PLR 200021054: Late S corporation election accepted after no filing record was found

Plain-English summary

A corporation intended to elect S corporation status, and its sole shareholder signed Form 2553 and relied on the corporation's attorney to file it. The IRS had no record of the form. The IRS found reasonable cause for the missed election under section 1362(b)(5). It ruled that the election would be treated as timely for the requested tax year if the corporation filed a completed Form 2553 within 60 days of the letter. The IRS did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Can the corporation make its S corporation election after the filing deadline?
• Outcome: Approved, if it files Form 2553 within 60 days of the ruling letter.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Index Number: 1362.01-03 Washington, DC 20224

Number: 200021054
Person to Contact:
Release Date: 5/26/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-102567-00
Date:
February 29, 2000

X =

A =

D1 =

Year 1 =

Year 2 =

Dear
:

This letter responds to a letter, dated January 7, 2000, 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 in Year 1. A, as the sole shareholder and president of X, represents that X was intended to be an S corporation beginning Year 2. The minutes of a meeting of the board of directors of X evidence this intent. A executed a Form 2553, Election by a Small Business Corporation, and relied on X’s attorney to file the form with the Internal Revenue Service. However, the Service has no record of a Form 2553 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 -2-

to make a timely election to be an S corporation for X’s Year 2 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 2 taxable year, within 60 days following the date of this letter, then such election will be treated as timely made for X’s Year 2 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 your first and second authorized representatives.

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