PLR 200817032: Late S corporation election granted with 60-day filing condition

Plain-English summary

A corporation intended to elect S corporation status but failed to file Form 2553 on time. The IRS found reasonable cause for the late election under § 1362(b)(5). It ruled that the election would be treated as timely for the requested effective date if the corporation filed a completed Form 2553 and a copy of the ruling with the proper service center within 60 days of the letter. The public release gives no further detail about why the filing was missed.

Ruling snapshot

• Question: Could the corporation make its S election effective on the requested date despite a late Form 2553?
• Outcome: Approved, conditional on filing within 60 days.
• Key authorities: IRC § 1362(a), (b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200817032
Third Party Communication: None
Release Date: 4/25/2008
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:B01
PLR-155776-07
Date:
January 29, 2008

Legend:

X = -----------------------------
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D1 = -----------------

State = -------------

D2 = ----------------------

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

This responds to the letter dated December 17, 2007, and related correspondence, submitted on behalf of X, requesting relief under ' 1362(b)(5) of the Internal Revenue Code.

FACTS

X was incorporated D1 under the laws of State. X intended to be treated as an S corporation for federal tax purposes. However, X inadvertently failed to timely file a Form 2553, Election by a Small Business Corporation, effective D2.

LAW AND ANALYSIS

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

PLR-155776-07
2

Section 1362(b) provides the rule on when an S election will be effective. 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. If the election is made after the first two and one-half months of a corporation=s taxable year, then the corporation will not be treated as an S corporation until the taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if no election is made pursuant to ' 1362(a), or, if made, the election is made after the date prescribed for making such an election, and the Secretary determines there was reasonable cause for the failure to timely make the election, then the Secretary may treat such an election as timely made for such taxable year and effective as of the first day of that tax year.

CONCLUSION

Based solely on the facts and representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation effective D2. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 effective D2, 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 D2.

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.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being mailed to your authorized representative.

Sincerely,
/s/
Audrey W. Ellis
Senior Counsel, Branch 1
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

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

cc: