PLR 200406030: Corporation gets relief for a late S election

Plain-English summary

A corporation's sole shareholder intended to elect S corporation status but inadvertently failed to file Form 2553 on time. The IRS found reasonable cause for the late filing under § 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed form, with the ruling letter, within 60 days. The IRS did not decide whether the corporation otherwise met the small business corporation requirements of § 1361(b).

Ruling snapshot

• Question: Could the corporation make its intended S election after missing the Form 2553 deadline?
• Outcome: Approved late election relief, conditioned on filing within 60 days.
• Key authorities: IRC §§ 1362(b)(5), 1361(b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200406030
Release Date: 02/06/2004
Index Number: 1362.01-03

------------------------------------------- Person To Contact:
----------------------------
--------------------, ID No. ---------------
--------------------------
Telephone Number:
----------------------------
---------------------
Refer Reply To:
CC:PSI:B02 – PLR-155348-03
-
Date:
November 3, 2003

X = ----------------------------
--------------------------------------------

A = ------------------------
-----------------------------------------------

D1 = ----------------------

Dear ------------------:

This letter responds to a letter dated September 12, 2003, and subsequent correspondence, submitted on behalf of X by its authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that A, the president and sole shareholder of X, intended to elect for X to be an S corporation effective D1. However, A inadvertently failed to timely file a Form 2553, Election by a Small Business Corporation, for X.

Section 1362(b)(5) 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 representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation effective D1. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective D1, along with a copy of this letter, with the

2
PLR-155348-03

appropriate service center within 60 days from the date of this letter, then such election will be treated as timely made for D1.

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, include 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) 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 X’s authorized representative.

Sincerely,

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

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes