PLR 200129035: Late S corporation election allowed after Form 2553 was omitted

Plain-English summary

A corporation's shareholders intended S corporation treatment from its first taxable year and filed an S corporation tax return, but the corporation did not file Form 2553 for that year. The IRS found reasonable cause for the missed election under IRC § 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed Form 2553, effective for its first taxable year, within 60 days of the letter. The IRS did not determine whether the corporation otherwise qualified as a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could a missing S corporation election be treated as timely for the corporation's first taxable year?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days of the ruling.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200129035
Washington, DC 20224
Release Date: 7/20/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B02-PLR-101898-01
Date:
April 25, 2001

X =

A =

B =

D1 =

Year 1 =

Dear
:

This responds to your letter dated December 13, 2000, and subsequent correspondence, written 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 and B, X’s shareholders, represent that they intended for X to be treated as an S corporation for federal tax purposes as of Year 1, X's first taxable year. X filed a Form 1120S, U.S. Income Tax Return for an S Corporation, for its Year 1 taxable year. However, a Form 2553, Election by a Small Business Corporation, was not filed for X for Year 1.

Section 1362(b)(5) 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

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PLR-101898-01

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.

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).

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) 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
Acting Senior Technician Reviewer
Branch 2
Office of the Associate
Chief Counsel
(Passthroughs and Special
Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes