PLR 200813018: Late Form 2553 accepted for intended S corporation start date

Plain-English summary

A corporation and its two shareholders intended S corporation status from the date the business was incorporated, but Form 2553 was filed late. The IRS found reasonable cause for the missed deadline under section 1362(b)(5). It agreed to treat an election as timely if the corporation files a completed Form 2553 with the intended effective date, and a copy of the ruling, within 60 days of the letter. The IRS did not decide whether the corporation otherwise qualifies for S status.

Ruling snapshot

• Question: Will a late S election take effect from the corporation's intended start date?
• Outcome: Approved, subject to filing Form 2553 and the ruling copy 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: 200813018
Third Party Communication: None
Release Date: 3/28/2008
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
------------------------------------------------ -----------------------, ID No. -------------
------------------------------------------- Telephone Number:
---------------------------
---------------------
----------------------------------------- Refer Reply To:
CC:PSI:B03
PLR-130613-07
Date:
December 19, 2007

Legend:

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

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

B = ------------------------------------------------------------------------------------------------------
---------------------------

State = ---------

Date = ----------------

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

This letter responds to a letter dated June 18, 2007, submitted on behalf of X requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

Facts

X was incorporated under the laws of State on Date. A and B, the shareholders of X on Date, intended for X to be an S corporation as of Date. However, X’s Form 2553, Election by a Small Business Corporation, was not timely filed.

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

Law and Analysis
PLR-130613-07
2

Section 1362(a)(1) provides that, except as provided in § 1362(g), a small business corporation may elect, in accordance with the provisions of § 1362, 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 third 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 third month of the taxable year and on or before the 15th day of the third 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 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 the election for the taxable year or no § 1362(a) election is made for any taxable year, and the Secretary determines that there was reasonable cause for the failure to timely make such election, the Secretary may treat the election as timely made for the 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 conclude that X is eligible for relief under § 1362(b)(5). Accordingly, if X makes an election to be an S corporation by filing with the appropriate service center a completed Form 2553 with an effective date of Date, within 60 days following the date of this letter, the election will be treated as timely made. A copy of this letter should be attached to Form 2553.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express or imply no opinion on 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) of the Code provides that it may not be used or cited as precedent.
PLR-130613-07
3

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the ruling request, it is subject to verification on examination.

Sincerely,

/s/

Mary Beth Collins
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)

A copy of this letter
A copy for § 6110 purposes

cc: