PLR 200812014: Corporation granted relief for late S election

Plain-English summary

A corporation's shareholders intended S corporation status from its incorporation date, but Form 2553 was not filed on time. The corporation requested relief under section 1362(b)(5). Based on the submitted facts and representations, the IRS found reasonable cause for the missed deadline. It said a completed Form 2553 filed within 60 days of the ruling, with a copy of the ruling attached, would be treated as timely for the original date. The IRS did not decide whether the corporation otherwise qualified for S status.

Ruling snapshot

• Question: Could a late S election be effective from the corporation's incorporation date?
• Outcome: Approved if Form 2553 was filed 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: 200812014
Third Party Communication: None
Release Date: 3/21/2008
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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Telephone Number:
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------------------------------------------------ Refer Reply To:
CC:PSI:B03
PLR-137015-07
Date: December 7, 2007

LEGEND

X = ------------------------------------------------------
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Shareholders = ------------------------
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State = --------------

d = -----------------------

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

This letter responds to a letter dated August 10, 2007, and subsequent correspondence, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

The information submitted states that X was incorporated under State law on d.
Shareholders intended for X to be an S corporation effective d. However, due to inadvertence, Form 2553, Election by a Small Business Corporation, was not timely filed.

X requests a ruling that it be recognized as an S corporation effective d.

LAW AND ANALYSIS

Section 1362(a)(1) provides that a small business corporation may elect to be an S corporation.

Section 1362(b)(1) provides that an election under § 1362(a) may be made by a small business corporation for any taxable year (A) at any time during the preceding taxable year, or (B) at any time during the taxable year and on or before the 15th day of the 3d month of the taxable year.

Section 1362(b)(3) provides that if (A) a small business corporation makes an election under § 1362(a) for any taxable year, and (B) such election is made after the 15th day of the 3d month of the taxable year and on or before the 15th day of the 3rd month of the following taxable year, then such election shall be treated as made for the following taxable year.

Section 1362(b)(5) provides that if (A) an election under § 1362(a) is made for any taxable year (determined without regard to § 1362(b)(3)), 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 (and § 1362(b)(3) shall not apply).

CONCLUSION

Based on the facts submitted and representations made, we conclude that X has established reasonable cause for failing to make an S corporation election. Thus, we

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conclude that X is eligible for relief under § 1362(b)(5). Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 to be effective d, 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 d.

Except as expressly provided herein, we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express or imply no opinion concerning whether X is otherwise eligible to be an S corporation for federal tax purposes.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

/s/

James A. Quinn
Senior Counsel, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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