PLR 200003034: S election can be filed within 60 days after ruling

Plain-English summary

A corporation intended to elect S corporation status for its first tax year, as reflected in its meeting minutes and employer identification number application. Its attorney and accountant each believed the other would prepare Form 2553, so the election was not filed on time. The IRS found reasonable cause under § 1362(b)(5) and agreed to treat the election as timely if the corporation filed a completed Form 2553 within 60 days of the ruling with a copy of the letter attached. The IRS did not decide whether the corporation otherwise qualified for S corporation status.

Ruling snapshot

• Question: Could the missed deadline for the corporation's first S election be excused?
• Outcome: Approved, conditional on filing Form 2553 within 60 days of the letter.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service          Department of the Treasury

Index Number:   1362.01-03        Washington, DC 20224



Number: 200003034                 Person to Contact:
Release Date: 1/21/2000
                                  Telephone Number:

                                  Refer Reply To:
                                  CC:DOM:P&SI:2 - PLR-114250-99
                                  Date:
                                  October 26, 1999




X          =


A          =


D1         =

Year 1     =

Dear                :

     This letter responds to your letter dated June 30, 1999, and
subsequent correspondence, requesting a ruling under § 1362(b)(5)
of the Internal Revenue Code.

     The information submitted states that X was incorporated on
D1. A, the president of X, represents that X intended to elect
to be an S corporation beginning Year 1, its first taxable year.
The Minutes of the Joint First Meeting of Shareholders and Board
of Directors of X indicate that X was to elect S corporation
status. X also indicated on its Form SS-4, Application for
Employer Identification Number, that it was an S corporation.
However, X’s attorney and X’s accountant each thought it was the
responsibility of the other to prepare a Form 2553, Election by a
Small Business Corporation. Therefore, no Form 2553 was prepared
and timely submitted to the Internal Revenue Service.

     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.


                                -2-



     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 Year 1
taxable year. Accordingly, provided that 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
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 requesting it.
Section 6110(k)(3) of the Code provides that it may not be used
or cited as precedent.


                                      Sincerely yours,




                                      H. GRACE KIM
                                      Assistant to the Chief
                                        Branch 2
                                      Office of the Assistant
                                        Chief Counsel
                                      (Passthroughs and
                                        Special Industries)
Enclosures: 2
     Copy of this letter
     Copy for § 6110 purposes