PLR 200414009: Late S election treated as timely with prompt filing

Plain-English summary

A corporation's sole shareholder intended S corporation status from incorporation, but the corporation did not file Form 2553 on time. The IRS found reasonable cause for the missed deadline. It ruled that an election effective from incorporation would be treated as timely if the corporation filed a completed Form 2553 and a copy of the ruling within 60 days of the letter. The IRS did not determine whether the corporation otherwise qualified for S corporation status.

Ruling snapshot

• Question: Could a late S corporation election take effect from incorporation?
• Outcome: Approved, conditioned on filing Form 2553 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: 200414009
Release Date: 4/2/04
Index Number: 1362.01-03

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Telephone Number:
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Refer Reply To:
CC:PSI:B02 – PLR-145043-03
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Date:
December 3, 2003

X = -------------------------
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A = -------------------------
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D1 = ----------------

Dear Mr. ----------:

This responds to a letter dated July 22, 2003, submitted on behalf of X by its authorized representative, requesting a ruling under ' 1362(b)(5) of the Internal Revenue Code.

A, as president of X and the sole shareholder of X, represents that X was incorporated on D1 and was intended to be an S corporation effective D1. 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 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 2
PLR-145043-03

letter, with the 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, 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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being forwarded to X=s authorized representative.

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