USA S-Corp Election for LLC owned by LLC


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Working with a client who has an LLC (structured like a private equity fund) that he is using to purchase several small businesses. The fund LLC recently purchased an existing LLC and will be the only shareholder.

Is the target company eligible for S-Corp treatment? I assumed it was, but found some rulings by the IRS that seem to contradict. Specifically, they seem to indicate that an LLC can not elect S-Corp tax treatment if it is owned by another LLC.
 

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