/3/2026
 Index Numbers: 1361.00-00, 1361.05-00,
               9100.00-00                                       Third Party Communication: None
                                                                Date of Communication: Not Applicable

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                                                                Person To Contact:
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                                                                --------------, ID No. -----------------
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                                                                Telephone Number:
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                                                                Refer Reply To:
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                                                                CC:PT&E:B03
                                                                PLR-113056-25
                                                                Date:
                                                                January 08, 2026




                                                       LEGEND

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

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

State A           =        -------------

State B           =        -------------

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

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

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

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

      This letter responds to a letter dated March 10, 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 file an election to treat Sub as a qualified subchapter S subsidiary
(QSub) under § 1361(b)(3) of the Internal Revenue Code (Code).
PLR-113056-25                                2

                                         FACTS

        The information submitted states that Sub, a State A limited liability company,
was formed on Date 1 and elected to be an S corporation effective Date 2. On Date 3,
X was incorporated under the laws of State B, and elected to be an S corporation
effective Date 3. Also on Date 3, incident to what X represents was part of a
reorganization under § 368(a)(1)(F), Sub’s sole shareholder contributed all of the stock
in Sub to X, thereby causing Sub to become a wholly owned subsidiary of X.

      X represents that it intended to elect to treat Sub as a QSub effective Date 3.
However, X inadvertently failed to timely file Form 8869, Qualified Subchapter S
Subsidiary Election, for Sub effective Date 3.

      X represents that its failure to make a timely QSub election for Sub was
inadvertent and not the result of tax avoidance or retroactive tax planning. Further, X
represents that all tax returns since Date 3 were filed consistent with Sub being treated
as a QSub effective Date 3.

                                  LAW AND ANALYSIS

       Section 1361(b)(3)(A) of the Internal Revenue 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 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 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,
PLR-113056-25                                 3

H, and I. Section 301.9100-2 provides the rules governing automatic extensions 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 (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 on the facts submitted and representations made, we conclude that
X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, we
grant X an extension of time of 120 days from the date of this letter to file a Form 8869
with the appropriate service center to elect to treat Sub as a QSub effective Date 3. A
copy of this letter should be attached to Form 8869.

        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, whether Sub was a valid S corporation or QSub, whether Sub is
eligible to be a QSub, or the validity of the reorganization under § 368(a)(1)(F) or its tax
consequences.

      The ruling contained in this letter is based upon information and representations
submitted by X 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 requesting it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

        Pursuant to a power of attorney on file with this office, we are sending a copy of
this letter to X's authorized representatives.
PLR-113056-25                                                4

                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs, Trusts, and Estates)


                                           By: ______________________________
                                               Brian J. Barrett
                                               Senior Technician Reviewer, Branch 3
                                               Office of the Associate Chief Counsel
                                               (Passthroughs, Trusts, and Estates)
Enclosure:
      Copy of this letter for § 6110 purposes

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