PLR 200118048: First year S corporation election receives late filing relief

Plain-English summary

A company's sole shareholder intended S corporation status from the incorporation date and submitted board minutes as evidence. The company missed the deadline for Form 2553. The IRS found reasonable cause for the late election under section 1362(b)(5). It said the election would be treated as timely if the company filed a completed Form 2553 within 60 days of the ruling letter, effective from incorporation, and attached 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 corporation election after the filing deadline?
• Outcome: Approved if it files Form 2553 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: 200118048
Washington, DC 20224
Release Date: 5/4/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 -PLR-118054-00
Date:
X =
February 6, 2001
A =

D1 =

Dear :

This letter responds to a letter dated May 26, 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 sole shareholder of X, represents that A intended for X to be an S corporation effective D1 and submitted minutes of a meeting of X’s directors as evidence of that intent. However, a Form 2553, Election by a Small Business Corporation, was not timely 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 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)

-2-

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