PLR 200304010: First-year S election receives late filing relief

Plain-English summary

A corporation intended to elect S corporation status for its first tax year and filed an S corporation income tax return, but never filed Form 2553. Its president pointed to the company's employer identification number application as evidence of that intent. The IRS found reasonable cause for the missing election and said an election for the first year would be treated as timely if the company filed a completed Form 2553 with the ruling letter within 60 days. The IRS did not decide whether the company met the small business corporation requirements.

Ruling snapshot

• Question: May the company's missing S election be effective for its first taxable year?
• Outcome: Approved if Form 2553 is filed with the ruling letter within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200304010
Washington, DC 20224
Release Date: 1/24/2003
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-142154-02
Date:
October 15, 2002

Legend

X
=

A
=

D1 =

Year 1 =

Dear
:

This letter responds to a letter dated July 22, 2002, and subsequent correspondence, submitted on behalf of X by its authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1 in Year 1. A, as the president of X, represents that X was intended to be an S corporation beginning Year 1, its first taxable year. A Form SS-4, Application for Employer Identification Number, evidences this intent. However, no Form 2553, Election by a Small Business Corporation, was filed with the Internal Revenue Service. For Year 1 X filed a Form 1120S, U.S. Income Tax Return for an S Corporation.

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.

PLR-142154-02
-2-

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 Year 1 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.

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 requesting it. Section 6110(k)(3) of the Code 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 and X’s second authorized representative.

Sincerely yours,

Carolyn Hinchman Gray
Senior Counsel
Branch 2
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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