S corporation target received more time to file section 336(e) election

Plain-English summary

The parties to the sale of all stock in an S corporation intended to elect under IRC § 336(e) to treat the qualified stock disposition as an asset disposition, but the target did not timely attach the required election statement to its return. The IRS found that the parties acted reasonably and in good faith and that relief would not prejudice the government. It granted the target 75 days to file the election statement and required all relevant parties, within 150 days, to file or amend returns consistently with the election. The relief is conditioned on the parties’ aggregate tax liabilities not being lower than if the election had been timely filed. The ruling does not decide whether the sale was a qualified stock disposition or address other tax consequences, penalties, or interest.

Ruling snapshot

• Question: May the S corporation target receive an extension to file the statement required for a section 336(e) election?
• Outcome: Approved, with 75 days for the election statement and 150 days for consistent returns
• Key authorities: IRC § 336(e); Treas. Reg. §§ 1.336-1, 1.336-2, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202511012 Third Party Communication: None
Release Date: 3/14/2025 Date of Communication: Not Applicable
Index Number: 9100.00-00, 336.05-00
Person To Contact:
----------------------------------- ---------------------, ID No. -----------------
------------------------------------------------------------ Telephone Number:
------ --------------------
------------------------------------------------ Refer Reply To:
----------------------------------------- CC:CORP:B05
PLR-113423-24
Date:
December 09, 2024

Legend

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

-----------------------------------------------------------------------------------------

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

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

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

----------------------------------------------------------------------------------------------

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

Date 1 = -----------------
PLR-113423-24 2

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

This letter responds to a letter dated July 11, 2024, submitted on behalf of S
Corporation Target, as supplemented by additional letters, requesting an extension of
time under § 301.9100-3 of the Procedure and Administration Regulations to file an
election. S Corporation Target is requesting an extension of time to file an election
statement under § 1.336-2(h)(3)(iii) (“Election Statement”) with respect to Purchaser’s
acquisition of all of the stock of S Corporation Target from Seller on Date 1. The
material information submitted is summarized below.

Immediately before Date 1, Seller directly owned all of the issued and outstanding stock
of S Corporation Target, a State A limited liability company that elected to be treated as
an S corporation for U.S. federal income tax purposes. On Date 1, Purchaser, a State A
limited liability company treated as a disregarded entity for U.S. federal income tax
purposes, acquired all the stock of S Corporation Target from Seller (the “Disposition”).
It has been represented that the Disposition qualified as a “qualified stock disposition”
as defined in § 1.336-1(b)(6).

S Corporation Target, Seller, and Purchaser (collectively, the “Parties”) intended that a
section 336(e) election would be made with respect to the Disposition. However, for
various reasons, a timely election was not made. Subsequently, a request was
submitted under § 301.9100-3 of the Procedure and Administration Regulations 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.

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.
PLR-113423-24 3

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 filing the Election Statement is fixed by the regulations (i.e., § 1.336-
2(h)(3)(iii)). Therefore, the Commissioner has discretionary authority under § 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 §§ 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 and Tax
Professional explain the circumstances that resulted in the failure to timely file the
Election Statement. The information establishes that the request for relief was filed
before the failure 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, 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 75 days from the date on this letter, to file the Election Statement with
respect to the Disposition.

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, 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.
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-113423-24) of, this letter
ruling.

WITHIN 150 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).
PLR-113423-24 4

The above extension of time is conditioned on the Parties’ tax liabilities (if any) not
being 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 Directors’ office upon audit of the federal income tax returns involved.

We express no opinion as to: (1) whether the 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 §
301.9100-3, we have relied on certain statements and representations made by the
Parties and Tax Professional. However, the applicable 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 representatives.

                                       Sincerely,



                                       ____________________________________
                                       Brian R. Loss
                                       Office of Associate Chief Counsel (Corporate)
                                       Branch Chief, Branch 5

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