PLR 200002022: Late S election accepted when service center had no filing record

Plain-English summary

A corporation's secretary said the company intended to elect S corporation status for its first taxable year and had sent Form 2553 to the IRS. The service center had no record of receiving it. Based on these representations, the IRS found reasonable cause for the missing election and agreed to treat a new filing as timely if the corporation submitted a completed Form 2553 within 60 days of the letter. The ruling did not decide whether the corporation otherwise qualified for S corporation status.

Ruling snapshot

• Question: Can the S election be treated as timely despite the missing service center record?
• Outcome: Approved, subject to filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

INTERNAL REVENUE SERVICE
Index No.: 1362.01-03
Number: 200002022
Release Date: 1/14/2000

CC:DOM:P&SI:2 - PLR-110825-99

October 13, 1999

X =
EIN:

A =

Date 1 =

Year 1 =

Dear

This is in reply to a letter dated June 7, 1999, submitted on behalf of X by X’s authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X first had shareholders on Date 1. A, as X's secretary, represents that it was A’s intent that X elect to be an S corporation effective for Year 1, X's first taxable year. A represents further that a Form 2553, Election by a Small Business Corporation, was prepared , and that the form was sent to the Internal Revenue Service, but the service center has no record of this.
Section 1362(b)(5) of the Code provides that if -- (A) an election under § 1362(a) is made for any taxable year after the date prescribed by § 1362(b) for making such election for such taxable year or no such election is made for any taxable year, and (B) the Secretary determines that there was reasonable cause for the failure to timely make such election, the Secretary may treat such an election as timely made for such taxable year.

Based solely on the facts and the representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation for X's first taxable year. Accordingly, provided X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective for its Year 1 taxable year, within 60 days following the date of this letter, then such 2

election will be treated as timely made for X’s Year 1 taxable year. A copy of this letter should be attached to the Form 2553.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code, including whether X was or is a small business corporation under § 1361(b) of the Code.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely yours,

J. THOMAS HINES
Senior Technician Reviewer
Branch 2
Office of the Assistant
Chief Counsel
(Passthroughs and
Special Industries)

Enclosures: 2
Copy of this letter
Copy for section 6110 purposes