PLR 200345003: Corporation receives relief for late S election

Plain-English summary

A corporation's sole shareholder intended S corporation treatment from its first tax year, and the corporation filed an S corporation return for that year. It had not filed the required Form 2553 election on time. The IRS found reasonable cause for the missed deadline under IRC § 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the letter. The IRS did not decide whether the corporation otherwise met the requirements to be a small business corporation under § 1361(b).

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200345003
Washington, DC 20224
Release Date: 11/07/2003
Index Number: 1362.01-03 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B02-PLR-141080-03
Date:
August 11, 2003

Legend

X
=

A
=

D1
=

Year 1
=

Dear
:

This responds to a letter dated July 2, 2003, submitted by X’s authorized representative 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 D1 of Year 1. A, the sole shareholder of X, represents that X was intended to be an S corporation effective D1 of Year 1. The organizational minutes of X indicate this intent. Moreover, a Form 1120S, U.S. Income Tax Return for an S Corporation, was filed for the Year 1 taxable year indicating the shareholder’s intention that X be an S corporation. However, no Form 2553, Election to be 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-141080-03

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(s) 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 and X’s other authorized representative.

Sincerely yours,

Audrey Ellis
Reviewer, CC:PSI:2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

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