PLR 200315010: LLC receives relief for late S corporation election

Plain-English summary

A single member limited liability company elected to be taxed as a corporation. Its owner intended S corporation treatment from that same date, but no Form 2553 was timely filed. The IRS found reasonable cause for the missed S election under section 1362(b)(5). It ruled that the election would be treated as timely if the company filed a completed Form 2553 with the intended effective date within 60 days of the letter. The IRS did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: May the LLC's late S election take effect when corporate tax treatment began?
• Outcome: Approved if Form 2553 is filed within 60 days
• Key authorities: IRC §§ 1362(a), 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200315010
Washington, DC 20224
Release Date: 4/11/2003
Index Number: 1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2 - PLR-147701-02
Date:
December 18, 2002
Legend

X
=

A
=

D1 =

D2 =

State =

Dear . :

This letter responds to a letter dated July 30, 2002, and subsequent correspondence, submitted on behalf of X by X’s authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X is a single member limited liability company organized pursuant to the laws of State on D1. X elected to be treated as an association taxable as a corporation effective D2. A, X’s single member, represents that he intended for X to be an S corporation as of the first day it was treated as an association taxable as a corporation. 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.

-2-
PLR-147701-02

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 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’s authorized representative.

Sincerely yours,

J. THOMAS HINES
Chief, Branch 2
Associate Chief Counsel
(Passthroughs and
Special Industries)

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