PLR 200433015: Late S corporation election accepted for first taxable year

Plain-English summary

A newly incorporated company intended to elect S corporation status, but its attorney did not file a completed Form 2553 on time. The IRS found reasonable cause for the late election under section 1362(b)(5). It said the election would be treated as timely for the company's first taxable year if the company filed a completed Form 2553 within 60 days of the ruling. The IRS did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the company's S corporation election take effect for its first taxable year despite the missed filing deadline?
• Outcome: Approved: the election would be timely if Form 2553 was filed 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: 200433015
Release Date: 08/13/2004
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:B02 – PLR-165470-03
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Date:
April 21, 2004

Legend

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

Year 1 = -------

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

This responds to a letter dated November 6, 2003, and subsequent correspondence, submitted by X’s authorized representative on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1 of Year 1. A, the president of X, represents that the shareholders of X intended for X to be an S corporation. However, X’s attorney failed to timely file a completed Form 2553, Election by a Small Business Corporation, 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

PLR-165470-03
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corporation for X’s first taxable year. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective for its Year 1 taxable year within 60 days following the date of this letter, then such election will be treated as timely made for X’s Year 1 taxable year. A copy of this letter should be attached to the Form 2553.

Except as specifically ruled upon above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provisions of the Code, including 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) of the Code provides that it may not be used or cited as precedent.

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

Sincerely yours,

Audrey W. Ellis
Reviewer, Branch 2
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes