PLR 200728006: S election accepted from incorporation if form is filed

Plain-English summary

Two shareholders intended their newly incorporated company to elect S corporation status from its incorporation date. The IRS service center had not received Form 2553, although the company and shareholders said they had filed returns consistently with S treatment. The IRS found reasonable cause for the missing election and said it would treat an election as timely if the company filed a completed Form 2553 with the ruling attached within 60 days. It did not decide whether the company otherwise met the requirements to be an S corporation.

Ruling snapshot

• Question: Could the company make an S election effective from its incorporation date despite the missing form?
• Outcome: Approved conditional late election relief.
• Key authorities: IRC §§ 1362(a), 1362(b)(5), 1361(b)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200728006
Release Date: 7/13/2007

Index Number: 1362.01-03

Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B02 – PLR-103673-07
Date:
April 04, 2007

Legend

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

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

This letter responds to a letter dated June 30, 2006, and subsequent correspondence, 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. X's shareholders, A and B, intended that X elect to be an S corporation effective d1. However, no Form 2553, Election by a Small Business Corporation, was received by the appropriate service center. X and its shareholders represent that they have filed their federal tax returns consistent with X being treated as an S corporation since d1. PLR-103673-07

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, 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) 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,

James A. Quinn
Senior Technician Reviewer (Acting), Branch 2 Associate Chief Counsel
(Passthroughs and Special Industries)

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