PLR 200104018: Late S corporation election relief where IRS had no filing record

Plain-English summary

A corporation intended to elect S corporation status for its first taxable year. Its secretary represented that Form 2553 had been prepared and filed, but the IRS service center had no record of it. The IRS found reasonable cause for the missed election and ruled that a completed Form 2553 would be treated as timely if filed within 60 days of the ruling date. The ruling did not decide whether the corporation otherwise met the requirements to be a small business corporation.

Ruling snapshot

• Question: Can the corporation obtain late election relief when the IRS has no record of its S corporation election form?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200104018
Washington, DC 20224
Release Date: 1/26/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-112696-00
X = Date:
October 24, 2000
A =

D1 =

Year 1 =

Dear :

This letter responds to a letter dated June 22, 2000, and subsequent correspondence, submitted by you 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 secretary of X, represents that X was intended to be an S corporation effective for the Year 1 taxable year. This intent is evidenced by the minutes of the organizational meeting of X, which indicate that X’s Directors resolved to be taxed as an S corporation. A further represents that A prepared and filed a Form 2553, Election by a Small Business Corporation, for X. However, X’s Internal Revenue service center has no record of X’s filing of a Form 2553. Therefore, no Form 2553 was timely filed for X for the Year 1 taxable year.

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 1 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, within 60 days following the date of this letter, then such

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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.

Sincerely yours,
JEANNE M. SULLIVAN
Assistant to the Chief, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

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