PLR 200105056: Late S corporation election accepted after officer missed filing requirement

Plain-English summary

A corporation intended to elect S status for its first tax year, but its president did not know Form 2553 had to be filed and no election was submitted. The IRS found reasonable cause for the missed deadline under section 1362(b)(5). It would treat the election as timely for that first year if the corporation filed a completed Form 2553 within 60 days of the ruling. The IRS did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Can an S corporation election take effect in the first tax year even though no timely Form 2553 was filed?
• Outcome: Approved if a completed election is filed 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: 200105056
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-116272-00
Date:
November 7, 2000

X =

A =

D1 =

Year 1 =

Dear :
This letter responds to your letter, dated June 5, 2000, and subsequent correspondence, submitted 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 in Year 1. A, as the president of X, represents that X was intended to be an S corporation beginning Year 1, its first taxable year. The minutes of a meeting of the board of directors of X the evidence this intent. However, A did not know that a Form 2553, Election by a Small Business Corporation, was required to be filed with X’s service center to elect S status. Therefore, no form 2553 was 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 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 -2-

appropriate service center effective for its Year 1 taxable year, 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 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