PLR 200109035: S election filed late by attorney may be treated as timely

Plain-English summary

A corporation intended to elect S status for its first taxable year and recorded that intent in an officers' resolution. It relied on an attorney to file Form 2553, but the attorney did not file it. The IRS found reasonable cause for the missed deadline and ruled that the election would be treated as timely if the company filed a completed Form 2553 within 60 days of the letter. The IRS did not decide whether the company otherwise met the requirements to be a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could the company receive relief for its attorney's failure to file the S election on time?
• Outcome: Approved, if a completed Form 2553 is filed within 60 days.
• Key authorities: IRC §§ 1361(b) and 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200109035
Washington, DC 20224
Release Date: 3/2/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-122393-00
Date:
December 1, 2000

X =

A =

D1 =

D2 =

Year 1 =

Dear :

This letter responds to a letter dated October 18, 2000, and subsequent correspondence, submitted by the authorized representative of X 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 president of X, represents that X was intended to be an S corporation effective for the Year 1 taxable year. This intent is evidenced by a resolution of the officers of X, dated D2 of Year 1, that X elects to be taxed under subchapter S. A further represents that X relied on its attorney to file Form 2553, Election by a Small Business Corporation, for X. However, X’s attorney failed to file a Form 2553 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

-2-

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 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 forwarded 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