PLR 200813029: Missed S corporation election can be filed within 60 days

Plain-English summary

A corporation intended to elect S status from its incorporation date but did not file Form 2553 on time. The IRS found reasonable cause for the missed deadline under section 1362(b)(5). It agreed to treat the election as timely if the corporation files a complete Form 2553, effective for the intended date, with a copy of the ruling within 60 days of the letter. The IRS did not decide whether the corporation otherwise qualifies as a small business corporation.

Ruling snapshot

• Question: Can the corporation obtain relief for a late S election?
• 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: 200813029
Third Party Communication: None
Release Date: 3/28/2008
Date of Communication: Not Applicable

Person To Contact:
------------------------, ID No. -------------
Index Number: 1362.01-03
Telephone Number:
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Refer Reply To:
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CC:PSI:B02
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PLR-138832-07
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Date:
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December 17, 2007
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Legend

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

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

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

This responds to a letter dated August 9, 2007, and subsequent correspondence, submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on Date under the laws of State. It was intended for X to be an S corporation effective Date. However, no Form 2553, Election by a Small Business Corporation, was timely filed for X.

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

Section 1362(b) provides the rule on when an S election will be effective. Section 1362(b)(2) provides in relevant part that if an S election is made within the first two and one-half months of a corporation’s taxable year, then the corporation will be treated as an S corporation for the year in which the election is made. Under § 1362(b)(3),
PLR-138832-07
2

however, if an S election is made after the first two and one-half months of a corporation’s taxable year, then that corporation will not be treated as an S corporation until the taxable year after the year in which the S election is filed.

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 submitted and the representations made, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation effective Date. Accordingly, provided that X makes an election to be an S corporation by filing a complete Form 2553 effective Date, 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.

Except as expressly provided herein, no opinion is expressed or implied concerning the federal income 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 requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

Sincerely,

Melissa C. Liquerman
Senior Technician Reviewer, Branch 2
(Passthroughs & Special Industries)

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

cc: