PLR 200150015: Sole shareholder granted late S election relief

Plain-English summary

The sole shareholder of a new corporation intended S corporation treatment and believed the election had been filed on time. Form 2553 had not been filed timely. The IRS ruled that the election could be treated as timely from the corporation's first taxable year. The shareholder had to file Form 2553 with that effective date and a copy of the ruling within 60 days. The IRS did not decide whether the corporation otherwise qualified for S status.

Ruling snapshot

• Question: Could the missed S corporation election take effect from the corporation's first taxable 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: 200150015
Washington, DC 20224
Release Date: 12/14/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-130808-01
Date:
September 12, 2001

LEGEND:

X
=

Shareholder =

D1
=

Dear

This letter responds to a letter dated May 30, 2001, requesting a ruling on behalf of X under a power of attorney on file with this office, 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.

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 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

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PLR-130808-01

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 for its taxable year beginning on D1. However, this ruling is contingent on Shareholder filing Form 2553, with an effective date of D1, 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 filed with 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.

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

Enclosures
Copy for § 6110 purposes