PLR 200149029: Late S corporation election may take effect from incorporation

Plain-English summary

A corporation's sole shareholder intended S corporation treatment from the date of incorporation and believed an election had been made, but Form 2553 was filed late. The IRS ruled under § 1362(b)(5) that the election would be treated as timely if the shareholder submitted a Form 2553 showing the incorporation date as the effective date within 60 days of the ruling letter. A copy of the ruling had to accompany the form. The IRS did not decide whether the corporation otherwise qualified for S corporation status.

Ruling snapshot

• Question: Could the late S corporation election be treated as effective from incorporation?
• Outcome: Approved if the shareholder files Form 2553 within 60 days of the letter.
• Key authorities: IRC §§ 1362(a), 1362(b)(3), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200149029
Washington, DC 20224
Release Date: 12/7/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-132295-01
Date:
September 6, 2001

LEGEND:

X
=

Shareholder =

D1
=

D2
=

Dear

This letter responds to a letter dated May 30, 2001, requesting a ruling on behalf of X under § 1362(b)(5) of the Internal Revenue Code.

FACTS:

X was incorporated on D1. X has one shareholder, Shareholder. It is represented that Shareholder intended that X be taxed as an S corporation and that Shareholder believed that a timely S election had been made. However, Form 2553, Election by a Small Business Corporation, was not filed timely. On D2, Taxpayer’s counsel filed Form 2553 on behalf of Taxpayer.

X requests a ruling under § 1362(b)(5) that its § 1362(a) election will be treated as timely made for its taxable year beginning on D1.

LAW & ANALYSIS:

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 2
PLR-132295-01

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 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 the election, then the Secretary may treat the election as timely made for such taxable year and § 1362(b)(3) shall not apply.

CONCLUSIONS:

Based on the facts submitted and representations made, we conclude that X’s § 1362(a) election will be treated as timely made provided Shareholder submits a Form 2553 with an effective date of D1 to the appropriate Service Center within 60 days of the date of this letter. A copy of this letter should be attached to the Form 2553 that is submitted to the Service Center.

Except as specifically set forth above, we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the Code. Specifically, we express or imply no opinion concerning whether X 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.

Under a power of attorney on file with this office, we are sending a copy of this letter to the taxpayer.

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

Enclosure
Copy for § 6110 purposes

cc: