PLR 200222025: Late S corporation election allowed after missed Form 2553

Plain-English summary

A corporation's sole shareholder intended it to be an S corporation, and board minutes recorded that intent, but no Form 2553 was filed. The IRS found reasonable cause for the missed election under section 1362(b)(5). It allowed the election to be treated as timely if the corporation filed a completed Form 2553 within 60 days of the ruling, effective on the redacted date requested. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely?
• Outcome: Approved, subject to 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: 200222025
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-106352-02
Date:
March 1, 2002

X
=

A
=

D1 =

D2 =

D3 =

Dear
:

This letter responds to a letter dated January 9, 2002, 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, and that A acquired all the stock of X on D2. A, as the sole shareholder and president of X, represents that X was intended to be an S corporation beginning on D3. The minutes of a meeting of the board of directors of X evidences this intent. However, no Form 2553, Election by a Small Business Corporation, was filed with the Internal Revenue Service.

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. 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 D3 within

PLR-106352-02
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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.

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