S corporation receives 120 days to make a late QSub election

Plain-English summary

An S corporation acquired full ownership of another corporation and intended to treat it as a qualified subchapter S subsidiary from a specified date. It did not timely file Form 8869 to make the QSub election. The parent represented that it acted reasonably and in good faith and that late relief would not prejudice the government. The IRS concluded that the standards under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied and granted 120 days to file a properly executed Form 8869 effective on the intended date. The ruling does not decide whether the parent is a valid S corporation or whether the subsidiary otherwise qualifies as a QSub.

Ruling snapshot

• Question: May an S corporation receive additional time to elect QSub treatment for its wholly owned subsidiary?
• Outcome: Approved, with 120 days to file Form 8869 and attach the ruling
• Key authorities: IRC §§ 1361(b)(3), 1362; Treas. Reg. §§ 1.1361-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202536020                                            Third Party Communication: None
 Release Date: 9/5/2025                                       Date of Communication: Not Applicable
 Index Number: 1361.00-00, 1361.05-00,
               9100.00-00                                     Person To Contact:
                                                              -----------------------, ID No. -----------------
 -----------------------------------------------              Telephone Number:
 ---------------------------------------------------          --------------------
 -------------------------                                    Refer Reply To:
 -------------------------------                              CC:PT&E:B03
                                                              PLR-122026-24
                                                              Date:
                                                              June 06, 2025




LEGEND

 X                      = -----------------------------------------------
                          -----------------------

 Sub                    = ---------------------------------
                          -----------------------

 State 1                = -------------

 State 2                = ----------------

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

 Date 2                 = -----------------

 Date 3                 = ----------------------

 Date 4                 = ----------------------



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

      This letter responds to a letter dated November 6, 2024, and subsequent
correspondence, submitted on behalf of X by its authorized representatives, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
PLR-122026-24                                  2

Regulations to elect to treat Sub as a qualified subchapter S Subsidiary (“QSub”) under
§ 1361(b)(3)(B)(ii) of the Internal Revenue Code (Code).

                                           FACTS

        The information submitted states that X was organized under the laws of State 1
on Date 1, and elected to be an S corporation effective as of that date. On Date 2, Sub
was organized under the laws of State 2 and elected to be an S corporation effective
Date 3. As of Date 4, X wholly owned Sub and intended to elect to treat Sub as a QSub
effective Date 4. However, X failed to timely file Form 8869, Qualified Subchapter S
Subsidiary Election, for Sub effective Date 4. X represents that it has acted reasonably
and in good faith and that granting relief will not prejudice the interests of the
government.

                                   LAW AND ANALYSIS

      Section 1362(a)(1) provides that, except as provided in § 1362(g), a small
business corporation may elect, in accordance with the provisions of § 1362, to be an S
corporation.

       Section 1361(b)(1) provides that an election under § 1362(a) may be made by a
small business corporation for any taxable year (A) at any time during the preceding
taxable year, or (B) at any time during the taxable year and on or before the 15th day of
the 3rd month of the taxable year.

       Section 1362(b)(5) provides that if: (A) an election under § 1362(a) is made for
any taxable year after the date prescribed by § 1362(b) for making such election for
such taxable year or no such election is made for any taxable year, and (B) the
Secretary determines that there was reasonable cause for failure to timely make such
election, then the Secretary may treat such an election as timely made for such taxable
year.

       Section 1361(b)(3)(A) generally provides that (i) a corporation which is a QSub
shall not be treated as a separate corporation, and (ii) all assets, liabilities, and items of
income, deduction, and credit of a QSub shall be treated as assets, liabilities, and such
items (as the case may be) of the S Corporation.

        Section 1361(b)(3)(B) provides that, for the purposes of § 1361(b)(3)(B), the term
“qualified subchapter S subsidiary” means any domestic corporation which is not an
ineligible corporation (as defined in § 1361(b)(2)) if (i) 100 percent of the stock of such
corporation is held by the S corporation, and (ii) the S corporation elects to treat such
corporation as a QSub.

     Section 1.1361-3(a) of the Income Tax Regulations prescribes the time and
manner for making an election to be classified as a QSub. Section 1.1361-3(a)(4)
PLR-122026-24                                3

provides that an election cannot be effective more than two months and 15 days prior to
the date the election is filed or more than 12 months after the election is filed. The
proper form for making the election is Form 8869, Qualified Subchapter S Subsidiary
Election.

       Section 1.1361-3(a)(6) provides that an extension of time to make a QSub
election may be available under the procedures applicable under §§ 301.9100-1 and
301.9100-3.

       Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 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. Section 301.9100-1(b) provides that the term “regulatory election” includes an
election whose due date is prescribed by a regulation published in the Federal Register.

       Sections 301.9100-1 through 301.9100-3 provide the standards that the
Commissioner will use to determine whether to grant an extension of time to make an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides rules for requesting extensions of time for
regulatory elections that do not meet the requirements of § 301.9100-2.

        Under § 301.9100-3, a request for relief will be granted when the taxpayer
provides the evidence (including affidavits described in § 301.9100-3(e)) to establish to
the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of relief will not prejudice the interests of the Government.

                                     CONCLUSION

       Based solely on the facts submitted and the representations made, we conclude
that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3 with respect to
the QSub election for Sub. Accordingly, we grant X an extension of time of 120 days
from the date of this letter to file a properly executed Form 8869 for Sub with the
appropriate service center effective Date 4. A copy of this letter should be attached to
the election.

       Except as expressly provided herein, we express or imply no opinion concerning
the federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we express or imply no opinion as to whether X is
a valid S corporation, or whether Sub is eligible to be a QSub.

       The ruling contained in this letter is 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 ruling, it is subject to verification on examination.
PLR-122026-24                                               4

      This ruling is only directed 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 a power of attorney on file with this office, we are sending a copy of
this letter to X’s authorized representative.

                                               Sincerely,


                                               Associate Chief Counsel
                                               (Passthroughs, Trusts, and Estates)



                                           By:
                                                 Richard T. Probst
                                                 Senior Technician Reviewer, Branch 3
                                                 Office of Associate Chief Counsel
                                                 (Passthroughs, Trusts, and Estates)


Enclosure:
      Copy of this letter for § 6110 purposes

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