PLR 200202064: Late S corporation election treated as timely if filed

Plain-English summary

A corporation's sole shareholder intended it to be an S corporation from its start, but a timely Form 2553 was not filed. The IRS found reasonable cause for the late election based on the submitted facts and documents showing that intent. It ruled that the election for the corporation's first taxable year would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the letter and attached a copy of the ruling. The IRS did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely for its first 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: 200202064
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-147880-01
Date:
October 16, 2001
X
=

A
=

D1
=

Year 1 =

Dear

This letter responds to a letter dated September 03, 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 X’s president and sole shareholder. A represents that A always intended for X to be an S corporation. Documents created during the incorporation process also indicate A’s intent for X to be an S corporation. However, a timely Form 2553, Election by a Small Business Corporation, was not filed.

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 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 2

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.

Sincerely yours,
Matthew Lay
Senior Technician Reviewer, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

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