SECTION 1. PURPOSE

This revenue procedure facilitates the grant of relief to taxpayers that request relief previously provided in numerous other revenue procedures by consolidating the provisions of those revenue procedures into one revenue procedure and extending relief in certain circumstances. This revenue procedure modifies and supersedes

Rev. Proc. 2003–43, 2003–1 C.B. 998; Rev. Proc. 2004–48, 2004–2 C.B. 172; and Rev. Proc. 2007–62, 2007–2 C.B. 786 for taxpayers to make late S corporation elections, Electing Small Business Trust (ESBT) elections, Qualified Subchapter S Trust (QSST) elections, Qualified Subchapter S Subsidiary (QSub) elections, and late corporate classification elections which the taxpayer intended to take effect on the same date that the taxpayer intended that an S corporation election for the entity should take effect. This revenue procedure also incorporates certain relief provisions included in Rev. Proc. 97–48, 1997–2 C.B. 521, and supersedes

2013–36 I.R.B. 173 September 3, 2013

Center. Section 1.1361–1(j)(6)(iii)(A) provides that the QSST election must be made within the 16-day-and-2-month period beginning on the day that the S corporation stock is transferred to the trust.

Section 1361(c)(2)(A)(v) provides that an ESBT (as defined in § 1361(e)) is a permitted S corporation shareholder. Section 1361(e)(1) defines an Electing Small Business Trust (ESBT) as any trust if: (1) the trust does not have as a beneficiary any person other than an individual, an estate, or an organization described in § 170(c)(2) through (5); (2) no interest in the trust was acquired by purchase; and (3) an election has been made with respect to the trust. To qualify as an ESBT, the trustee of the trust must make an ESBT election by signing and filing an election statement with the applicable IRS Service Center. Section 1.1361–1(m)(2)(iii) provides that the ESBT election must be filed within the time requirements prescribed in § 1.1361–1(j)(6)(iii) for filing a QSST election (described above).

(2) Late ESBT and QSST Elections. Failure to properly make an election to be treated as an ESBT or a QSST may result in a shareholder who is not an eligible S corporation shareholder under § 1361(b)(1)(B) holding stock of the corporation. As a result, the failure to properly file an ESBT or QSST election may result in an inadvertently invalid S corporation election, or in an inadvertent termination of an S corporation election.

Section 1362(f) grants the Secretary authority to provide relief if a corporation’s S corporation election was not effective for the taxable year for which it was made by reason of a failure to meet the requirements of § 1361(b) or to acquire the required shareholder consents. Under § 1362(f), the Secretary may also grant relief if the corporation’s S corporation election terminated under § 1362(d)(2) or (3). A corporation is eligible for relief under this provision if (1) the Secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent, (2) no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination, steps were taken (i) so that the S corporation is a small business corporation, or (ii) to acquire the required shareholder consents, and (3) the corporation, and each person who was a shareholder of

the relief provided in Situation 1 of Rev. Proc. 97–48. This revenue procedure obsoletes the relief provided in Situation 2 of Rev. Proc. 97–48 because such relief is no longer available. Furthermore, this revenue procedure incorporates certain relief provisions included in Rev. Proc. 2004–49, 2004–2 C.B. 210, and modifies and supersedes the relief provided in sections 4.01 and 4.02 of Rev. Proc. 2004–49. This revenue procedure obsoletes the relief provided in section 4.03 of Rev. Proc. 2004–49 because the time period for its narrow scope of relief has expired.

This revenue procedure provides the exclusive simplified methods for taxpayers to request relief for late S corporation elections, ESBT elections, QSST elections, QSub elections, and late corporate classification elections which the taxpayer intended to take effect on the same date that the taxpayer intended that an S corporation election for the entity should take effect. This revenue procedure provides relief if the taxpayer satisfies the general requirements of Section 4 and the specific requirements applicable to that taxpayer under Sections 5 through 7 of this revenue procedure. Accompanying this document is a flowchart designed to aid taxpayers in applying this revenue procedure.