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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Telephone Number:
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Refer Reply To:
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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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