PLR 200621014: Corporation gets relief for a late S election

Plain-English summary

A corporation intended to elect S corporation status from the date it was incorporated but did not file Form 2553 on time. Based on the submitted facts, the IRS found reasonable cause for the delay under IRC § 1362(b)(5). It said the election would be treated as timely if the corporation filed a completed Form 2553 with a copy of the ruling within 60 days of the letter. The IRS did not determine whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation's late S election be treated as timely?
• Outcome: Approved, subject to 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: 200621014
Release Date: 5/26/2006
Index Number: 1362.01-03

• Person To Contact:
  ----------------------------- ------------------------------- -------- -------------
  ------------ -----------------------------------------------------
  -------------------------------------------- Telephone Number:
  ----------------------------- --------------------
  --------------------------- Refer Reply To:
  CC:PSI:2 – PLR-162128-05
  Date:
  February 08, 2006

Legend

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

Dear ------------------------------------

This letter responds to your letter dated November 7, 2005, 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 d1. A, X's president, represents that X intended to be an S corporation effective d1. However, no Form 2553, Election by a Small Business Corporation, was timely filed for 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.

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-162128-05
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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.

Sincerely yours,

Bradford R. Poston
Senior Counsel, Branch 2
Associate Chief Counsel
(Passthroughs and Special Industries)

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