PLR 200320008: Missing S corporation election may be filed late

Plain-English summary

A sole shareholder intended for a corporation to elect S status but inadvertently failed to file Form 2553. The IRS found reasonable cause for the omission and allowed the election to be treated as timely for the requested taxable year if a completed form was filed within 60 days of the letter. The form had to state the specified effective date. The IRS did not decide whether the corporation otherwise qualified for S status.

Ruling snapshot

• Question: Could the corporation make a late S election effective for the requested year?
• Outcome: Approved if Form 2553 was filed within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200320008
Washington, DC 20224
Release Date: 5/16/2003
Index Number: 1361.01-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:3 PLR-100992-03
Date:
January 31, 2003

Legend

X =

A =

d1 =

d2 =

State =

Dear
:

This letter responds to a letter dated December 31, 2002, on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

Facts

X was incorporated under State law on d1. A, X’s sole shareholder, intended for X to be an S corporation. A inadvertently failed to file a Form 2553, Election by a Small Business Corporation.

X requests a ruling that it will be recognized as an S corporation effective for the taxable year beginning d2.

Law and Analysis

Section 1362(a)(1) provides that a small business corporation may elect to be an S corporation. Section 1362(b)(1) provides that such election shall be effective for the current taxable year if it is made during the preceding taxable year or before the 15th day of the third month of the current taxable year. Section 1362(b)(3) provides that an election 2
PLR-100992-03

made after the 15th day of the third month of the current taxable year shall be treated as having been made for the following taxable year.

Section 1362(b)(5) provides that if an election under § 1362(a) is made for any taxable year (determined without regard to § 1362(b)(3)), after the date prescribed by this subsection for making such election for such taxable year or no such election is made for any taxable year, and the Secretary determines that there was reasonable cause for the failure to make such election, then the Secretary may treat such an election as timely made for such taxable year (and § 1362(b)(3) shall not apply).

Conclusion

Based on the facts submitted and representations made, we conclude that X has established reasonable cause for failing to make an S election in a timely manner. Thus, based on the facts submitted and representations made, we conclude that X is eligible for relief under § 1362(b)(5). Accordingly, if X makes an election to be an S corporation by filing with the appropriate service center a completed Form 2553 within 60 days of this letter, containing as an effective date d2, then such election shall be treated as timely made for X’s taxable year beginning d2. A copy of this letter should be attached to the Form 2553 filed with the Service Center. A copy is enclosed for that purpose.

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 the taxpayer.

Except as expressly provided herein, we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express or imply no opinion concerning whether X is otherwise eligible to be an S corporation for federal income tax purposes.

Sincerely,

/s/

Jeanne Sullivan
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2)
A copy of this letter
A copy for §6110 purposes.