PLR 200117015: Late S election backed by directors' meeting minutes

Plain-English summary

A corporation intended to be taxed as an S corporation from its incorporation date, but Form 2553 had not been filed. Its chief executive officer submitted minutes from the first directors' meeting as evidence of that intent. The IRS found reasonable cause for the missed election under section 1362(b)(5). It agreed to treat an election effective from incorporation as timely 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 a small business corporation.

Ruling snapshot

• Question: Could a missing S election be treated as timely from incorporation?
• Outcome: Approved, if Form 2553 was filed within 60 days.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200117015
Washington, DC 20224
Release Date: 4/27/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:
(202) 622-3060
Refer Reply To:
CC:PSI:2 - PLR-118569-00
Date:
January 24, 2001
X =

A =

D1 =

Dear
:

This letter responds to a letter dated August 31, 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. A, the chief executive officer of X represents it was intended that X be an S corporation effective D1 and submitted minutes of X’s first meeting of its directors as evidence of that intent. However, a Form 2553, Election by a Small Business Corporation, was not 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 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 -2-
Mr. Littlefield
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’s authorized representative.

Sincerely yours,
Jeanne 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