PLR 200201011: Late S corporation election treated as timely made

Plain-English summary

A corporation asked whether its election to be treated as an S corporation could be accepted after the Form 2553 was filed late. The corporation had acted as though the election were effective, including filing its tax returns on Form 1120S. The IRS found reasonable cause for the late filing and ruled that the election would be treated as timely made if the corporation filed Form 2553 with the appropriate service center within 60 days of the letter. The ruling addressed the late election under IRC § 1362(b)(5), while reserving other questions, including whether the corporation qualified as a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely made?
• Outcome: Approved: the election would be treated as timely made if the stated filing condition was met.
• Key authorities: IRC §§ 1361(b), 1362(a), 1362(b), and 1362(b)(5).

Full text (IRS public release)

INTERNAL REVENUE SERVICE

Number: 200201011
Release Date: 1/4/2002
Index No.: 1362.01-03

CC:PSI:2 - PLR-119815-01

September 28, 2001

X =

A =

D1 =

Year 1 =

Dear

This responds to a letter dated March 19, 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 of Year 1. A, X's president, represents that it was the shareholders’ intent to have X elect to be an S corporation effective D1 of Year 1. X’s Form SS-4, Application for Employer Identification Number, reflects that it was the shareholders’ intent to have X treated as an S corporation. X filed its tax returns using Form 1120S, U.S. Income Tax Return for an S corporation. However, the Form 2553, Election by a Small Business Corporation, for X was not timely filed with the service center.

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 for X's tax year beginning D1 of Year 1. Accordingly, provided that X makes an election to be an S corporation by filing a Form 2553 with the appropriate service center effective for its Year 1 -2-
PLR-119815-01
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 ruled upon above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provisions of the Code, including whether X was or is a small business corporation under § 1361(b).

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.

Pursuant to 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 Chief, Branch 2
Associate Chief Counsel
(Passthroughs and Special Industries)

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