Extra time granted to make a late section 336(e) election on a stock sale
Plain-English summary
An individual bought all the stock of an S corporation from its shareholder.
A section 336(e) election lets a qualifying stock sale be treated as a sale of
the company's assets for tax purposes, which can give the buyer a stepped-up
basis in those assets. To make the election, the seller and the S corporation
must sign a binding agreement and the corporation must attach an election
statement to its timely filed return. The parties missed those deadlines, so
they asked the IRS for an extension of time under Treasury Regulation
301.9100-3. The IRS found that the parties acted reasonably and in good faith,
that the 9100 requirements were met, and that granting relief would not hurt
the government. It granted 60 days from the date of the letter to enter the
agreement and file the election statement. This matters because a 336(e)
election can carry large tax benefits, and a missed deadline can sometimes be
cured through 9100 relief when the taxpayer moved promptly and in good faith.
Ruling snapshot
- Question: Should the parties get more time under § 301.9100-3 to enter the required agreement and file the statement for a section 336(e) election?
- Outcome: Approved (60 days from the date of the letter)
- Key authorities: IRC § 336(e); Treas. Reg. §§ 1.336-1, 1.336-2(h)(3); Treas. Reg. §§ 301.9100-1 through 301.9100-3
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202618008 Third Party Communication: None
Release Date: 5/1/2026 Date of Communication: Not Applicable
Index Number: 336.05-00, 9100.22-00
Person To Contact:
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------------------------------- Refer Reply To:
------------------------------ CC:CORP:B05
PLR-115998-25
Date:
January 30, 2026
LEGEND
S Corporation Target = -----------------------------------------------
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Shareholder = ----------------
Purchaser = -------------
Date 1 = ---------------------
Company Officials = ----------------------------
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Tax Professional = ---------------------------------------
Dear ------------:
This letter responds to a letter dated August 15, 2025, submitted on behalf of S
Corporation Target, Shareholder, and Purchaser (collectively, the "Parties"), requesting
an extension of time under §301.9100-3 of the Procedure and Administration
Regulations to file an election. The Parties are requesting an extension of time to
properly execute the agreement referenced in §1.336-2(h)(3)(i) (the "Agreement") and
for S Corporation Target to file the election statement under §1.336-2(h)(3)(iii) of the
Income Tax Regulations ("Election Statement") with respect to Purchaser's acquisition
of all the stock of S Corporation Target from Shareholders on Date 1. The material
information submitted is summarized below.
On Date 1, Purchaser, an individual, acquired all of the stock of S Corporation Target
from Shareholder (the "Stock Disposition"). The Parties represented that the Stock
Disposition qualified as a "qualified stock disposition" as defined in §1.336-1(b)(6).
The section 336(e) election was due on or before the due date (including extensions) of
the federal income tax return of S Corporation Target for the taxable year that includes
the Stock Disposition date, but for various reasons, a timely section 336(e) election was
not made. Subsequently, a ruling request was submitted under §301.9100-3 for an
extension of time to enter into the Agreement and file the Election Statement. The
Parties each represented that they are not seeking to alter a return position for which an
accuracy related penalty has been or could be imposed under section 6662.
Regulations promulgated under section 336(e) permit certain sales, exchanges, or
distributions of stock of a corporation to be treated as asset dispositions if: (1) the
disposition is a "qualified stock disposition" as defined in §1.336-1(b)(6); and (2) a
section 336(e) election is made.
Section 1.336-2(h)(3) provides that a section 336(e) election for an S corporation target
is made by: (i) all of the S corporation shareholders, including those who do not dispose
of any stock in the qualified stock disposition, and the S corporation target entering into
a written, binding agreement, on or before the due date (including extensions) of the
federal income tax return of the S corporation target for the taxable year that includes
the disposition date, to make a section 336(e) election; (ii) the S corporation target
retaining a copy of the written agreement; and (iii) the S corporation target attaching the
section 336(e) election statement, described in §1.336-2(h)(5) and (6), to its timely filed
(including extensions) federal income tax return for the taxable year that includes the
disposition date.
Under §301.9100-1(c), the Commissioner has discretion to 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
Internal Revenue Code except subtitles E, G, H, and I.
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 a regulatory election.
Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for
making certain elections. Requests for relief under §301.9100-3 will be granted when
the taxpayer provides evidence to establish to the satisfaction of the Commissioner that
the taxpayer acted reasonably and in good faith, and that granting relief will not
prejudice the interests of the government. Section 301.9100-3(a).
The time for entering into the Agreement and filing the Election Statement is fixed by the
regulations (i.e., §1.336-2(h)(3)(i) and (iii)). Therefore, the Commissioner has
discretionary authority under §301.9100-3 to grant an extension of time to enter into the
Agreement and file the Election Statement, provided the Parties acted reasonably and
in good faith, the requirements of §§301.9100-1 and 301.9100-3 are satisfied, and
granting relief will not prejudice the interests of the government.
Information, affidavits, and representations submitted by the Parties, Company Officials,
and Tax Professional explain the circumstances that resulted in the failure to timely
enter into the Agreement and file the Election Statement. The information establishes
that the request for relief was filed before the failure to enter into the Agreement and to
file the Election Statement was discovered by the Internal Revenue Service. See
§301.9100-3(b)(1)(i).
Based on the facts and information submitted, including the representations made, we
conclude that the Parties have acted reasonably and in good faith, the requirements of
§§301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the
interests of the government. Accordingly, an extension of time is granted under
§301.9100-3, until 60 days from the date on this letter, to enter into the Agreement and
file the Election Statement with respect to the Stock Disposition.
WITHIN 60 DAYS OF THE DATE ON THIS LETTER, S Corporation Target and
Shareholder must enter into a written, binding agreement in accordance with §1.336-
2(h)(3)(i) to make the section 336(e) election, and S Corporation Target must file the
Election Statement in accordance with §1.336-2(h)(3)(iii). The Election Statement must
be attached to S Corporation Target's tax return for the taxable year including Date 1.
In addition, a copy of this letter must be attached to S Corporation Target's return.
Alternatively, if S Corporation Target files its return electronically, it may satisfy the
requirement of attaching a copy of this letter to the return by attaching a statement to its
return that provides the date on, and control number (PLR-115998-25) of, this letter
ruling.
WITHIN 120 DAYS OF THE DATE ON THIS LETTER, all relevant parties must file or
amend, as applicable, all returns and amended returns (if any) necessary to report the
transaction consistently with the making of a section 336(e) election for the taxable year
in which the transaction was consummated (and for any other affected taxable year).
The above extension of time is conditioned on the Parties' tax liabilities (if any) being
not lower, in the aggregate, for all years to which the section 336(e) election applies
than such liabilities would have been if the Agreement had been timely entered into and
the Election Statement had been timely filed (taking into account the time value of
money). No opinion is expressed as to the taxpayers' tax liabilities for the years
involved. A determination thereof will be made by the applicable Director's office upon
audit of the federal income tax returns involved.
We express no opinion as to: (1) whether the Stock Disposition qualifies as a "qualified
stock disposition"; or (2) any other tax consequences arising from the section 336(e)
election. In addition, we express no opinion as to the tax consequences of filing the
return or making the section 336(e) election late under the provisions of any other
section of the Code and regulations, or as to the tax treatment of any conditions existing
at the time of, or resulting from, filing the section 336(e) election late that are not
specifically set forth in the above ruling. For purposes of granting relief under
§301.9100-3, we have relied on certain statements and representations made by the
Parties, Company Officials, and Tax Professional. However, the Director should verify
all essential facts. In addition, notwithstanding that an extension is granted under
§301.9100-3 to file the section 336(e) election, penalties and interest that would
otherwise be applicable, if any, continue to apply.
This ruling is directed only to the taxpayers requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.
Pursuant to the Power of Attorney on file with this office, a copy of this letter is being
sent to your authorized representative.
The rulings contained in this letter are 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 request for rulings, it is subject to verification on examination.
Sincerely,
Jonathan M. Kushner
Senior Technician Reviewer, Branch 5
Office of Associate Chief Counsel (Corporate)
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