Federal Tax Day - Current, L.6, Code Sec. 1362: Entities Granted Relief for Inadvertent S Corporation Termination (LTR 202634002, 202634006, 202634010) , (Aug 24, 2026)

Three entities were granted relief related to their S corporation elections. In the first case, relief was granted under Code Sec. 1362(f) where the entity’s S corporation election was ineffective because a required shareholder consent was not obtained, the operating agreement inadvertently created a second class of stock, and disproportionate distributions would have caused the election to terminate.

In the second case, relief was granted under Code Sec. 1362(f) where the entity intended to be classified as an S corporation effective on its formation date was ineffective because its Form 2553 was incomplete. In the third case, relief was granted under Code Sec. 1362(f) where an S corporation election was inadvertently terminated because the trustees failed to make a timely ESBT elections. All the taxpayer represented that their ineffective election was not the result of tax avoidance or retroactive tax planning. Hence, the circumstances resulting in the taxpayer’s ineffective election were inadvertent, and the taxpayer’s election was valid and not terminated.

IRS Letter Ruling 202634002

IRS Letter Ruling 202634006

IRS Letter Ruling 202634010

• Code Sec. 1362

  • CCH Reference - FED ¶32,053.65