PLR 200311025: Previously late S election receives conditional relief

Plain-English summary

A corporation's sole shareholder and president said the corporation intended S corporation treatment, but it did not file Form 2553 on time. The corporation later filed a late form and sought relief for a redacted effective date. The IRS found reasonable cause under section 1362(b)(5). It would treat the election as timely for that date if the corporation filed a completed Form 2553 again with the appropriate service center, effective for the stated date, within 60 days of the ruling and included a copy of the letter. The IRS gave no opinion on whether the corporation otherwise met the small business corporation requirements.

Ruling snapshot

• Question: Can an S election already filed late be treated as timely for the requested effective date?
• Outcome: Approved, contingent on filing a completed Form 2553 within 60 days
• Key authorities: IRC §§ 1362(b)(5), 1361(b)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200311025
Washington, DC 20224
Release Date: 3/14/2003
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-138879-02
Date:
December 12, 2002
Legend

X
=

A
=

D1 =

D2 =

Dear
:

This letter responds to a letter dated June 28, 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 A is the sole shareholder of X. A, the president of X, represents that X intended to be an S corporation. However, no Form 2553, Election by a Small Business Corporation, was timely filed for X. On D1, a late Form 2553 was 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 effective D2. Accordingly, provided that X makes an election to be an S

-2-
PLR-138879-02

corporation by filing a completed Form 2553 effective D2, 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 D2.

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.

Sincerely yours,

CAROLYN HINCHMAN GRAY
Senior Counsel, Branch 2
Associate Chief Counsel
(Passthroughs and Special Industries)

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