PLR 200536001: Late S corporation election accepted with a new filing

Plain-English summary

A corporation intended to elect S corporation status from the date it was formed. Its president said a former accountant timely mailed the election form, but the IRS service center had no record of receiving it. The IRS found reasonable cause for the missing timely election under section 1362(b)(5). It agreed to treat the election as timely if the corporation filed a completed Form 2553, effective from its formation date, with a copy of the ruling within 60 days. The IRS did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation's S election be treated as timely despite the missing filing record?
• Outcome: Approved, conditioned on filing Form 2553 and the ruling 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: 200536001
Third Party Communication: None
Release Date: 9/9/2005
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-100825-05
Date:
May 05, 2005
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X = ----------------------------------
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A = ----------------------
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D1 = ----------------------

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

This responds to a letter dated November 3, 2004, submitted on behalf of X by its authorized representatives, requesting a ruling under ' 1362(b)(5) of the Internal Revenue Code.

A, as president of X, represents that X was incorporated on D1 and was intended to be an S corporation effective D1. A represents that a former accountant for X timely mailed Form 2553, Election by a Small Business Corporation, to the appropriate service center. The service center, however, has no record of a Form 2553 having been timely filed for X.

Section 1362(b)(5) of the Code 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.

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 effective D1, along with a copy of this letter, 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) of the Code.

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,

J. Thomas Hines
Chief, Branch 2
Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: