PLR 200150002: Company may make a late S corporation election

Plain-English summary

A company and its shareholders intended it to be an S corporation from its incorporation date, but they did not file Form 2553 for that effective date. The IRS found reasonable cause for the late election under § 1362(b)(5). It ruled that the election would be treated as timely if the company filed a completed Form 2553 within 60 days of the letter and attached a copy of the ruling. The IRS did not decide whether the company otherwise qualified as a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could the company make an S corporation election effective on its incorporation date despite missing the original filing deadline?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days of the letter.
• Key authorities: IRC §§ 1361(b), 1362(a), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200150002
Washington, DC 20224
Release Date: 12/14/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:P&SI:2 - PLR-112995-01
Date:
X = August 15, 2001

A =

B =

D1 =

Dear

This responds to a letter dated February 21, 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. A and B, the shareholders of X, represent they intended X to be an S corporation effective D1. However, a Form 2553, Election by a Small Business Corporation, was not filed for X effective D1.

Section 1362(b)(5) 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. 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).
2

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.

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

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes