PLR 200123022: Late S corporation election treated as timely

Plain-English summary

A corporation asked the IRS to treat its late S corporation election as timely for its first taxable year. Its sole shareholder intended the corporation to elect S corporation status, and a directors' resolution stated that intention, but Form 2553 was not filed on time. The IRS found reasonable cause for the missed deadline under IRC § 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the ruling date, effective for that first taxable year. The IRS expressed no opinion on whether the corporation otherwise met the definition of a small business corporation under § 1361(b).

Ruling snapshot

• Question: May the late S corporation election be treated as timely for the corporation's first taxable year?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a), 1362(b)(5), 1361(b), and 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200123022
Washington, DC 20224

Release Date: 6/8/2001
Index Number: 1362.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-130629-00
Date:
March 6, 2001

Legend

X:

A:

D1:

D2:

Year 1:

Dear
:

This letter responds to your representative’s letter dated November 1, 2000, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The represented facts are as follows: X was incorporated on D1. A, the sole shareholder of X, intended X to be an S corporation effective for the Year 1 taxable year, but Form 2553, Election by a Small Business Corporation, was not filed timely. This intent is evidenced by a resolution of the directors of X, dated D2 of Year 1, which states that X will elect to be taxed under subchapter S. Accordingly, X requests a ruling that it will be treated as an S corporation effective D1.

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 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 2 PLR-130629-00

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