PLR 200637028: Corporation may make its late S corporation election

Plain-English summary

A corporation intended to elect S corporation status but did not file Form 2553 on time. The IRS found reasonable cause for the missed deadline and agreed to treat the election as timely if the corporation filed a completed form, effective as of its intended date, with a copy of the ruling within 60 days. The ruling did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Can the corporation receive relief for its late S corporation election?
• Outcome: Approved, conditioned on filing Form 2553 and the ruling within 60 days.
• Key authorities: IRC § 1362(b)(5); IRC § 1361(b).

Full text (IRS public release)

Number: 200637028
Release Date: 9/15/2006
Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Third Party Communication: None
Index Number: 1362.01-03
Date of Communication: Not Applicable

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Person To Contact:
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Refer Reply To:
CC:PSI:B02

• PLR-162804-05
  Date:
  April 20, 2006

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X = ------------------------------------------------------------
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A = -----------------------------
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D1 = -------------------

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

Dear
:

This responds to a letter dated December 6, 2005, submitted by X’s authorized representative 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 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 (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 PLR-162804-05

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.

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