PLR 200316028: Late S corporation election treated as timely

Plain-English summary

A newly incorporated company intended to elect S corporation status for its first tax year, but its attorney failed to file Form 2553. The company pointed to other filings that showed this intent. The IRS found reasonable cause for the delay and ruled that the election would be treated as timely if the company filed a completed Form 2553 within 60 days of the letter. The ruling does not decide whether the company otherwise met the requirements for S corporation status.

Ruling snapshot

• Question: Could the company make a late S corporation election for its first tax year?
• Outcome: Approved, if Form 2553 is filed within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200316028
Washington, DC 20224
Release Date: 4/18/2003
Index Number: 1362.01-03 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B02-PLR-149819-02
Date:
January 9, 2003

Legend

X
=

A
=

D1 =

Year 1 =

Dear
:

This responds to a letter dated August 24, 2002, submitted by X’s authorized representative on behalf of X, requesting a ruling under section 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1 of Year 1.
A, the Vice President of X, represents that the shareholders of X intended for X to be an S corporation. X’s Form SS-4, Application for Employer Identification Number documents this intent. This intent is also evidenced in X’s Form 7004, Application For Automatic Extension of Time To File Corporation Income Tax Return. However, X’s attorney inadvertently failed to file Form 2553, Election to be a Small Business Corporation, effective Year 1.
2
PLR-149819-02

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 for X’s first 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 ruled upon above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provisions of the Code, including whether X was or is a small business corporation under § 1361(b).

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.

Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely yours,

J. Thomas Hines
Chief, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

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