Our client’s need

The client, an S corporation shareholder, sold all shares of the S corporation. The client and purchaser agreed to make an election under IRC section 336(e) (Section 336(e) Election) to treat the stock sale as an asset sale. Because of the sale, the S corporation was required to file a short-period income tax return on Form 1120-S. A Section 336(e) Election must be attached to a timely-filed tax return. Unfortunately, the S corporation failed to file its short-period return. As such, the Form 1120-S was filed late, and the Section 336(e) Election was invalid.

Baker Tilly’s solution

Baker Tilly first contacted an attorney at the Internal Revenue Service’s (IRS’s) Office of Chief Counsel to discuss the client’s facts and assess the IRS’s willingness to grant relief in this case. Baker Tilly then drafted a private letter ruling request utilizing the procedures available under Treasury Regulation section 301.9100-3. Baker Tilly met with the IRS Chief Counsel Attorney, answered all questions, and prepared any requisite submissions. Finally, after the IRS granted the ruling request, Baker Tilly prepared an amended Form 1120-S to attach a timely Section 336(e) Election.

Results

By obtaining a private letter ruling, Baker Tilly preserved the Section 336(e) Election, which saved the client hundreds of thousands of dollars in tax.

For more information on this topic or to learn how Baker Tilly specialists can help, contact our team.