PLR 200013040: Late S corporation election accepted after filing mistake

Plain-English summary

A corporation's president intended to elect S corporation status but thought that marking the employer identification number application was enough. The corporation did not file Form 2553, although it filed an S corporation income tax return and the president reported consistently with S status. The IRS found reasonable cause for the missed election and agreed to treat it as timely for the first tax year if the corporation filed a completed Form 2553 within 60 days of the letter. The ruling did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation's missed S election be treated as timely?
• Outcome: Approved, if it filed Form 2553 within 60 days of the letter.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

200013040

Index Number: 1362.01-03 Washington, DC 20224

Person to Contact:
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-114650-99

Date: JAN - 3 2000

X =

A =

D1 =

Year 1 =

Dear

This letter responds to a letter, dated July 6, 1999, and subsequent correspondence, submitted on behalf of X by its authorized representative, 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, the president of X, intended that X elect to be an S corporation beginning Year 1, its first taxable year. A filed a Form SS-4, Application for Employer Identification Number, for X indicating that X was an S corporation. A thought that the filing of the Form SS-4 was all that was required for X to elect S status. Therefore, no Form 2553, Election by a Small Business Corporation, was filed with the Internal Revenue Service. For Year 1 X filed a Form 1120S, U.S. Income Tax Return for an S Corporation. A filed an individual tax return for Year 1 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, 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- 200013040

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,
(signed) H. GRACE KIM

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

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