PLR 200005020: Unmailed S corporation election receives late filing relief

Plain-English summary

A newly incorporated company and its two shareholders intended S corporation status from the first taxable year. They signed Form 2553, and the company identified itself as an S corporation on its employer identification number application, but the attorney's secretary failed to mail the election form. The IRS found reasonable cause for the missed filing. It ruled that the election would be treated as timely if the company filed a completed Form 2553 within 60 days of the letter. The ruling did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could an S election signed but never mailed be treated as timely?
• Outcome: Relief granted if Form 2553 was filed within 60 days
• Key authorities: IRC §§ 1361(b), 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Index Number: 1362.01-03 Washington, DC 20224

Number: 200005020
Person to Contact:
Release Date: 2/4/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-114409-99
Date:
November 8, 1999

X =

A =

B =

D1 =

Year 1 =

Dear
:

This letter responds to a letter dated, August 2, 1999, and subsequent correspondence, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1 of Year 1. A and B are the sole shareholders of X. A, as X’s president, represents that X and its shareholders intended that X elect to be an S corporation beginning in Year 1, its first taxable year. X indicated on its Form SS-4, Application for Employer Identification Number, that it was an S corporation. X’s attorney prepared a Form 2553, Election by a Small Business Corporation, which A and B signed. However, X’s attorney’s secretary failed to mail the Form 2553 and therefore it was not filed with 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

-2-

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 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.

In accordance with the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

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