PLR 200532039: Late S corporation election granted after missed filing

Plain-English summary

A corporation's president intended S corporation treatment from the date of incorporation, but the company did not file Form 2553 on time. The IRS found reasonable cause for the late election under section 1362(b)(5). It ruled that an election effective from incorporation would be treated as timely if the company filed a completed Form 2553 and a copy of the ruling within 60 days of the letter. The IRS did not decide whether the company otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: May a missed S corporation election take effect from the company's incorporation date?
• Outcome: Approved, if the required election and ruling copy are filed within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200532039
Release Date: 8/12/2005
Index Number: 1362.01-03

• Person To Contact:
  --------------------------------- ----------------------- -------- -------------
  ---------------------------- Telephone Number:
  ------------------------------------------- ---------------------
  ---------------------------- Refer Reply To:
  CC:PSI:2 – PLR-166093-04
  Date:
  May 03, 2005

Legend

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

Dear ----------------
This letter responds to a letter dated December 20, 2004, 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 president of X, represents that A intended to elect S corporation treatment effective on d1. However, no timely 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 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,
PLR-166093-04
2

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.

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

Sincerely yours,

Beverly Katz
Senior Technician Reviewer, Branch 2
Associate Chief Counsel
(Passthroughs and Special Industries)

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