PLR 200448030: Sole-shareholder company receives late S election relief

Plain-English summary

A corporation's sole shareholder intended the company to be an S corporation, but Form 2553 was not filed on time. The IRS concluded that there was reasonable cause for the missed deadline. It agreed to treat the election as timely from the corporation's incorporation date if a completed Form 2553 was filed within 60 days of the letter. The IRS did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation make an S election effective from its incorporation date despite filing late?
• Outcome: Approved, conditional on filing Form 2553 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: 200448030
Third Party Communication: None
Release Date: 11/26/2004
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B02
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PLR-128759-04
Date:
July 21, 2004

Legend

X: --------------------------------
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A: ---------------------
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d1: ---------------------

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

This responds to a letter dated March 22, 2004, and subsequent correspondence, submitted on behalf of X by its 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, the sole shareholder of X, represents that X was intended to be an S corporation. 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.
PLR-128759-04
2

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 corporation effective d1. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective d1 within 60 days following the date of this letter, then such election will be treated as timely made for d1. A copy of this letter should be attached to the Form 2553.

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) provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter is being forwarded to X.

Sincerely,

Audrey W. Ellis
Reviewer, Branch 2
Associate Chief Counsel
(Passthroughs & Special Industries)

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