PLR 200210052: Late S corporation election treated as timely if filed within 60 days

Plain-English summary

A corporation's shareholders intended to elect S corporation status for the tax year in question, and the corporation filed S corporation returns, but it did not file a timely completed election form. The IRS found reasonable cause for the delay under IRC § 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed Form 2553, effective for that year, within 60 days of the letter. The ruling 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?
• Outcome: Approved, if a completed Form 2553 was 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: 200210052
Washington, DC 20224
Release Date: 3/8/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-149770-01
Date:
December 11, 2001

Legend

X
=

Date 1 =

Year 1 =

Dear

This responds to a letter dated September 11, 2001, 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 Date 1. The shareholders of X intended for X to be an S corporation. Communications between X’s shareholders and the attorney who handled X’s incorporation indicate that intent. X filed a Form 1120S, U.S. Income Tax Return for an S Corporation, for X’s taxable years beginning in Year 1. However, no timely Form 2553, Election to be a Small Business Corporation, was 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 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 ruled upon above, no opinion is expressed concerning the

PLR-149770-01
2

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

This ruling is directed only to the taxpayer(s) requesting 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
Associate Chief Counsel
(Passthroughs and Special Industries)

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