PLR 200425030: Late S election allowed for stated effective date

Plain-English summary

A corporation's sole shareholder discussed an S corporation election with its accountant, but Form 2553 was not filed on time. The request described an intended election for one redacted tax year. The IRS found reasonable cause and agreed to treat a late election as timely for a separately labeled redacted effective date, if the corporation filed Form 2553 and a copy of the ruling within 60 days. The letter does not explain the difference between the requested year and the stated effective date. The IRS did not decide whether the corporation otherwise qualified for S status.

Ruling snapshot

• Question: Can the corporation's late S election be treated as timely?
• Outcome: Approved for the ruling's stated effective date, 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: 200425030
Release Date: 6/18/04
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-152931-03
Date:
March 2, 2004

Legend

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

d2 = -------

d3 = ----------------------

Dear --------------------

This letter responds to a letter dated August 25, 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 formed on d1. A, X’s president and sole shareholder, discussed with X’s accountant making an S election to be effective for the d2 taxable year. However, Form 2553, Election to be a Small Business Corporation, was not timely filed.

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

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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 d3. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective d3, 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 d3.

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,

Carolyn Hinchman Gray
Senior Counsel, Branch 2
Associate Chief Counsel
(Passthroughs and Special Industries)

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