PLR 200143027: Corporation received relief for a late S election

Plain-English summary

A corporation intended to be taxed as an S corporation from the beginning of a specified tax year, but its election was not filed on time. The IRS found reasonable cause for the delay and ruled that the election would be treated as timely under section 1362(b)(5). The relief required the corporation to file Form 2553 with the requested effective date within 60 days of the letter. The IRS did not decide whether the corporation otherwise qualified for S status.

Ruling snapshot

• Question: Could a late S corporation election take effect for the corporation's requested tax year?
• Outcome: Approved, conditional on filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(a), (b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200143027
Washington, DC 20224
Release Date: 10/26/2001
Index Number: U.I.L. No.: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-119212-01
Date:
July 31, 2001

Legend

Company
=

State
=

Shareholders =

a
=

b
=

Dear

This letter responds to a letter dated March 22, 2001, and subsequent correspondence, requesting a ruling on behalf of Company under § 1362(b)(5) of the Internal Revenue Code.

The information submitted discloses that Company was incorporated on a in State. Company has two shareholders, Shareholders. It is represented that Company has intended to be an S corporation since b. However, Company discovered that its S election had not been timely filed.

Company requests a ruling under § 1362(b)(5) that its § 1362(a) election will be treated as timely made for its taxable year that began on b.

Section 1362(a) provides that a small business corporation may elect to be an S corporation.

Section 1362(b) provides when an S election will be effective. Generally, if an S election is made within the first two and one half months of a corporation's taxable year, then that corporation will be treated as an S corporation for the year in which the election is made. Section 1362(b)(3) provides that if an S election is made after the first two and one half months of a corporation's taxable year, then that corporation will not
PLR-119212-01
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be treated as an S corporation until the taxable year following the year in which the S election is made.

Section 1362(b)(5) provides that if no § 1362(a) election is made for any taxable year, and the Secretary determines that there was reasonable cause for the failure to timely make such election, then the Secretary may treat such an election as timely made for such taxable year and § 1362(b)(3) shall not apply.

Based on the facts submitted and representations made, we conclude that Company has established reasonable cause for failing to make a timely S election for its taxable year that began on b. Accordingly we conclude that Company's § 1362(a) election will be treated as timely made for its taxable year that began on b. However, this ruling is contingent on Company filing Form 2553, Election by a Small Business Corporation, with an effective date of b, with the appropriate Service Center within 60 days from the date of this ruling. A copy of this letter should be attached to the Form 2553.

Except as specifically set forth above, we express or imply no opinion concerning the federal tax consequences of the foregoing facts. Specifically, we express or imply no opinion on whether Company otherwise qualifies as an S corporation.

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.

Sincerely yours,
MARY BETH COLLINS
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosure:
Copy for section 6110 purposes