IRS written determination 202627006

us-irs-private-letter-rulings-202627006IRS written determination 202627006Guidance

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Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 202627006
Release Date: 7/2/2026
Index Number: 1361.00-00, 1361.05-00,
1362.04-00, 9100.00-00

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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
--------------------, ID No. -----------------
Telephone Number:
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Refer Reply To:
CC:PT&E:B01
PLR-116588-25
PLR-116589-25
PLR-116590-25
PLR-116591-25
Date:
March 17, 2026

LEGEND

X = -------------------------------------------------------------------------
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Sub 1 = -------------------------------------------------------------------------
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Sub 2 = -------------------------------------------------------------------------
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Sub 3 = -------------------------------------------------------------------------
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Sub 4 = -------------------------------------------------------------------------
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State = ----------------
Date 1 = ---------------------
Date 2 = ----------------------
Date 3 = -----------------
Date 4 = ----------------------

PLR-116588-25

2
Date 5 = ----------------------

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

This letter responds to a letter dated September 15, 2025, and subsequent
correspondence, submitted on behalf of X by X’s authorized representatives, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations to elect to treat Sub 1, Sub 2, and Sub 3 as Qualified Subchapter S
Subsidiaries (QSubs) under § 1361(b)(3) of the Internal Revenue Code (Code) as well
as a ruling under § 1362(f) for an ineffective QSub election for Sub 4.

FACTS

X was incorporated under the laws of State on Date 1 and made an election to be
treated as an S corporation effective Date 2.

X, directly or indirectly, wholly owns Sub 1, Sub 2, Sub 3 and Sub 4.

X intended to treat Sub 1 and Sub 2 as QSubs effective Date 3, Sub 3 as a QSub
effective Date 4, and Sub 4 as a QSub effective Date 5. However, X inadvertently failed
to timely file Forms 8869, Qualified Subchapter S Subsidiary Election, for Sub 1, Sub 2,
and Sub 3.

A QSub election was made for Sub 4 effective Date 5. However, the QSub election was
ineffective because Sub 1, not X, the S corporation parent, had filed Form 8869 electing
to treat Sub 4 as a QSub.

X and its shareholders represent that the ineffective QSub election for Sub 4 was
inadvertent and was not motivated by tax avoidance or retroactive tax planning. X and
its shareholders have agreed to make adjustments (consistent with the treatment of
Sub 4 as a QSub) as may be required by the Secretary.

LAW AND ANALYSIS

Section 1361(a)(1) provides that the term “S corporation” means, with respect to any
taxable year, a small business corporation for which an election under § 1362(a) is in
effect for the year.

Section 1361(b)(1) defines a “small business corporation” as a domestic corporation
which is not an ineligible corporation and which does not (A) have more than 100
shareholders, (B) have as a shareholder a person (other than an estate, a trust
described in § 1361(c)(2), or an organization described in § 1361(c)(6) who is not an
individual, (C) have a nonresident alien as a shareholder, or (D) have more than one
class of stock.

PLR-116588-25

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Section 1361(b)(3)(A) generally provides that (i) 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) defines a QSub as a domestic corporation which is not an
ineligible corporation (as defined in § 1361(b)(2)), if (i) 100 percent of the stock of the
corporation is held by the S corporation, and (ii) 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 for
making an election to be classified as a QSub. Under § 1.1361-3(a)(2), an S
corporation elects to treat a subsidiary as a QSub by filing a Form 8869 with the
appropriate service center. Section 1.1361-3(a)(4) 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.

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

Section 1362(f) provides, in part, that if (1) an election under § 1361(b)(3)(B)(ii) by any
corporation (A) was not effective for the taxable year for which made (determined
without regard to § 1361(b)(2)) by reason of a failure to meet the requirements of
§ 1361(b) or (B) was terminated under § 1361(b)(3)(C), (2) the Secretary determines
that the circumstances resulting in such ineffectiveness or termination were inadvertent,
(3) no later than a reasonable period of time after discovery of the circumstances
resulting in such ineffectiveness or termination, steps were taken so that the corporation
for which the election was made or the termination occurred is a QSub, and (4) the
corporation for which the election was made or the termination occurred, and each
person who was a shareholder in such corporation at any time during the period
specified pursuant to § 1362(f), agrees to make such adjustments (consistent with the
treatment of such corporation as a QSub) as may be required by the Secretary with
respect to such period, then notwithstanding the circumstances resulting in such
ineffectiveness or termination, such corporation shall be treated as a QSub during the
period specified by the Secretary.

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.

PLR-116588-25

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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 an election. Section
301.9100-2 provides the rules governing automatic extensions of time for making
certain elections. 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), a request for relief will be granted when the taxpayer provides
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) granting relief will not prejudice the interests of the government.

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that X has
satisfied the requirements of §§ 301.9100-1 and 301.9100-3 with respect to the QSub
elections for Sub 1, Sub 2, and Sub 3. Accordingly, we grant X an extension of time of
120 days from the date of this letter to elect to treat Sub 1 and Sub 2 as QSubs effective
Date 3 and Sub 3 as a QSub effective Date 4. The elections should be made by filing
Forms 8869 with the appropriate service center. A copy of this letter should be attached
to each election.

Additionally, based solely on the facts submitted and the representations made, we
conclude that the QSub election for Sub 4 was ineffective because Sub 1 filed the
Form 8869 for Sub 4. We further conclude that the circumstances resulting in the
ineffective QSub election for Sub 4 were inadvertent within the meaning of § 1362(f).
Consequently, under § 1362(f), we rule that, provided the QSub election for Sub 4 was
otherwise valid and did not otherwise terminate under § 1361(b)(3)(C), Sub 4 shall be
treated as a QSub from Date 5 and thereafter.

This ruling is contingent on X and its shareholders filing, within 120 days from the date
of this letter, all required federal income tax returns (including amended returns) for all
open years consistent with the relief granted in this letter. A copy of this letter must
accompany any such returns.

We express no opinion concerning the assessment of any interest, additions to tax,
additional amounts, or penalties for failure to file a timely tax or information return with
respect to any taxable year that may be affected by this ruling.

Except as specifically set forth above, we express or imply no opinion concerning the
consequences of the facts described above under any other provision of the Code,
including whether X is a valid S corporation, or whether each Sub 1, Sub 2, Sub 3, or
Sub 4 is eligible to be a QSub.

PLR-116588-25

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The ruling contained in this letter is based on information and representations supplied
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.

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, we are sending a copy of this
letter to X’s authorized representatives.

Sincerely,

Jeffrey Van Hove
Acting Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

____________/s/_______________
Joy C. Spies
Senior Technician Reviewer, Branch 1
Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

Enclosure:
Copy for § 6110 purposes

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