Late section 336(e) election extension granted

Plain-English summary

A partnership acquired more than 80% of an S corporation through a disregarded entity, and the parties intended to treat the stock sale as an asset sale under section 336(e). They entered the required arrangement but did not timely attach the election statement to the target's return because they relied on a tax professional who failed to file or advise them to file it. The IRS found that the parties acted reasonably and in good faith and requested relief before the IRS discovered the omission. It granted 75 days to file the election statement and 150 days to file or amend all affected returns consistently. Relief is conditioned on aggregate tax liabilities not being lower than they would have been with a timely election.

Ruling snapshot

• Question: May the parties file a late section 336(e) election statement for the qualified stock disposition?
• Outcome: Approved, with 75-day and 150-day compliance deadlines
• Key authorities: IRC § 336(e); Treas. Reg. §§ 1.336-2(h)(3) and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202521016 Third Party Communication: None
Release Date: 5/23/2025 Date of Communication: Not Applicable
Index Number: 9100.22-00, 336.05-00
Person To Contact:
------------------- -------------------------------, ID No. -----------
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-------------------------------------- Telephone Number:
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Refer Reply To:
CC:CORP:B5
PLR-118282-24
Date:
February 19, 2025

Legend

Shareholders = ----------------------------------------------------------------------
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S Corporation Target = ----------------------------------------------------------------------
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Purchaser = ----------------------------------------------------------------------
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Date 1 = ------------------

Company Official = ----------------------------------------------------------------------
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Tax Professional = ----------------------------------------------------------------------
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Dear ----------------:

This letter responds to a letter dated October 2, 2024, submitted on behalf of S
Corporation Target, S Corporation Target’s Shareholders, and Purchaser (collectively,

PLR-118282-24 2

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 file an election statement under § 1.336-2(h)(3)(iii) of the Income Tax Regulations
("Election Statement") with respect to Purchaser's acquisition of more than 80% of the
stock of S Corporation Target from its Shareholders on Date 1. The material information
submitted is summarized below.

On Date 1, Purchaser, a partnership, acquired (through a disregarded entity whose sole
regarded owner, for federal income tax purposes, is Purchaser) more than 80% of the
stock of S Corporation Target from its Shareholders (the "Stock Disposition"). It has been
represented that the Stock Disposition qualified as a "qualified stock disposition" as
defined in § 1.336-1(b)(6).

The Parties intended for the stock sale to be treated as an asset sale, but for various
reasons, a timely election was not made. Subsequently, a request was submitted under
§ 301.9100-3 for an extension of time to file the Election Statement. The Parties
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

PLR-118282-24 3

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, Company Official,
and Tax Professional explain the circumstances that resulted in the failure to timely file
the Election Statement. The information establishes that the Parties reasonably relied on
a qualified tax professional who failed to timely file, or to advise them to timely file, the
Election Statement, and 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) and (v).

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 75 days from the date on this letter, to file the Election Statement with
respect to the Stock 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. 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-118282-24) 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).

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.

PLR-118282-24 4

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 Official, 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, copies of this letter are being
sent to your authorized representatives.

                                        Sincerely,


                                        _______________________
                                        William W. Burhop
                                        Senior Technician Reviewer, Branch 5
                                        Office of Associate Chief Counsel (Corporate)

cc:

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