PLR 200033010: late S corporation election treated as timely

Plain-English summary

A company intended to be an S corporation from its incorporation and operated on that basis, but discovered after its first tax year that it had missed the election deadline. The IRS ruled under section 1362(b)(5) that its S election would be treated as timely for the requested year. The relief depends on the company filing Form 2553 with the stated effective date within 60 days of the letter and attaching a copy of the ruling. The IRS did not decide whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the company's missed S corporation election deadline be excused for its first tax year?
• Outcome: Approved, conditional on filing Form 2553 within 60 days of the ruling.
• Key authorities: IRC §§ 1362(a), 1362(b)(3), and 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service                       Department of the Treasury

Index Number:       U.I.L. No.: 1362.01-03     Washington, DC 20224



                                               Person to Contact:
Number: 200033010                              Telephone Number:
Release Date: 8/18/2000
                                               Refer Reply To:
                                               CC:DOM:P&SI:3 PLR-102969-00
                                               Date:
                                               May 10, 2000




Legend

Company             =


State               =

Shareholders        =




a                   =

b                   =


Dear

       This letter responds to a letter dated November 3, 1999, requesting a ruling on
behalf of Company under § 1362(b)(5) of the Internal Revenue Code.

       The information submitted discloses that Company was incorporated on a in
State. Company has two shareholders, Shareholders. It is represented that Company
has intended to be an S corporation since its incorporation.

        Believing itself to be an S corporation, Company has operated accordingly since
b. After the end of its first taxable year beginning on b, however, Company discovered
that its S election had not been timely filed.

      Company requests a ruling that its § 1362(a) election will be treated as timely
made for its taxable year that begins on b.
PLR-102969-00                               2


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

       Section 1362(b) explains when an S election will be effective. Generally, 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. Section 1362(b)(3) provides that 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 following the year in which the S
election is made.

       Section 1362(b)(5) provides that if no § 1362(a) election is made for any taxable
year, and 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 and § 1362(b)(3) shall not apply.

        Applying the relevant law to the facts submitted and representations made, we
rule that Company's § 1362(a) election will be treated as timely made for its taxable
year that begins on b. However, this ruling is contingent on Company filing Form 2553,
Election by a Small Business Corporation, with an effective date of b, with the
appropriate Service Center within 60 days from the date of this ruling. 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 foregoing facts. Specifically, we express no opinion on
whether Company otherwise qualifies as an S corporation.

       This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

                                                Sincerely yours,


                                                WILLIAM P. O’SHEA
                                                Chief, Branch 3
                                                Office of the Assistant
                                                 Chief Counsel
                                                (Passthroughs and Special
                                                 Industries)


Enclosure:
      Copy for section 6110 purposes