PLR 200045014: Corporation receives relief for late S election

Plain-English summary

A corporation's shareholders wanted S corporation status from the date it began conducting business, but the election was not filed on time. The IRS found reasonable cause for the delay and ruled that the corporation would be treated as an S corporation from that date if it otherwise qualified. It directed the corporation to submit Form 2553 within 60 days of the letter. The IRS did not decide whether the corporation met the other S corporation requirements.

Ruling snapshot

• Question: Can the late S election take effect on the date the corporation began conducting business?
• Outcome: Approved relief, subject to other S corporation requirements and timely Form 2553 submission.
• Key authorities: IRC § 1362(a), (b)(1), (b)(3), (b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200045014
Washington, DC 20224
Release Date: 1/9/2000
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B01-PLR-112167-00
Date:
August 9, 2000

Legend

X =

D1 =

This responds to your letter dated June 10, 2000 requesting relief under §1362(b)(5) of the Internal Revenue Code.

Facts

X began conducting business on D1. The shareholders of X desired that X be treated as an S corporation effective on D1. However, the election to be treated as an S corporation was not timely filed. Accordingly, X requests a ruling that it will be treated as an S corporation effective D1.

Law and Analysis

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

Section 1362(b)(1) provides in relevant part that if an S election is made within the first two and one-half months of a corporation’s taxable year, then the corporation will be treated as an S corporation for the year in which the election is made. Under §1362(b)(3), however, 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 filed.

Section 1362(b)(5) provides that (1) if no election is made pursuant to section 1362(a), or if the election is made after the date prescribed for making such an election, and (2) the Secretary determines that there was reasonable cause for the failure to timely make the election, then the Secretary may treat such an election as timely made

CC:PSI:B01-PLR-112167-00
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for such taxable year and effective as of the first day of that year.

X did not timely file an election to be treated as an S corporation under §1362(a).
X has, however, established reasonable cause for not making a timely S election and is entitled to relief under § 1362(b)(5).

Conclusion

Based solely on the facts submitted and the representations made, and provided that X otherwise qualifies as an S corporation, we conclude that X will be treated as an S corporation effective D1. Within 60 days from the date of the letter, X should submit a properly completed Form 2553 with a copy of this letter attached to the relevant service center.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, no opinion is expressed concerning whether X is, in fact, an S corporation for federal tax purposes.

This ruling is directed only to the taxpayer(s) 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 the taxpayer.

Sincerely,
/s/ Dianna K. Miosi
Chief, Branch 1
Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2)
Copy of this letter\
Copy for § 6110 purposes