New IRS relief provisions.

• Author: Josephs, Stuart R.
• Position: FederalTaxUpdate

Stuart R. Josephs, CPA, of the San Diego-based Tax Assistance Practice, reports the following:

NEW IRS RELIEF PROVISIONS

Final, temporary and proposed regulations (T.D. 9139 and REG-131786-03, published July 20, 2004) provide that eligible entities filing timely S corporation elections will be deemed to have elected to be classified as associations taxable as corporations.

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Also, Rev. Proc. 2004-48, IRB 2004-32, Aug. 9, 2004, provides a simplified method to request relief for a late S corp election and a late corporate classification election which was intended to be effective on the same date that the S corp election was intended to be effective. Generally, certain eligible entities may be granted relief if the entity satisfies the requirements of Sec. 4 of this revenue procedure.

In addition, Rev. Rul. 2004-85, IRB 2004-33, Aug. 16, 2004 holds that:

* A QSub election does not terminate solely because the parent S corp engages in an "F" reorganization;

* A QSub election terminates if the S corp transfers 100 percent of the QSub stock, by sale or an "A," "C" or "D" reorganization, to another S corp (in a transaction not qualifying as an "F" reorganization); and

* An entity classification...