PLR 200202061: Late S corporation election treated as timely if filed

Plain-English summary

A newly incorporated company intended to be an S corporation from its first taxable year, but did not file Form 2553 on time. Its president represented that this was the intended status, and the company's bylaws supported that intent. The IRS found reasonable cause for the missed election deadline. It ruled that the election would be treated as timely if the company filed a completed Form 2553 effective for that first year within 60 days of the letter and attached a copy of the ruling. The IRS did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Number: 200202061
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-139116-01
Date:
October 15, 2001

X =

A =

D1 =

Year 1 =

Dear
:
This responds to your letter, dated July 16, 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 in Year 1. A, as the president of X, represents that X was intended to be an S corporation beginning Year 1, its first taxable year. The bylaws of X evidences this intent. However, a Form 2553, Election by a Small Business Corporation, was not timely filed with the Internal Revenue Service.

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 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
PLR-139116-01
-2-

described above under any other provision of the Code, including whether X was or is a small business corporation under § 1361(b).

This ruling is directed only to the taxpayer requesting 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