S election relief after service center found no filing record

Plain-English summary

A corporation's sole shareholder said a Form 2553 had been mailed and that both the corporation and shareholder filed tax returns consistent with S corporation status. The service center later said it had no record of receiving the election. The IRS found reasonable cause for the failure to make a timely election under section 1362(b)(5). It would treat a completed Form 2553 as timely if filed within 60 days of the letter for the corporation's first tax year. The IRS did not decide whether the corporation otherwise qualified under section 1361(b).

Ruling snapshot

• Question: Could the corporation's S election for its first tax year be treated as timely despite the missing filing record?
• Outcome: Approved, provided Form 2553 is filed within 60 days of the letter
• Key authorities: IRC §§ 1362(b)(5) and 1361(b)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200108020
Washington, DC 20224
Release Date: 2/23/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 -PLR-114373-00
Date:
November 21, 2000

X =

A =

D1 =

D2 =

Dear :

This letter responds to a letter dated June 23, 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 issued stock and began doing business on D1. A, the sole shareholder of X represents that A intended X to be an S corporation effective D1 and that a Form 2553, Election by a Small Business Corporation, was mailed to a service center. A also represents that X filed its income tax return as an S corporation for its first taxable year and A filed A’s income tax return consistent with the treatment of X as an S corporation. In a letter dated D2, the service center advised X that it had no record of the filing of the Form 2553.
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 -2-

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 D1, within 60 days following the date of this letter, then such election will be treated as timely made. 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.

Sincerely yours,

Jeanne Sullivan
Assistant to the Chief
Branch 2
Office of the Assistant
Chief Counsel
(Passthroughs and
Special Industries)

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