PLR 200030006: Late S corporation election receives conditional relief

Plain-English summary

A corporation intended to elect S corporation status from its incorporation date but did not file Form 2553 on time. The IRS found reasonable cause for the late election and granted relief under section 1362(b)(5). To receive the requested effective date, the corporation had to file a completed Form 2553 within 60 days of the letter and attach a copy of the ruling. The IRS expressly did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could a late Form 2553 be treated as timely for the corporation's intended effective date?
• Outcome: Approved if the corporation files the specified form within 60 days.
• Key authorities: IRC § 1362(a) and (b)(5).

Full text (IRS public release)

Internal Revenue Service                         Department of the Treasury

Index Number:        1362.01-03                  Washington, DC 20224

Person to Contact:
Number: 200030006                                Telephone Number:
Release Date: 7/28/2000
Refer Reply To:
CC:DOM:P&SI:3-PLR-103370-00
Date:
April 21, 2000

Legend

Corporation =

Date          =

Dear

This letter responds to a letter dated January 31, 2000, requesting a ruling under
section 1362(b)(5) of the Code that Corporation’s S corporation election be effective as
of Date.

Facts

Corporation was incorporated on Date. The shareholder of Corporation wanted
Corporation to elect to be an S corporation under section 1362 effective Date.
However, the Form 2553, Election by a Small Business Corporation, was not timely
filed.

Corporation requests a ruling that it will be recognized as an S corporation as of
Date under section 1362(b)(5) of the Code.

Analysis

Section 1362(a) provides that a small business corporation may elect to be an S
corporation.

Section 1362(b) governs the effective date of an S election. If an S election is
made within the first two and one half months of a corporation’s taxable year, then that
corporation will be treated as an S corporation for the year in which the election is
made. If an S election is made after the first two and one half months of a corporation’s
taxable year, then that corporation will not be treated as an S corporation until the
taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if: (1) an election under section 1362(a) is

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PLR-103370-00

made for any taxable year after the date prescribed by section 1362 for making the
election or no section 1362(a) election is made for any taxable year, and (2) the
Secretary determines that there was reasonable cause for the failure to timely make
such election, then the Secretary may treat such an election as timely made for such
taxable year.

Conclusion

Based solely on the facts and representations submitted, we conclude that
Corporation has established reasonable cause for not making a timely election and is
eligible for relief under section 1362(b)(5). Accordingly, provided Corporation makes an
election to be an S corporation by filing with the appropriate Service Center a
completed Form 2553, which contains an effective date of Date for the election, within
60 days following the date of this letter, then such election will be treated as timely
made. 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. Specifically, no opinion is expressed concerning whether Corporation is, in fact,
an S corporation for federal tax purposes.

Pursuant to a power of attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

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.

Sincerely,
William P. O’Shea
Chief, Branch 3
Office of the Assistant Chief Counsel
(Passthroughs and Special Industries)