PLR 200617021: Late S election allowed for corporation that moved states

Plain-English summary

A corporation was formed in one state and later filed incorporation papers in another. Its sole shareholder wanted S corporation treatment from the original formation date, but Form 2553 was not filed on time. The IRS found reasonable cause for the late filing. It ruled that the election would be treated as timely for the corporation's first taxable year if it filed a completed Form 2553 with a copy of the ruling within 60 days. The IRS did not determine whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation's S election take effect from its original formation date despite the late filing?
• Outcome: Approved, conditional on filing Form 2553 with 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: 200617021
Release Date: 4/28/2006
Index Number: 1362.01-03

-------------------------------------
Person To Contact:
-----------------------------------
-----------------------, ID No. -------------
Telephone Number:
------------------------------
---------------------
--------------------------
Refer Reply To:
--
CC:PSI:B02 – PLR-148073-05
Date:
January 10, 2006

Legend

X: -------------------------------------
------------------------
----------------

A: -------------------------
---------------------------------------------------------------------------------------

State 1: ------------

State 2: ---------

d1: ------------------

d2: ----------------------

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

This responds to a letter dated September 13, 2005, and additional correspondence submitted on behalf of X by X’s authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated in State on d1. X moved to State 2. X filed articles of incorporation in State 2 on d2. A, the sole shareholder of X, intended for X to be an S corporation effective d1. However, no Form 2553, Election by a Small Business Corporation, was timely filed for X.

PLR-148073-05
2

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 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 X’s taxable year beginning 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’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

cc: