PLR 200327031: Attorney's missed S election receives filing relief

Plain-English summary

A corporation intended to be an S corporation from incorporation and filed an S corporation return for its first tax year. Its attorney inadvertently failed to file Form 2553, the election needed for that treatment. The IRS found reasonable cause for the failure under § 1362(b)(5). It ruled that the election would be treated as timely for the first year if the corporation filed a completed Form 2553 within 60 days of the letter. The IRS did not determine whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Can the corporation's omitted Form 2553 be filed late for its first tax year?
• Outcome: Approved if the election is filed within 60 days.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200327031
Washington, DC 20224
Release Date: 7/3/2003
Index Number:1362.01-03
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2- PLR-152672-02
Date:
March 25, 2003

X
=
EIN:

A
=
SSN:

Date 1 =

Year 1 =

Dear
:

This letter responds to your letter dated September 18, 2002, and subsequent correspondence, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on Date 1. A, the vice president of X, represents that it was intended that X always be an S corporation. A Form 1120S, U.S. Income Tax Return for an S Corporation, was filed with the Internal Revenue Service for Year 1 indicating the intention that X be an S corporation. However, X’s attorney inadvertently failed to file Form 2553, Election by a Small Business Corporation, effective Date 1.

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
PLR-152672-02
2

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 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.

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

cc: