PLR 200201018: Late S corporation election treated as timely

Plain-English summary

A corporation intended to be an S corporation in its first tax year but did not file Form 2553 on time. The IRS found reasonable cause for the missed election under § 1362(b)(5). It agreed to treat the election as timely if the corporation filed a completed Form 2553, effective for that first year, within 60 days of the letter. The ruling did not determine whether the corporation otherwise met the requirements to be an S corporation.

Ruling snapshot

• Question: Could the late S corporation election be treated as timely for the corporation's first tax year?
• Outcome: Approved: the election would be timely if Form 2553 was filed within 60 days.
• Key authorities: IRC §§ 1362(b)(5) and 1361(b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200201018
Washington, DC 20224
Release Date: 1/4/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-139631-01
Date:
X = October 2, 2001
A
=

D1
=

Year 1 =

Dear
:

This responds to the letter dated July 2, 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, the president of X, represents that it was intended for X to be an S corporation beginning in Year 1. However, a Form 2553, Election by a Small Business Corporation, was not timely filed on behalf of X for Year 1.

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 for X's first 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-139631-01

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.

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

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