PLR 200148027: First-year S election accepted after late Form 2553

Plain-English summary

A corporation intended to be an S corporation from its first tax year but did not file Form 2553 by the deadline. Its employer identification application showed that intent, and it filed an S corporation income tax return for the year. The IRS found reasonable cause for the late election and said it would treat the election as timely if the corporation filed a completed Form 2553 within 60 days of the letter. The IRS did not decide whether the corporation otherwise met the S corporation eligibility rules.

Ruling snapshot

• Question: Could the corporation's late S election apply to its first tax year?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200148027
Washington, DC 20224
Release Date: 11/30/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-129236-01
Date:
August 27, 2001

X
=

A
=

D1 =

Year 1 =

Dear
:

This letter responds to your letter, dated May 23, 2001, and subsequent correspondence, submitted 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 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. X’s Form SS-4, Application for Employer Identification Number, evidences this intent. However, a Form 2553, Election by a Small Business Corporation, was not timely 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, within 60 days following the date of this
PLR-129236-01
-2-

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. The Form 2553 submitted with the ruling request is returned herewith.

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 requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

In accordance with the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely yours,
SHANNON COHEN
Assistant to the Branch Chief, Branch 2
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 3
Copy of this letter
Copy for § 6110 purposes
Form 2553