PLR 200836013: Corporation received 60 days to file its late S election

Plain-English summary

A corporation's shareholders intended it to be an S corporation from the date it was formed, but Form 2553 was not timely filed. The IRS found reasonable cause for the failure and granted relief under section 1362(b)(5). The election would be treated as timely if the corporation filed a completed Form 2553 for the intended effective date within 60 days of the ruling and attached a copy of the ruling. The IRS did not decide whether the corporation otherwise qualified for S corporation status.

Ruling snapshot

• Question: Could the corporation obtain relief for its late S corporation election?
• Outcome: Approved, with 60 days to file Form 2553 and attach the ruling
• Key authorities: IRC § 1362(a), (b), and (b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200836013
Third Party Communication: None
Release Date: 9/5/2008
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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Refer Reply To:
CC:PSI:B03
PLR-105824-08
Date: May 29, 2008

Legend

X = ----------------
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A = ------------------------
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B = ----------------------------
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d1 = ------- ------------

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

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

We received a letter dated February 1, 2008, and subsequent correspondence, submitted on behalf of X by its authorized representative requesting a ruling under ' 1362(b)(5) of the Internal Revenue Code. This letter responds to that request.

Facts

X was incorporated under State law on d1. X’s shareholders, A and B, intended for X to be an S corporation effective d1. However, X’s Form 2553, Election by a Small Business Corporation, was not timely filed. Thus, X requests a ruling that it will be recognized as an S corporation effective d1.
PLR-105824-08
2

Law and Analysis

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)(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 the election, the Secretary may treat such an 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 effective d1, within 60 days following the date of this letter, the election shall be treated as timely made. A copy of this letter should be attached to the Form 2553 filed with the service center. A copy is enclosed for that purpose.

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.

In accordance with a power of attorney on file with this office, a copy of this letter is being sent to your authorized representative.
PLR-105824-08
3

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

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