PLR 200102023: Late S corporation election granted conditional relief

Plain-English summary

A corporation intended to elect S corporation status in its first taxable year, but its president and attorney each thought the other would file Form 2553. The IRS found reasonable cause for the missed deadline and granted relief under section 1362(b)(5). If the corporation files a completed Form 2553 with the stated effective date within 60 days of the letter, the election will be treated as timely. The IRS gave no opinion on whether it otherwise qualifies as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Will a missed S corporation election be treated as timely?
• Outcome: Approved, contingent on filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200102023
Washington, DC 20224
Release Date: 1/12/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-111819-00
Date:
X = October 5, 2000

A =

B =

D1 =

Year 1 =

Dear :
This letter responds to a letter dated May 31, 2000, and subsequent correspondence, written 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 of Year 1. A and B are the shareholders of X. A, the president of X, represents that it was intended for X to be an S corporation beginning in Year 1, its first taxable year. X believed that its attorney would timely prepare and file a Form 2553, Election by a Small Business Corporation. However X’s attorney believed that X would prepare and file its own Form 2553. Therefore, a Form 2553 was not timely filed for X for Year 1.
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 first 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 1 taxable year, -2-
Mr. David Ortiz
within 60 days following the date of this letter, then such election will be treated as timely made for X’s Year 1 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 sent to X’s authorized representatives.

Sincerely yours,
J. THOMAS HINES
Acting Branch Chief Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes