PLR 200118032: Attorney's missed filing receives S election relief

Plain-English summary

A company's sole shareholder intended S corporation status for its first taxable year and relied on the company's attorney to handle the filing. The attorney failed to file Form 2553 on time. The IRS found reasonable cause for the missed deadline and granted relief under section 1362(b)(5). The company had to file a completed Form 2553 within 60 days of the ruling letter, effective for its first taxable year, and attach the letter. The IRS did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Can the company make its first year S election after its attorney missed the filing deadline?
• Outcome: Approved if Form 2553 is filed within 60 days of the letter.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200118032
Washington, DC 20224
Release Date: 5/4/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
X =
CC:PSI:2 - PLR-119782-00
Date:
February 2, 2001
A =

D1 =

Year 1 =

Dear :

This letter responds your letter dated September 28, 2000, and subsequent correspondence, submitted 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 represent that A is the sole shareholder of X. A, the president of X, further represents that it was intended for X to be an S corporation beginning in Year 1, its first taxable year. A relied on X’s attorney to take care of the necessary requirements for X to be an S corporation. However, X’s attorney failed to timely file a Form 2553 for X for Year 1.
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 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.

-2-
Mr. C. Dickinson Hill

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 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