PLR 200438009: Late S corporation election granted conditional relief

Plain-English summary

A corporation's sole shareholder intended to elect S corporation status from the date of incorporation, but the corporation never filed Form 2553. The IRS found reasonable cause for the missed election. It ruled that the election 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 decide whether the corporation otherwise met the requirements for an S corporation.

Ruling snapshot

• Question: May the corporation make its S corporation election after the deadline?
• Outcome: Approved if Form 2553 and the ruling are filed 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: 200438009
Release Date: 9/17/04
Index Number: 1362.01-03

Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:2 – PLR-112441-04
Date:
May 10, 2004

Legend

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

Dear ------------------
This letter responds a letter dated January 30, 2004, submitted on behalf of X, by X’s 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 d1. However, no Form 2553, Election by a Small Business Corporation, was 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 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

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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 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).

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.

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 yours,

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

Enclosures (2)
Copy of this letter
Copy for § 6110 purpose-s