SECTION 5. RELIEF FOR CERTAIN

QSUB ELECTIONS UNDER THIS REVENUE PROCEDURE

.01 Eligibility for Relief. A corporation that is not requesting relief under section 4 of this revenue procedure (because the corporation has a valid S corporation election) may be granted additional time under section 5.03 of this revenue procedure to file a QSub election with respect to a subsidiary if the following requirements are met:

(1) The subsidiary corporation fails to qualify as a QSub on the desired effective date solely because the parent S corporation failed to file a timely (with respect to the desired effective date) election to treat the subsidiary as a QSub;

(2) The due date for the S corporation’s tax return (excluding extensions) for the first taxable year of the S corporation for which it intended to treat the subsidiary as a QSub has not passed; and

(3) The S corporation has reasonable cause for its failure to timely make the QSub election.

.02 Procedural Requirements for Re- lief. Within 12 months of the due date for filing a QSub election to be effective on the desired effective date (but in no event later than the due date for the S corporation’s tax return (excluding extensions) for the first taxable year of the S corporation for which the S corporation intended to treat the subsidiary as a QSub), the corporation must file with the applicable service center a completed QSub election. The QSub election must state at the top of the form “FILED PURSUANT TO REV. PROC. 98–55.” Attached to the form must be a statement explaining the reason for the failure to file a QSub election within the time period required for the desired effective date. For purposes of this section 5, if a corporation is seeking (or has sought) relief under section 4.01 of this revenue procedure for a late S corpo

ration election, and also did not make a timely (with respect to the desired effective date) election to treat a subsidiary as a QSub effective on a date other than the first day the corporation intended to be an S corporation, the corporation will be treated as having made a valid S corporation election. In this situation, the corporation must also file (or have filed) a request for relief pursuant to section 4.01 of this revenue procedure.

.03 Grant of Additional Time for Filing Certain QSub Elections. Upon receipt of a completed application requesting relief under section 5.02 of this revenue procedure, the Service will determine whether the requirements for granting an additional time to file a QSub election have been satisfied and will notify the corporation of the result of this determination.