PLR 200222023: Late S corporation election allowed with timely Form 2553 filing

Plain-English summary

A corporation's president said it was intended to be an S corporation from its incorporation date, but the corporation did not file Form 2553 on time. The IRS found reasonable cause for the late election under section 1362(b)(5). It ruled that an election effective on the requested date would be treated as timely if the corporation filed a completed Form 2553 and a copy of the ruling within 60 days. The IRS did not decide whether the corporation otherwise met the definition of a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could the corporation's S election take effect from its incorporation date despite the missed filing deadline?
• Outcome: Approved, subject to filing Form 2553 and the ruling within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200222023
Washington, DC 20224
Release Date: 5/31/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-168601-01
Date:
March 1, 2002
X
=

A
=

D1
=

Dear
:

This letter responds to a letter dated December 12, 2001, and subsequent correspondence, 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. A, the president of X, represents that X was intended to be an S corporation effective D1. However, no Form 2553, Election by a Small Business Corporation, was timely filed for X.

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 effective D1. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective D1, along with a copy of this letter, with the appropriate service center within 60 days from the date of this letter, then such election will be treated as timely made for D1.

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.

-2-
PLR-168601-01

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’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