PLR 200417021: Corporation receives relief after CPA missed S election

Plain-English summary

A corporation's president and sole shareholder intended an S corporation election from a specified date, as reflected in meeting minutes. The corporation's CPA did not file Form 2553. The IRS found reasonable cause for the failure and granted late election relief under § 1362(b)(5). If the corporation files a completed Form 2553 with the intended effective date and a copy of the ruling within 60 days, the election will be treated as timely. The IRS did not determine whether the corporation meets the other S corporation eligibility requirements.

Ruling snapshot

• Question: Can the corporation's missed S election be treated as timely from the intended date?
• Outcome: Approved, conditioned on filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200417021
Release Date: 4/23/04
Index Number: 1362.01-03

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Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:2 – PLR-151740-03
Date:
January 6, 2004

Legend

X = ----------------
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A = ----------------------
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d1 = -----------------

d2 = ---------------------------

Dear --------------------
This letter responds to a letter dated August 21, 2003, 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 X was incorporated on d1. A, X’s president and sole shareholder represents that A intended that X elect to be an S corporation effective d2. The Minutes of Combined Meeting of Stockholders and Directors indicates this intent. However, X’s CPA did not file the Form 2553, Election by a Small Business Corporation.

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 2

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 d2. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective d2, along with a copy of this 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 d2.

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).

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
Associate Chief Counsel
(Passthroughs and Special Industries)

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