9100 extension to file a late § 336(e) election treating an S-corp stock sale as an asset sale

Plain-English summary

When a buyer purchases all the stock of an S corporation, the parties can jointly elect under Code § 336(e) to treat the stock sale as if the company sold all its assets and liquidated. That election can give the buyer a stepped-up basis in the target's assets, but it has to be made on time: the shareholders and the target must sign a binding agreement by the return due date and attach an election statement to the timely filed return. Here the buyer, the seller, and the S corporation target signed the required binding agreement but missed the deadline to file the election statement. They asked the IRS for a late-filing extension under Treas. Reg. § 301.9100-3, the general rule that lets the Commissioner forgive a missed regulatory election if the taxpayer acted reasonably and in good faith and the government is not prejudiced. Because the parties asked for relief before the IRS discovered the missed election, they are treated as having acted reasonably and in good faith. The IRS granted an extension of 75 days from the date of the letter to file the election statement, conditioned on the parties' total tax liability not being lower than it would have been with a timely election.

Ruling snapshot

• Question: May the parties get an extension of time under Treas. Reg. § 301.9100-3 to file the late § 336(e) election statement for a qualified stock disposition of an S corporation?
• Outcome: Approved (75-day extension granted)
• 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: 202623005                                           Third Party Communication: None
 Release Date: 6/5/2026                                      Date of Communication: Not Applicable
 Index Number: 336.00-00, 336.05-00,
               9100.00-00, 9100.22-00                        Person To Contact:
                                                             ------------------, ID No. -----------------
 -------------------                                         Telephone Number:
 -------------                                               -------------------
                                                             Refer Reply To:
 ----------------------------------                          CC:CORP:1
 -------------                                               PLR-116206-25
                                                             Date:
                                                             March 06, 2026



 LEGEND

 S Corporation Target                 = --------------------------------------
                                      -----------------------
                                      -------------------------------

 Purchaser                            = ---------------------------------
                                      -----------------------
                                      -----------------------------------------------

 Seller                               = -----------------------------------------------
                                      -----------------------

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

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

 Company Official                     = -------------------

 Tax Professional                     = ---------------------------------------------------------

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

This letter responds to a letter dated August 15, 2025, submitted on behalf of S
Corporation Target, Purchaser, and Seller (collectively, the "Parties"), requesting an
extension of time under Treas. Reg. § 301.9100-3 to file the election statement under
Treas. Reg. § 1.336-2(h)(3)(iii) (the "Election Statement") with respect to Purchaser's
acquisition of all of the stock of S corporation Target from Seller on Date 1.

                                          FACTS

Immediately before Date 1, Seller directly owned all of the issued and outstanding stock
of S Corporation Target, a State A corporation that elected to be treated as an S
corporation for U.S. federal income tax purposes. On Date 1, Purchaser acquired all of
the stock of S Corporation Target from Seller (the "Stock Disposition"). The Parties
represented that the Stock Disposition qualified as a "qualified stock disposition" as
defined in Treas. Reg. § 1.336-1(b)(6).

The Parties intended for the Stock Disposition to be treated as an asset sale, and for an
election to be made, pursuant to section 336(e) of the Internal Revenue Code of 1986,
as amended (the "Code"), with respect to the Stock Disposition. As part of the sale
agreement, the Parties entered into a written, binding agreement to make an election
under section 336(e) to treat the Stock Disposition as if S Corporation Target sold all its
assets in liquidation. However, for various reasons, a timely election was not made.
Subsequently, a request was submitted under Treas. Reg. § 301. 9100-3 for an
extension of time to 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 at
the time of the request for relief. S Corporation Target confirms that granting relief would
not result in S Corporation Target having a lower tax liability in the aggregate for all
taxable years affected by the election that S Corporation Target would have had if the
election had been timely made (taking into account the time value of money).

                                   APPLICABLE LAW

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 Treas. Reg. § 1.336-1(b)(6);
and (2) a section 336(e) election is made.

Treas. Reg. § 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 Treas. Reg. § 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 Treas. Reg. § 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 Code except subtitles E, G, H, and I.

Treas. Reg. §§ 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. Treas. Reg. § 301.9100-1(a). Treas. Reg. § 301.9100-2 provides
automatic extensions of time for making certain elections. Requests for relief under
Treas. Reg. § 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. Treas. Reg. § 301.9100-3(a). Specifically, Treas. Reg. § 301.9100-3(b)(1)
provides that, a taxpayer is deemed to have acted reasonably and in good faith if the
taxpayer requests relief under this section before the failure to make the regulatory
election is discovered by the Internal Revenue Service (the "IRS").

The time for filing the Election Statement is fixed by regulations (i.e., Treas. Reg. §
1.336-2(h)(3)(iii)). Therefore, the Commissioner has discretionary authority under Treas.
Reg. § 301.9100-3 to grant an extension of time to file the Election Statement, provided
the Parties acted reasonably and in good faith, the requirements of Treas. Reg. §§
301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the
interests of the government.

                                         ANALYSIS

While Purchaser, S Corporation Target, and Seller entered into a written, binding
agreement to make an election under section 336(e) to treat the Stock Disposition as if
S Corporation Target sold all its assets in liquidation, the Parties failed to timely file the
Election Statement. Information, affidavits, and representations submitted by the
Parties, Company Official of S Corporation Target, and Tax Professional explain the
circumstances that resulted in the failure to timely file the Election Statement. The
information establishes that the Parties' request for relief was filed before the failure to
file the Election Statement was discovered by the Internal Revenue Service. See Treas.
Reg. § 301.9100-3(b)(1)(i).

                                          RULING

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
Treas. Reg. §§ 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 Treas. Reg. § 301.9100-3, until 75 days from the date on this letter, to file the
Election Statement with respect to the Stock Disposition.

                              PROCEDURAL STATEMENTS

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, S Corporation Target must file the
Election Statement in accordance with Treas. Reg. § 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. 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-116206-25)
of, this letter ruling.

WITHIN 150 DAYS OF THE DATE ON THIS LETTER, all relevant parties must file or
amend, as appropriate, 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 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 filing of 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 Treas.
Reg. § 301.9100-3, we have relied on certain statements and representations made by
the Parties, Company Official of S Corporation Target, and Tax Professional. However,
the Director should verify all essential facts. In addition, notwithstanding that an
extension is granted under Treas. Reg. § 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 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, a copy of this letter is being
sent to your authorized representative.

                                                 Sincerely,

                                                 _____________________________________
                                                 Douglas C. Bates
                                                 Senior Technician Reviewer, Branch 1
                                                 Office of Associate Chief Counsel (Corporate)

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