PLR 200631015: Corporation receives relief for a late S election

Plain-English summary

A corporation intended to elect S corporation status from a specified date but did not timely file Form 2553. It told the IRS that it had conducted no business and earned no income until a later year. The IRS found reasonable cause for the late election and agreed to treat it as timely from the requested date if the corporation files a completed Form 2553 and a copy of the ruling within 60 days. The ruling does not decide whether the corporation otherwise qualifies as a small business corporation.

Ruling snapshot

• Question: Can the corporation's late S election take effect from its requested date?
• Outcome: Approved, subject to filing Form 2553 within 60 days.
• Key authorities: IRC § 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200631015
Third Party Communication: None
Release Date: 8/4/2006
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
---------------------------------
---------------------, ID No. -------------
-----------------------------------
Telephone Number:
--------------------------------
---------------------
-----------------------------
Refer Reply To:
CC:PSI:B02
-
PLR-154512-05
Date:
March 01, 2006
-

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

A = --------------------------------
--------------------------------

D1 = -----------------------

D2 = ----------------------

Year 1 = -------

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

This responds to a letter dated October 15, 2005, submitted by you on behalf of X, requesting a ruling under ' 1362(b)(5) of the Internal Revenue Code.

A, as president of X, represents that X was incorporated on D1. X, however, conducted no business and had no income until Year 1. X was intended to be an S corporation effective D2. However, no Form 2553, Election by a Small Business Corporation, was 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 2 PLR-154512-05 (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 D2. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective D2, 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 D2.

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.

Sincerely,

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

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