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Taxpayers should note that the IRS has recently added three new issues to its informal S corporation no-rule list, thus negating a taxpayer’s ability to receive a private letter ruling in these areas.
At a Federal Bar Association Section of Taxation Tax Law Conference in Washington, D.
The second category in which the IRS will no longer issue rulings involves the second-class of stock regulations involving tests with an objective and subjective prong, such as employment agreements, options or warrants.
The final category of issues that the IRS will no longer rule on is taxpayers with bad filings. 1.1362-6(b)(3)(iii) permits an extension for an S corporation to file consents to an election if shareholders fail to file timely consents.
Poston stated that “we really don’t consider that by itself to be something that presents a real threat to the validity of an S election.” Poston stated that although the IRS will not issue letter rulings when the S corporation has a bad return filing or when an S corporation election or consent is filed with missing or incomplete information, there is administrative relief available for some types of missing information to an S election. Poston stated that relief can be obtained at the IRS Service Center level and not by contacting the IRS Office of Chief Counsel. Poston additionally stated that the IRS will not issue rulings when the S corporation filed a C corporation return in some past year or years.