PLR 200501010: Late S corporation election treated as timely if filed within 60 days

Plain-English summary

A corporation intended to be an S corporation from its incorporation date, but did not file Form 2553 on time. The IRS found reasonable cause for the missed election under § 1362(b)(5). It ruled that an election effective for the specified tax year would be treated as timely if the corporation filed a completed Form 2553 with a copy of the ruling within 60 days. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under § 1361(b).

Ruling snapshot

• Question: Could the corporation make a late S election effective for the specified tax year?
• Outcome: Approved, conditioned 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: 200501010
Release Date: 01/07/2005
Index Number: 1362.01-03

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Person To Contact:
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-----------------------, ID No. --------------
Telephone Number:
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Refer Reply To:
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CC:PSI:B02 – PLR-145429-04
Date:
September 20, 2004
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X = ----------------------------------
EIN: ----------------

A = -----------------
SSN: -----------------

Date 1 = -----------------

Year 1 = -------

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

This responds to a letter dated July 19, 2004, submitted 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 Date 1. A, the president of X, represents that the shareholders of X intended for X to be an S corporation effective Date 1. However, no timely Form 2553, Election to be a Small Business Corporation, was filed.

Section 1362(b)(5) of the Code provides that if B (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.
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PLR-145429-04

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 for X=s Year 1 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.

Sincerely yours,

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

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