PLR 200206043: Officer's resolution supports relief for late S election

Plain-English summary

A corporation's president represented that the company intended to be an S corporation for its first taxable year, and the company submitted an officers' resolution showing that intent. It had not filed Form 2553 by the election deadline. The IRS found reasonable cause for the late filing under IRC § 1362(b)(5). It ruled that a completed Form 2553 filed within 60 days of the letter would be treated as timely for that first year. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could the corporation's late S election be treated as timely for its first taxable year?
• Outcome: Approved, if it files a completed Form 2553 within 60 days of the letter.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 20206043
Washington, DC 20224
Release Date: 2/8/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-141765-01
Date:
November 9, 2001

Legend

X:

A:

D1:

Year 1:

Dear :

This responds to your letter dated August 3, 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 that X be an S corporation effective for the Year 1 taxable year. X has submitted a resolution of the officers of X evidencing this intent. However, a Form 2553, Election by a Small Business Corporation, was not timely filed for X’s Year 1 taxable year.

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. 2 PLR-141765-01

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).

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.

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