PLR 200245004: S corporation intent on an IRS application supports late election relief

Plain-English summary

A corporation intended S corporation status from its incorporation date. Its application for an employer identification number described it as an S corporation, but it had not timely filed Form 2553. The IRS granted relief under section 1362(b)(5), provided the corporation otherwise qualified for S status and filed a completed Form 2553 effective on the intended date within 60 days. The form had to include a copy of the ruling. The IRS did not decide whether the corporation met the small business corporation requirements of section 1361(b).

Ruling snapshot

• Question: Could the corporation's S election take effect from its incorporation date despite the missed Form 2553 deadline?
• Outcome: Approved, subject to S corporation eligibility and 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: 200245004
Washington, DC 20224
Release Date:11/8/2002
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-136397-02
Date:
July 18, 2002

X
=

A
=

D1 =

Dear
:

This letter responds to a letter dated June 20, 2002, 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, as evidenced by X’s Form SS-4, Application for Employer Identification Number, which indicates X’s type of entity as “S Corp.” 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, and provided that X otherwise qualifies as an S corporation, we conclude that X will be treated as an S corporation effective D1. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective D1 within 60 days following the date of this letter, then such election will be treated as timely made for X effective D1. A copy of this letter should be attached to the Form 2553.
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PLR-136397-02

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.

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
Acting Chief, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes