PLR 200209012: Late S corporation election may be treated as timely

Plain-English summary

A corporation's original shareholders intended it to be an S corporation from the date of incorporation, but Form 2553 was not filed on time. The board chair supplied an affidavit describing that intent. The IRS found reasonable cause for the late election under section 1362(b)(5). It agreed to treat the election as timely for the specified tax year if the corporation filed a completed Form 2553 within 60 days of the ruling letter. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Can the corporation obtain relief for its late S corporation election?
• Outcome: Approved conditionally, subject to filing a completed Form 2553 within 60 days.
• Key authorities: IRC §§ 1361(b) and 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200209012
Washington, DC 20224
Release Date: 3/1/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-129048-01
Date:
November 21, 2001

Legend

X:

A:

B:

C:

D:

E:

F:

G:

H:

I:

J:

K:

D1:

Year 1:

Dear :

This letter responds to your letter dated May 22, 2001, and subsequent correspondence, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The represented facts are as follows: X was incorporated on D1. A, B, C, D, E,

2
PLR-129048-01

F, G, H, I, J and K, the shareholders of X on D1, intended X to be an S corporation effective for the Year 1 taxable year, but Form 2553, Election by a Small Business Corporation, was not filed timely. I, Chairman of the Board of X, states in an affidavit, that he intended that X be an S corporation effective D1. Accordingly, X requests a ruling that it will be treated as an S corporation effective D1.

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 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 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 forwarded to X.

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

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