Parent received 120 days to correct QSub election filed on wrong form

Plain-English summary

An S corporation wholly owned a corporate subsidiary and intended to elect qualified subchapter S subsidiary status as of the acquisition date. It mistakenly filed Form 2553 instead of Form 8869, and the service center rejected the filing because the subsidiary's sole shareholder was a corporation. The IRS found that the parent met the standards for regulatory-election relief and granted 120 days to file Form 8869 effective as of the intended date. The ruling did not determine whether the parent was a valid S corporation or whether the subsidiary otherwise qualified as a QSub.

Ruling snapshot

• Question: Could an S corporation obtain additional time to make a QSub election after filing Form 2553 instead of Form 8869?
• Outcome: Relief approved, with 120 days to file the proper election
• Key authorities: IRC § 1361(b)(3); 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: 202538015 Third Party Communication: None
Release Date: 9/19/2025 Date of Communication: Not Applicable
Index Number: 9100.00-00, 1361.05-00
Person To Contact:
--------------------------------------- ----------------------------, ID No. --------------

------------------------- Telephone Number:

Refer Reply To:
CC:PT&E:B01
PLR-122029-24
Date:
June 06, 2025

LEGEND

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

Y = ------------------------

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

State 2 = --------

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

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

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

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

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

This letter is in response to your request dated November 12, 2024, submitted on behalf
of X, requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations for X to elect to treat Y as a qualified subchapter S
subsidiary ("QSub”) under §1361(b)(3) of the Internal Revenue Code.

PLR-122029-24 2

FACTS

According to the information submitted, X was incorporated under the laws of State 1 on
Date 1. X elected to be treated as an S corporation effective Date 2. Y was incorporated
under the laws of State 2 on Date 3. X wholly owns Y. X represents that it intended to
elect to treat Y as a QSub effective Date 3. However, X inadvertently filed a Form 2553,
Election by a Small Business Corporation instead of Form 8869, Qualified Subchapter S
Subsidiary Election, intended to be effective Date 3. This filing was rejected by the
service center because Y’s sole shareholder, X, was a corporation. On Date 4, Y
converted from a State 2 corporation to a State 2 limited liability company (“LLC”) under
the laws of State 2.

LAW AND ANALYSIS

Section 1361(b)(3)(A) provides that a QSub shall not be treated as a separate
corporation, and 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) defines a QSub as a domestic corporation which is not an
ineligible corporation, if 100 percent of the stock of the corporation is owned by an S
corporation, and the S corporation elects to treat the corporation as a QSub.

Section 1.1361-3(a) of the Income Tax Regulations provides the time and manner of
making a QSub election. A taxpayer makes a QSub election with respect to a subsidiary
by filing a Form 8869 with the appropriate service center.

Section 1.1361-3(a)(1) provides that the corporation for which a QSub election is made
must meet all the requirements of § 1361(b)(3)(B) at the time the election is made and
for all periods for which the election is to be effective.

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 to make a regulatory election, or a statutory election (but no more than
6 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) defines the term “regulatory
election” as an election whose due date is prescribed by a regulation published in the
Federal Register, or a revenue ruling, revenue procedure, notice, or announcement
published in the Internal Revenue Bulletin.

Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections.

PLR-122029-24 3

Section 301.9100-3 provides the standards the Commissioner will use to determine
whether to grant an extension 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 information submitted and representations made, we conclude that,
the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an
extension of time of 120 days from the date of this letter to elect to treat Y as a QSub,
effective Date 3. Y was a corporation on Date 3, and as such, X should make the
election for Y by filing Form 8869 with the appropriate service center, with a copy of this
letter attached.

Except for the specific ruling above, we express or imply no opinion concerning the
federal tax consequences of the facts of this case under any other provision of the
Code. Specifically, we express or imply no opinion concerning whether X is a valid S
corporation or whether Y is eligible to be a QSub.

This ruling is directed only to the taxpayer requesting it. According to § 6110(k)(3) of the
Code, this ruling may not be used or cited as precedent.

Under a power of attorney on file with this office, we are sending a copy of this letter to
X's authorized representative.

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 ruling request, it is subject to verification on examination.

PLR-122029-24 4

Sincerely,

Jeffrey Erickson
Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

By: __/s/______

Joy C. Spies
Senior Technician Reviewer, Branch 1
Office of Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

Enclosure:
Copy for § 6110 purposes

cc: -----------------------

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