PLR 200021031: Late S election allowed after missing Form 2553

Plain-English summary

A corporation's president believed an S election had been filed for its first tax year, and the corporation filed an S corporation return. The service center had no record of receiving Form 2553. The IRS found reasonable cause for the missed election and said it would be treated as timely if the corporation filed a completed Form 2553, effective for that first year, within 60 days of the letter. The ruling did not determine whether the corporation otherwise qualified as a small business corporation under IRC § 1361(b).

Ruling snapshot

• Question: Could the corporation's missing S election be treated as timely for its first tax year?
• Outcome: Approved, if Form 2553 is filed within 60 days.
• Key authorities: IRC §§ 1361(b) and 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Index Number: 1362.01-03 Washington, DC 20224

Number: 200021031
Person to Contact:
Release Date: 5/26/2000 Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2-PLR-117147-99
Date:
February 23, 2000

X =

A =

Date 1 =

Year 1 =

Dear
:

This letter responds to your September 7, 1999 letter and subsequent correspondence submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X incorporated on Date 1 of Year 1. A, the president of X, represents that it was intended that X be an S corporation beginning with X’s Year 1 taxable year and believed that A filed for X a Form 2553 (Election by a Small Business Corporation) with the applicable service center. Believing that Form 2553 had been filed, X filed a Form 1120S (U.S. Income Tax Return for an S corporation) for Year 1. However, the applicable service center informed X that it could not process X’s Form 1120S because it did not have a record that a Form 2553 had been filed for X.

Section 1362(b)(5) of the Code provides that if-- (A) an election under § 1362(a) for any taxable year is made 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 -

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 Year 1, 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, we express no opinion 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, 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