PLR 200105046: First-year S election allowed after late Form 2553

Plain-English summary

A newly incorporated company intended to elect S status from its incorporation date, as reflected in its employer identification number application. It did not file a completed Form 2553 on time. The IRS found reasonable cause for the late election under section 1362(b)(5). It would treat the election as timely for the first tax year if the company filed a completed Form 2553 within 60 days of the ruling. The IRS did not decide whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: Can the company's S election take effect from its incorporation date despite the missed filing deadline?
• Outcome: Approved if it files a completed election within 60 days of the letter.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200105046
Washington, DC 20224
Release Date: 2/2/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-112590-00
Date:
October 26, 2000

X =

A =

D1 =

Year 1 =

Dear
:
This letter responds to your letter, dated June 12, 2000, and subsequent correspondence, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.
The information submitted states that X was incorporated on D1 in Year 1. A, as the president of X, represents that X was intended to be an S corporation effective D1, Year 1. X’s Form SS-4, Application for Employer Identification Number, evidences this intent. However, a completed Form 2553, Election by a Small Business Corporation, was not timely filed for X.

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 effective Year 1. 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 D1, Year 1, 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 -2-

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 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 X’s authorized representative.

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