PLR 200211002: Missing S election may be treated as timely from inception

Plain-English summary

A corporation with one shareholder intended S status from its formation date and filed an S corporation return for its first year. The IRS had not received its Form 2553. The IRS found reasonable cause for the failure to make a timely election and ruled that an election could be treated as timely for that first year. The company had to file Form 2553 with the formation date as its effective date within 60 days of the letter. The IRS did not decide whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation's missing S election be treated as timely for its first tax year?
• Outcome: Approved, contingent on filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200211002
Washington, DC 20224
Release Date: 3/15/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-111256-01
Date:
August 1, 2001

Company:

State:

Shareholder:

Date:

Dear

This letter responds to your letter dated January 8, 2001, submitted on behalf of Company, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code regarding Company's late S corporation election.

FACTS

Company was incorporated in State on Date. Shareholder is the sole owner of Company. Company represents that it intended to be an S corporation from inception; however, its Form 2553 (Election by a Small Business Corporation) was not received by the Internal Revenue Service. Company filed Form 1120S (U.S. Income Tax Return for an S Corporation) for its first tax year.

LAW AND ANALYSIS

Section 1362(b)(1) provides that, in general, that an election by a small business corporation under § 1362(a) to be an S corporation may be made for any taxable year--

(A) at any time during the preceding taxable year, or

(B) at any time during the taxable year and on or before the 15th day of the 3d month of the taxable year.

Section 1362(b)(3) provides that if--

(A) a small business corporation makes an election under § 1362(a) for any taxable year, and

(B) that election is made after the 15th day of the 3d month of the taxable year

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PLR-111256-01
and on or before the 15th day of the 3d month of the following taxable year,

then that election shall be treated as made for the following taxable year.

Section 1362(b)(5) provides that if--

(A) an election under § 1362(a) is made for any taxable year (determined without regard to § 1362(b)(3)) after the date prescribed by this subsection for making the election for that 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 the election,

the Secretary may treat such election as timely made for that taxable year (and
§ 1362(b)(3) shall not apply).

Based solely on the facts and representations submitted by Company, we conclude that there was reasonable cause for Company’s failure to make a timely S corporation election. Therefore, we conclude that Company's late election under § 1362(a) is to be treated under § 1362(b)(5) as filed timely for its first tax year beginning Date. This ruling is contingent, however, on Company filing Form 2553, to be effective on Date, with the appropriate service center no later than 60 days from the date of this letter. A copy of this letter should be attached to the Form 2553.

Except for the specific ruling above, we express or imply no opinion concerning the federal income tax consequences of the facts of this case under any other provision of the Code. Specifically, we express or imply no opinion on whether Company otherwise is eligible to be an S corporation.

Under a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

This ruling is directed only to the taxpayer who requested it. According to § 6110(k)(3), this ruling may not be used or cited as precedent.

Sincerely,
CHRISTINE ELLISON
Chief, Branch 3
Office of Associate Chief Counsel
(Passthroughs and Special Industries) enclosure: copy of this letter copy for § 6110 purposes