PLR 200024046: Corporation receives relief after mistaking Form SS-4 for an S election

Plain-English summary

A corporation intended to elect S status for a tax year after its incorporation. Its president believed that filing Form SS-4 for an employer identification number automatically gave the corporation S status, so it did not timely file Form 2553. The IRS found reasonable cause under section 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed Form 2553, effective for the requested year, within 60 days of the letter. The IRS did not decide whether the corporation otherwise met the small business corporation requirements.

Ruling snapshot

• Question: Can a corporation receive late S election relief when its president mistakenly thought Form SS-4 created S status?
• Outcome: Approved if a completed Form 2553 is filed within 60 days of the letter.
• 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: 200024046
Person to Contact:
Release Date: 6/16/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-119452-99
Date:
March 21, 2000
X =

A =

D1 =

Year 1 =

Year 2 =

Dear
:

This letter responds to a letter dated December 3, 1999, and subsequent correspondence submitted by 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 beginning with its Year 2 taxable year. A believed that X automatically received S corporation status by filing Form SS-4, Application for Employer Identification Number, and receiving an acceptance of Form SS-4 from the Service. Therefore, no Form 2553, Election by a Small Business Corporation, was filed timely for X for Year 2.

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 2

-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 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’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