PLR 200339024: Late S election allowed for corporation's first tax year

Plain-English summary

A corporation's shareholders intended S corporation status and the corporation filed an S corporation tax return for its first year, but it did not timely file Form 2553. The IRS found reasonable cause for the missed election. It said the election would be treated as timely for that first tax year if the corporation filed Form 2553 within 60 days of the letter and attached a copy of the ruling. The IRS did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Can the corporation make an S election effective for its first tax year despite missing the Form 2553 deadline?
• Outcome: Approved, conditional on filing within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200339024
Washington, DC 20224
Release Date: 09/26/2003
Index Number: 1362.01-03 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-107570-03
Date:
June 20, 2003

X
=

A
=

Date 1 =

Year 1 =

Dear

This letter responds to your letter January 13, 2003, 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 Date 1. A, the 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. Additionally, X filed a Form 1120S, U.S. Income Tax Return for an S Corporation for its first taxable year, Year 1. 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, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation for X’s 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 this letter, then such election will be treated as timely made for X's Year 1 taxable year. A copy of

PLR-107570-03
2

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 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 your 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

cc: