PLR 200447034: Late S corporation election accepted with a new Form 2553

Plain-English summary

A corporation's sole shareholder intended the company to be an S corporation, but its Form 2553 election was not filed on time. The IRS found reasonable cause under section 1362(b)(5) and allowed the late election to be treated as timely if the company filed a completed Form 2553 within 60 days of the letter. The form had to state the intended effective date and include a copy of the ruling. The IRS did not determine whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the late S corporation election be treated as timely?
• Outcome: Conditional relief approved.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200447034
Release Date: 11/19/04
Index Number: 1362.02-03

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Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B03 – PLR-167859-03
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Date:
July 07, 2004

LEGEND

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

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

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

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

This letter responds to your letter dated November 14, 2003, and subsequent correspondence written on behalf of X, requesting 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

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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.

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.

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This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Sincerely yours,

/s/
Christine Ellison
Chief, Branch 3
Office of Associate Chief Counsel
(Passthroughs and Special Industries)

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