PLR 200425044: Late S corporation election allowed with Form 2553 filing

Plain-English summary

A corporation's sole shareholder intended to elect S corporation status, but the corporation did not file Form 2553 on time. The IRS found reasonable cause for the late election under § 1362(b)(5). It agreed to treat the election as timely if the corporation filed a completed Form 2553, with a copy of the ruling, within 60 days of the letter. The IRS did not decide whether the corporation otherwise met the eligibility requirements for an S corporation.

Ruling snapshot

• Question: Can the corporation's late S corporation election be treated as timely?
• Outcome: Approved, conditioned on filing Form 2553 and the ruling letter 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: 200425044
Release Date: 6/18/04
Index Number: 1362.01-03

• Person To Contact:
  ------------------------------ -----------------------------------------------------
  -------------------------------------------------- Telephone Number:
  ---------------------------- ---------------------
  ------------------------------- Refer Reply To:
  CC:PSI:2 – PLR-171460-03
  Date:
  - March 10, 2004

Legend:

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

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

d1 = ----------------------

Dear -------------------
This letter responds to your letter dated November 25, 2003, and subsequent correspondence, submitted on behalf of X, 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, no Form 2553, Election by a Small Business Corporation, was timely filed 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 appropriate service center within 60 days from the date of this letter, then such election

PLR-171460-03
2

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,

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

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

------------------------
--------------------------------------
----------------------------------------

------------------------------------------------
-----------------------------
------------------------

-------------------------------------------
-------------------------------------------
----------------------
--------------------------------------