PLR 200012075: Late S corporation election allowed if Form 2553 is filed promptly

Plain-English summary

A corporation and its shareholders intended S corporation treatment from its first tax year, but the prepared election form was not filed on time. They had filed tax returns consistent with S corporation status. The IRS found reasonable cause for the missed deadline and said the election would be treated as timely if the corporation filed a completed Form 2553, effective for that first year, within 60 days of the ruling letter. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could the corporation's late S election be treated as timely for its 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: 200012075
Person to Contact:
Release Date: 3/24/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-117797-99
Date:
December 23, 1999

X =

A =

D1 =

Year 1 =

Dear
:
This letter responds to your letter, dated November 1, 1999, requesting a ruling, on behalf of X, under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1 of Year 1. A, as president of X, represents that the shareholders of X intended that X elect to be an S corporation beginning in Year 1, its first taxable year. X’s SS-4, Application for Employer Identification Number, and X’s Action by Unanimous Written Consent of X indicate that X was to be an S corporation. A represents that a Form 2553, Election by a Small Business Corporation, was prepared and signed by X’s shareholders. However, due to X’s inadvertence, the Form 2553 was not timely filed on behalf of X for Year 1. For Year 1, X filed Form 1120S, U.S. Income Tax Return for an S Corporation, and X’s shareholders filed Form 1040, U.S. Individual Income Tax Return, consistent with X being an S corporation.
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, -2-
Mr. Craig Reisfield
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 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 who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

Sincerely yours,

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

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