PLR 200202040: Late S corporation election allowed after missed filing

Plain-English summary

A company's president intended the company to be an S corporation, and shareholder meeting minutes and an S corporation return reflected that intent. The person the president expected to file Form 2553 did not file it. The IRS found reasonable cause for the missed election under section 1362(b)(5). It ruled that an election effective for the company's first tax year would be treated as timely if a completed Form 2553 was filed within 60 days of the letter. The IRS did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the company make an S corporation election after the missed Form 2553 filing?
• Outcome: Approved: the election is timely if Form 2553 is filed within 60 days.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200202040
Washington, DC 20224
Release Date: 1/11/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-144270-01
Date:
October 5, 2001
X
=

A
=

D1
=

Year 1 =

Dear . :

This letter responds to a letter dated August 14, 2001, submitted on behalf of X by A, X’s president, 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 is the president. A represents that A always intended for X to be an S corporation and the minutes of the shareholder meeting indicate A’s intention for X to be an S corporation. Moreover, a Form 1120S, U.S. Income Tax Return for an S corporation, was filed with the IRS indicating A’s intention that X be an S corporation. However, the person who A thought was going to file the completed Form 2553, Election by a Small Business Corporation, did not do so.

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 -2-
PLR-144270-01

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) of the Code.

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.

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,
J. Thomas Hines
Branch Chief, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 2
Copy of this letter
Copy for §6110 purposes