PLR 200215046: Late S corporation election accepted with timely filing

Plain-English summary

A corporation intended to be taxed as an S corporation and filed an S corporation tax return, but it never filed the required election form. The IRS found reasonable cause for the missed election. It ruled that the election would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the letter, effective for the intended tax year. The ruling did not decide whether the corporation otherwise met the requirements to be a small business corporation.

Ruling snapshot

• Question: May an S corporation election be treated as timely despite the missing Form 2553?
• Outcome: Approved, conditional on filing Form 2553 within 60 days
• Key authorities: IRC §§ 1361(b), 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200215046
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-120718-01
Date:
January 15, 2002

X
=

A
=

D1
=

D2
=

Dear
:

This letter responds to a letter dated March 6, 2000, together with subsequent correspondence, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1. A, as the sole shareholder and president of X, represents that X was intended to be an S corporation beginning on D2. However, no Form 2553, Election by a Small Business Corporation, was filed with the Internal Revenue Service. X filed a Form 1120S, U.S. Income Tax Return for an S Corporation, for X’s taxable year beginning on D2.

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 the tax year beginning on D2. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective on D2, within 60 days following the date of this letter, then such election will be treated as timely made. A copy of this letter should be attached to the Form 2553.
-2-
PLR-120718-01

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 requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

In accordance with the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

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