PLR 200139027: Late S election allowed after attorney miscommunication

Plain-English summary

A corporation intended to elect S corporation status from its incorporation date, but a miscommunication between its president and attorney left Form 2553 unfiled. The IRS found reasonable cause for the missed deadline under § 1362(b)(5). It agreed to treat an election as timely from the intended date if the corporation filed a completed Form 2553 within 60 days of the ruling letter. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could the S election take effect from incorporation despite the missed filing?
• Outcome: Approved: late election relief was granted, subject to filing within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200139027
Washington, DC 20224
Release Date: 9/28/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:P&SI:2 - PLR-113365-01
Date:
X = July 3, 2001

A =

B =

D1 =

Dear :

This letter responds to a letter dated February 28, 2001 and subsequent correspondence submitted by you 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. A and B are the shareholders of X. A, the president of X, represents that X intended to be an S corporation effective D1. However, due to a miscommunication between A and the attorney for X, a Form 2553, Election by a Small Business Corporation, was not filed for X 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 effective D1. 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.
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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 sent to X.
Sincerely yours,
Jeanne Sullivan
Acting Senior Technician
Reviewer, Branch 2
Office of the Assistant
Chief Counsel
(Passthroughs and
Special Industries)

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