Qsub election

Technical topics regarding tax preparation.
#1
timyt  
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Hi Pros, I hope you are well. We are going to file a Qsub election for a client. We wanted to elect the Qsub status as of 8/1/18. We have not filed the election yet. The instructions says you can use an effective date 12 months after the election is file. Are we still timely fling this if he show the election date as of 8/1/18? Thank you.
 

#2
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The effective date may be up to 12 months after the election is filed. What you're proposing is an election after the effective date, which isn't allowed.
I just filed one for an effective date of Jan 1, 2019.
~Captcook
 

#3
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CaptCook, What about a late election? Have you done this before?
 

#4
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I've never done a late election.

Not sure you can.
~Captcook
 

#5
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The effective date can be up to 2 months and 15 days prior to the date of the election as well, unless something recently changed.
 

#6
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The time to file a QSub election that would have been effective on August 1st of this year expired on October 15th of this year, two months and 15 days after that desired effective date. That was a month ago. Better make other plans.

Read all about it here: https://www.law.cornell.edu/cfr/text/26/1.1361-3:

(a)(3) Time of making election. A QSub election may be made by the S corporation parent at any time during the taxable year.

(a)(4) Effective date of election. A QSub election will be effective on the date specified on the election form or on the date the election form is filed if no date is specified. The effective date specified on the form cannot be more than two months and 15 days prior to the date of filing and cannot be more than 12 months after the date of filing. For this purpose, the definition of the term 'month' found in § 1.1362-6(a)(2)(ii)(C) applies. If an election form specifies an effective date more than two months and 15 days prior to the date on which the election form is filed, it will be effective two months and 15 days prior to the date it is filed. If an election form specifies an effective date more than 12 months after the date on which the election is filed, it will be effective 12 months after the date it is filed.
 

#7
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But don't miss -3(a)(6) in the linked regulation... ;)
 

#8
jon  
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I seems to me in 2014 or 2015 they changed and allowed the election up to the filing of the return ( I cannot remember if it included extensions.)
 

#9
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I did this for one of my companies back in August. It is 2 months 15 days prior to election, or 12 months after election. There are options for an extension, but did not look into them. What Harry Roscoe posted is correct unless you can qualify for an extension (which I believe are similar to late S-Corp elections).
 

#10
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According to the December, 2017, (quite current), revision of IRS's Form 8869 and its instructions, here's the **official** current version of "time to make a QSub election" including what to do if you're gonna plead "reasonable cause" for having filed a late election:
When To Make the Election
The parent S corporation can make the QSub election at any time
during the tax year. However, the requested effective date of the QSub
election generally cannot be more than:
• 12 months after the date the election is filed, or
• 2 months and 15 days before the date the election is filed.
An election filed more than 12 months before the requested effective
date will be made effective 12 months after the date it is filed. An
election filed more than 2 months and 15 days after the requested
effective date generally is late and will be made effective 2 months and
15 days before the date it is filed. However, an election filed more than 2
months and 15 days after the requested effective date will be accepted
as timely filed if the corporation can show that the failure to file on time
was due to reasonable cause.
To request relief for a late election, the corporation generally must
request a private letter ruling and pay a user fee in accordance with
Rev. Proc. 2017-1, 2017-1 I.R.B. 1 (or its successor). However, relief
from the ruling and user fee requirements is available. See Rev. Proc.
2013-30, 2013-36 I.R.B. 173, for details.
I really doubt that change(s) made back in 2014 or 2015, if there were any made then, would *not* be reflected in the "current" [December 2017] form and its instructions. Read the current instructions - they're not **authoritative** but they sure do look like they agree with the regulations, which do have some weight, n'est-ce pas?
Here's a link to the form and its instructions: https://www.irs.gov/pub/irs-pdf/f8869.pdf
 

#11
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I would like to throw compliments in the direction of the team at IRS/Treasury who saw fit to adopt the abbreviated but quite distinctive "QSub" in the regulations as a buzzy and snappy - but apparently "official" - name for the wholly-owned subsidiary for which the owner/parent S corporation has made the election!! Well done!! How high up the chain-of-command did that decision have to go??

[On accounta "QSSS" just ain't got no buzz!]
 

#12
Smktax  
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If the "subsidiary" for which the Qsub election is to be made is an LLC and not a corp, you may be able to make a late entity classification election (as opposed to a Qsub election) and use the late relief procedures for making the entity classification election. With an entity classification election, you would have a disregarded entity under the S corporation, rather than a Qsub under the S corporation. The result of a Qsub election and an entity classification election is the same (a deemed 332 liquidation) where the subsidiary is 100% owned by the S corporation.
 

#13
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I'm confused. If the "subsidiary" is an LLC and not a corporation, then isn't the *default* entity classification - without making an entity classification election - that the "subsidiary" has been and will continue to be a disregarded entity, because it is a Single-Member (and I presume domestic entity, cuz I'm just a local boy) LLC (and the S corporation has to be the LLC's 100% owner) since the making of an election isn't required at all, and the whole thing about making a "late" election by using the late relief procedures is therefore pretty much moot...?

i.e., it was done for us by default from the very beginning, wasn't it? :?
 

#14
jon  
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I think he is referring to an LLC who has elected to be a S Corp???
 

#15
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If the LLC is owned by the "parent" S corporation, then the LLC can't elect to be an S corporation; the LLC's [only] owner is not an individual (or certain trusts).
 

#16
Smktax  
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The LLC may have elected to be a C corporation.
 


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