PLR 200140035: First-year S election treated as timely after missed filing

Plain-English summary

A corporation intended to be an S corporation in its first taxable year, as reflected in its organizational minutes, and filed an S corporation return. It had never filed the required Form 2553 election. The IRS found reasonable cause for the missed election and agreed to treat a new Form 2553 as timely for that first year if filed within 60 days of the ruling letter. The IRS did not decide whether the corporation otherwise met the small business corporation requirements under § 1361(b).

Ruling snapshot

• Question: Could the corporation's S election be effective for its first taxable year despite the missing Form 2553?
• Outcome: Approved: the election would be treated as timely if filed within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200140035
Washington, DC 20224
Release Date: 10/5/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-113432-01
Date:
July 3, 2001

X =

A =

D1 =

Year 1 =

Dear
:
This letter responds to your letter, dated February 1, 2001, and subsequent correspondence, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.
The information submitted states that X was incorporated on D1 in Year 1. A, as the president of X, represents that X was intended to be an S corporation beginning Year 1, its first taxable year. The minutes of the organizational meeting of X evidences this intent. However, no Form 2553, Election by a Small Business Corporation, was filed with the Internal Revenue Service. For Year 1, X filed a Form 1120S, U.S. Income Tax Return for an S Corporation.

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, -2-

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 requesting it.
Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
Sincerely yours,
J. THOMAS HINES
Chief, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures: 2
Copy of this letter
Copy for § 6110 purposes