PLR 200152004: Corporate minutes support relief for late S election

Plain-English summary

A corporation's president said it was intended to be an S corporation from inception, and its corporate minutes included a resolution to make the election. The corporation did not file Form 2553 on time for its first tax year. The IRS found reasonable cause for the missed election and ruled that it would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the ruling. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could the corporation's late S election take effect for its first tax year?
• Outcome: Approved conditionally: file Form 2553 within 60 days of the ruling.
• Key authorities: IRC §§ 1362(b)(5) and 1361(b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200152004
Washington, DC 20224
Release Date: 12/28/2001
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-127203-01
Date:
September 14, 2001
X
=

A
=

D1 =

Year 1 =

Dear
:

This responds to your letter dated May 7, 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 in D1 of Year 1. A, the president of X, represents that X was intended to be an S corporation from its inception. This intent is evidenced by the corporate minutes of X, which include a resolution that X would elect under § 1362(a). However, a Form 2553, Election by a Small Business Corporation, was not timely filed for X for its Year 1 taxable year.

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 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.

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).
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PLR-127203-01

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,
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