PLR 200006045: Late S election is treated as timely if filed within 60 days

Plain-English summary

A corporation intended to elect S corporation status for its first tax year, but its president, accountant, and attorney were confused about who would file Form 2553. No form was filed for that year. The IRS found reasonable cause for the missed deadline and granted relief under section 1362(b)(5). A completed Form 2553 electing S status for that year would be treated as timely if filed within 60 days of the ruling with a copy of the letter attached. The IRS gave no opinion on whether the corporation met the separate requirements to be a small business corporation under section 1361(b).

Ruling snapshot

• Question: Can a missed S corporation election be treated as timely for the corporation's first tax year?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days
• Key authorities: IRC §§ 1362(b)(5) and 1361(b)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Index Number: 1362.01-03 Washington, DC 20224

Number: 200006045
Person to Contact:
Release Date: 2/11/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-114753-99
Date:
November 17, 1999
X =

A =

D1 =

D2 =

Year 1 =

Dear
:

This letter responds to a letter dated August 18, 1999, and subsequent correspondence submitted by you as X’s authorized representative 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, but did not begin doing business until D2 of Year 1. A, the president of X, represents that X was intended to be an S corporation effective from X’s inception. A further represents that there was confusion among A, X’s accountant, and X’s attorney as to who would file a Form 2553, Election by a Small Business Corporation, for X effective for X’s Year 1 taxable year. Therefore, no Form 2553 was filed for X for X’s Year 1 taxable year.

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 Year 1 taxable year. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the

-2-

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 who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
Pursuant to a power of attorney on file with this office, a copy of this letter is being forwarded to X.

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