PLR 200447001: Corporation receives conditional relief for late S election

Plain-English summary

A corporation’s sole shareholder intended S corporation treatment from a specified date, but Form 2553 was not filed on time. The IRS found reasonable cause for the missed election under section 1362(b)(5). It ruled that the election would be treated as timely if the corporation filed a completed Form 2553 within 60 days of the letter, specified the intended effective date, and attached the ruling. The IRS did not decide whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation make its S corporation election after the filing deadline?
• Outcome: Approved, conditional 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: 200447001
Release Date: 11/19/04
Index Number: 1362.01-03

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Person To Contact:
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Refer Reply To:
CC:PSI:3 / PLR-100955-04
Date:
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July 07, 2004

LEGEND

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

D2 = ----------------

State = ----------

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

This letter responds to a letter dated December 3, 2003, and subsequent correspondence from your authorized representative, requesting, on behalf of X, a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

X was incorporated under State law on D1, and X's sole shareholder, A, intended for X to be an S corporation effective D2. However, X's Form 2553, Election by a Small Business Corporation was not filed timely. X requests a ruling under § 1362(b)(5) that it will be recognized as an S corporation effective for the taxable year beginning D2.
PLR-100955-04
2

LAW AND ANALYSIS

Section 1362(a) provides that a small business corporation may elect to be an S corporation.

Section 1362(b)(1) provides that an election under § 1362(a) may be made by a small business corporation for any taxable year (A) at any time during the preceding taxable year, or (B) at any time during the taxable year and on or before the fifteenth day of the third moth of the taxable year.

Section 1362(b)(3) provides that if (A) a small business corporation makes an election under §1362(a) for any taxable year, and (B) such election is made after the 15th day of the 3d month of the taxable year and on or before the 15th day of the 3rd month of the following taxable year, then such election shall be treated as made for the following taxable year.

Section 1362(b)(5) provides that if (A) an election under §1362(a) is made for any taxable year (determined without regard to §1362(b)(3)) after the date prescribed by this subsection 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 (and § 1362(b)(3) shall not apply).

CONCLUSION

Based on the facts submitted and representations made, we conclude that X has established reasonable cause for its failing to make a timely election and that X is eligible for relief under § 1362(b)(5). Accordingly, if X makes an election to be an S corporation by filing with the appropriate Service Center a completed Form 2553, containing an effective date of D2 for the election, within 60 days following the date of this letter, then such election will be treated as timely made. A copy of this letter should be attached to the Form 2553 filed with the Service Center. A copy is enclosed for that purpose.

Except as expressly provided herein, we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express or imply no opinion concerning whether X is an S corporation for Federal tax purposes.

Pursuant to a power of attorney on file with this office, we are sending a copy of this letter to X’s authorized representatives.
PLR-100955-04
3

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.

Sincerely,

/s/

Christine Ellison
Chief, Branch 3
Office of Associate Chief Counsel
Passthroughs and Special Industries

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

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