PLR 200004010: Prepared but unfiled S election receives deadline relief

Plain-English summary

A corporation's shareholders prepared Form 2553 to elect S corporation status but never filed it. The IRS ruled that the election would be treated as timely for the tax year beginning on the requested date under § 1362(b)(5). Relief was contingent on filing Form 2553 with that effective date and a copy of the letter within 60 days. The IRS did not decide whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Can the unfiled S election be treated as timely for the requested tax year?
• Outcome: Approved, contingent on filing Form 2553 within 60 days; S corporation eligibility was not decided.
• Key authorities: IRC § 1362(a), (b)(3), (b)(5).

Full text (IRS public release)

Internal Revenue Service                         Department of the Treasury

Index Number:        1362-01.03                  Washington, DC 20224



                                                 Person to Contact:
Number: 200004010                                Telephone Number:
Release Date: 1/28/2000
                                                 Refer Reply To:
                                                 CC:DOM:P&SI:3-PLR-111408-99
                                                 Date:
                                                 October 20, 1999




Legend

Corporation =

D1            =

D2            =

      This letter responds to a letter dated June 15, 1999, submitted on behalf of
Corporation, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code that
Corporation’s S corporation election will be effective as of D2.

Facts

       Corporation was incorporated on D1. The shareholders of Corporation intended
for Corporation to elect S corporation status, and prepared a Form 2553, Election by a
Small Business Corporation, with an effective date of D2. The Form 2553, however,
was never filed.

Analysis

      Section 1362(a) provides that a small business corporation may elect to be an S
corporation.

       Section 1362(b) explains when an S election will be effective. Generally, if an S
election is made within the first two and one half months of a corporation's taxable year,
then that corporation will be treated as an S corporation for the year in which the
election is made. Section 1362(b)(3) provides that if an S election is made after the first
two and one half months of a corporation's taxable year, then that corporation will not
be treated as an S corporation until the taxable year following the year in which the S
election is made.
       Section 1362(b)(5) provides that if no § 1362(a) election is made for any taxable


year, and the Secretary determines that there was reasonable cause for the failure to
timely make such election, then the Secretary may treat such an election as timely
made for such taxable year and § 1362(b)(3) shall not apply.

Conclusion

        Applying the relevant law to the facts submitted and representations made, we
rule that Company's § 1362(a) election will be treated as timely made for its taxable
year that begins on D2. However, this ruling is contingent on Company filing Form
2553, Election by a Small Business Corporation, with an effective date of D2, with the
appropriate Service Center within 60 days from the date of this ruling. A copy of this
letter should be attached to the Form 2553.

        Except as specifically set forth above, we express no opinion concerning the
federal tax consequences of the facts described above under any other provision of the
Code. Specifically, no opinion is expressed concerning whether Corporation otherwise
qualifies as an S corporation.

       Pursuant to a power of attorney on file with this office, a copy of this ruling is
being sent to your authorized representative.

       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.

                                               Sincerely,

                                              Jeff Erickson
                                              Assistant to the Chief, Branch 3
                                              Office of the Assistant Chief Counsel
                                              (Passthroughs and Special Industries)

Enclosures (2)
      Copy of this letter
      Copy for Section 6110 purposes