PLR 200017050: Corporation received 60 days to make a late S election

Plain-English summary

A corporation intended to elect S corporation status from its first taxable year, but its tax preparer failed to prepare Form 2553 and the election was not filed. The IRS found reasonable cause for the late election and allowed the corporation 60 days from the ruling letter to file a completed Form 2553 with the requested effective date. The letter says the election will then be treated as timely made for that taxable year, subject to the stated conditions. It expressly gives no opinion on whether the corporation was or is otherwise a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could the corporation receive relief for its late S corporation election under IRC § 1362(b)(5)?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(a), 1362(b), and 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

200017050

Index Number: 1362.01-03 Washington, DC 20224

Person to Contact:
Telephone Number:

Refer Reply To:

CC:DOM:P&SI:2 - PLR-119140-99

Date:

January 24, 2000

X =

A =

D1 =

D2 =

Year 1 =

Dear

This letter responds to a letter dated October 26, 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 of Year 1. A, the president of X, represents that X was intended to be an S corporation effective from X's inception. This intent is evidenced by the Minutes of the First Meeting of X, dated D2 of Year 1, which contain a resolution by X's board of directors that X be taxed as a "small business corporation." A further represents that X's tax preparer was instructed to prepare a Form 2553, Election by a Small Business Corporation, for X, but that the tax preparer failed to prepare a Form 2553. Therefore, no Form 2553 was filed for X.

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

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,
(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