PLR 200215014: IRS grants relief for a late S corporation election

Plain-English summary

The shareholders of a corporation intended for it to be an S corporation, but no timely Form 2553 election was filed. The IRS found reasonable cause for the missed election and ruled that the corporation's election would be treated as timely for its first taxable year if it filed a completed Form 2553 within 60 days after the letter. The ruling does not decide whether the corporation is or was otherwise a small business corporation under IRC § 1361(b). The relief matters because it gives the corporation a path to request S corporation treatment despite the late filing.

Ruling snapshot

• Question: May the corporation's late S corporation election be treated as timely because of reasonable cause?
• Outcome: Approved, subject to filing Form 2553 within 60 days.
• Key authorities: IRC §§ 1362(a), 1362(b), and 1362(b)(5); IRC § 1361(b); IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200215014
Washington, DC 20224
Release Date: 4/12/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-163921-01
Date:
January 3, 2002

Legend

X
=

D1
=

Year 1
=

Dear
:

This responds to a letter dated October 23, 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 D1 of Year 1. The shareholders of X intended for X to be an S corporation. 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 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.
PLR-163921-01
2

Except as specifically ruled upon above, no opinion is expressed concerning the 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