PLR 200311026: Late S election allowed for first tax year

Plain-English summary

A corporation's president and sole shareholder said the corporation was intended to be an S corporation for its first tax year, but Form 2553 was not filed on time. The IRS ruled that the corporation would be treated as an S corporation for that year if it otherwise qualified and filed a completed Form 2553 within 60 days of the ruling, effective for the first year. A copy of the letter had to accompany the form. The IRS expressed no opinion on whether the corporation met the separate small business corporation requirements.

Ruling snapshot

• Question: May the corporation's S election be treated as timely for its first tax year?
• Outcome: Approved, subject to S corporation eligibility and filing 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: 200311026
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-149202-02
Date:
December 12, 2002
Legend

X
=

A
=

D1 =

Year 1 =

Dear
:

This letter responds to a letter dated July 31, 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 and sole shareholder of X, represents that X was intended to be an S corporation effective for X’s Year 1 taxable year. 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 for its 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

-2-
PLR-149202-02

this letter, then such election will be treated as timely made for X effective for its 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 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,

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

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