PLR 200127014: First-year S corporation election may be filed late

Plain-English summary

A corporation's sole shareholder intended S corporation treatment for its first tax year, but Form 2553 was not filed on time. A corporate resolution supported that intent. The IRS found reasonable cause for the missed deadline and ruled that an election for the first year would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the letter. A copy of the ruling had to accompany the form. The IRS did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: May the corporation make a late S election effective for its first tax year?
• Outcome: Approved, conditional on filing Form 2553 within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200127014
Washington, DC 20224
Release Date: 7/6/2001
Index Number: 1362.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-107161-01
Date:
April 3, 2001

Legend

X:

A:

D1:

D2:

Year 1:

Dear
:

This letter responds to your representative’s letter dated , and subsequent correspondence, 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 D2. 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 officers of X, dated D1, 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 D2.

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 2
PLR-107161-01

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.

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