PLR 200538003: S election relief where IRS had no filing record

Plain-English summary

A corporation’s president said a Form 2553 to elect S corporation status had been prepared and mailed, but the IRS had no record of the filing. The IRS found reasonable cause for the failure to make a timely election. It ruled that the election would be treated as timely from the requested effective date if the corporation filed a completed Form 2553 and a copy of the ruling within 60 days. The IRS did not decide whether the corporation met the separate small business corporation requirements.

Ruling snapshot

• Question: Could the corporation obtain relief for an S election the IRS had no record of receiving?
• Outcome: Approved if Form 2553 and the ruling were 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: 200538003
Release Date: 9/23/2005
Index Number: 1362.01-03

• Person To Contact:
  -------------------- ----------------------- -------- -------------
  ------------- Telephone Number:
  ----------------------------------------------------- ---------------------
  -------------------------------------------- Refer Reply To:
  ------------------------ CC:PSI:2 – PLR-108870-05
  Date:
  May 27, 2005

Legend

X = -----------------------------------------------------
---------------------------------------------------

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

Dear -----------------
This letter responds to a letter dated February 7, 2005, 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 X intended to elect S corporation treatment effective on d1. Further, A represents that a Form 2553, Election by a Small Business Corporation, effective for d1 was prepared and mailed. However, the Service has no record of X filing a Form 2553 by 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-108870-05
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).

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,

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

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