PLR 200827016: Late S election allowed if returns are amended consistently

Plain-English summary

A corporation intended to elect S status from a specified date but did not file Form 2553 on time. The IRS found reasonable cause for the missed deadline. It ruled that the election would be treated as timely if the corporation filed Form 2553 within 60 days of the letter and both the company and all shareholders amended their returns consistently with S corporation treatment. The IRS did not decide whether the company otherwise meets the requirements to be a small business corporation.

Ruling snapshot

• Question: Can the corporation make a late S election effective on its intended date?
• Outcome: Approved, subject to filing Form 2553 and consistent amended returns.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200827016
Third Party Communication: None
Release Date: 7/4/2008
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:B02
PLR-140328-07
Date:
March 06, 2008

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

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

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

This responds to a letter dated August 31, 2007, submitted by X’s authorized representative on behalf of X, requesting a ruling under ' 1362(b)(5) of the Internal Revenue Code.

A, as president of X, represents that X was incorporated on D1. X was intended to be an S corporation effective D2. However, no Form 2553, Election by a Small Business Corporation, was timely filed for X.

Section 1362(b)(5) of the Code 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.

PLR-140328-07
2

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 D2. Accordingly, provided that, within 60 days of the date of this letter, 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, and X and all of X’s shareholders amend their tax returns consistent with the treatment of X as an S corporation effective D2, then such election will be treated as timely made for D2.

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) of the Code.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code 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 sent to X’s authorized representatives.

Sincerely,

J. Thomas Hines
Chief, Branch 2
Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: