PLR 200718016: Late S corporation election receives conditional relief

Plain-English summary

A corporation intended to elect S corporation status from its incorporation date, but did not file its election on time. The IRS found reasonable cause for the late filing and ruled that the election would be treated as timely if the corporation filed a completed election with a copy of the letter within 60 days. The IRS did not determine whether the corporation otherwise qualified as a small business corporation. The ruling’s operative sentence prints “Form 2533,” while the facts identify the S election form as Form 2553.

Ruling snapshot

• Question: Could the corporation’s late S election be effective from incorporation?
• Outcome: Approved, conditioned on filing the election 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: 200718016
Release Date: 5/4/2007
Index Number: 1362.01-03

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Person To Contact:
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----------------, ID No. -------------
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Telephone Number:
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Refer Reply To:
CC: PSI: B02
PLR-143563-06
Date:
January 18, 2007

X = ------------------------
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State = -------------
Date 1 = -------------------

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

This responds to a letter dated September 7, 2006, and subsequent correspondence, submitted on behalf of X by X’s authorized representative, requesting relief under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on Date 1 under the laws of State. It was intended for X to be an S corporation effective Date 1. 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, then 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 Date 1. Accordingly, provided that X makes an election be an S corporation by filing a completed Form 2533 effective Date 1, 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 Date 1.

Except as specifically set forth above, no opinion is expressed concerning the federal income tax consequences of the facts described above under any other

PLR-143563-06
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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 requesting 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 sent to X’s authorized representative.

Sincerely,

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

Enclosures (2):
Copy of this letter
Copy for section 6110 purposes