PLR 200843009: Late S corporation election was treated as timely

Plain-English summary

A corporation intended to elect S corporation status effective from its incorporation date but did not file Form 2553 on time. Section 1362 generally delays an election filed after the first two and one-half months of a tax year until the following tax year. It also lets the IRS treat a late election as timely when reasonable cause exists. Based on the submitted facts and representations, the IRS found reasonable cause and gave the corporation 60 days from the ruling date to file Form 2553 with the intended effective date. The IRS did not independently decide whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation’s late S corporation election take effect from its incorporation date?
• Outcome: Approved. The election would be treated as timely if the corporation filed Form 2553 within 60 days.
• Key authorities: IRC §§ 1362(a), 1362(b), 1362(b)(3), 1362(b)(5)

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

Number: 200843009                                            Third Party Communication: None
Release Date: 10/24/2008                                      Date of Communication: Not Applicable
                                                               Person To Contact:
Index Number: 1362.01-03                                       ----------------------, ID No. -------------
                                                               Telephone Number:
                                                               ---------------------
 ----------------                                              Refer Reply To:
-----------------------------------                            CC:PSI:B02
---------------------                                          PLR-106471-08
 ------------------------------                                Date:
                                                               July 10, 2008




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

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

 D1        = -----------------------


 Dear --------------

 This responds to a letter dated January 10, 2008, and subsequent correspondence,
 submitted on behalf of X by X’s authorized representative, requesting a ruling under
 § 1362(b)(5) of the Internal Revenue Code.

 The information submitted states that X was incorporated in State on D1. It was
 intended that X elect S corporation treatment effective D1; however, a Form 2553,
 Election by a Small Business Corporation, was not 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. Generally, 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. Section 1362(b)(3) provides that if an S 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 (1) an election under § 1362(a) is made for any
 taxable year after the date prescribed by § 1362(b) for making the election for the
PLR-106471-08                                  2

taxable year or no § 1362(a) election is made for any taxable year, and (2) the
Secretary determines that there was reasonable cause for the failure to timely make the
election, then the Secretary may treat the election as timely made for such taxable year
and § 1362(b)(3) shall not apply.


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 D1. Accordingly, provided that X makes an election to be an S corporation by
filing a completed Form 2553 with the appropriate service center effective D1 within 60
days following the date of this letter, then such election will be treated as timely made
for X's taxable year beginning D1. A copy of this letter should be attached to the Form
2553.

Except as specifically set forth above, no opinion is expressed or implied as to the
federal income tax consequences of the transaction described above under any other
provision of the Code. Specifically, no opinion is expressed concerning whether X is, in
fact, 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.

Pursuant to the power of attorney on file with this office, a copy of this letter is being
sent to X’s authorized representative.


                                        Sincerely,



                                        Bradford R. Poston
                                        Senior Counsel, Branch 2
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)



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



cc: