PLR 200843028: LLC received 60 days to make late S election

Plain-English summary

A limited liability company timely elected association status on Form 8832 and intended S corporation treatment from the same date. It did not timely file Form 2553. Section 1362(b)(5) permits a late S election to be treated as timely when reasonable cause explains the failure. Based on the submitted facts and representations, the IRS found reasonable cause. It gave the company 60 days from the ruling date to file Form 2553 with the intended effective date and attach the ruling. The IRS did not decide whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the LLC’s late S election be treated as effective from the date of its corporate-classification election?
• Outcome: Approved, provided it filed Form 2553 within 60 days and attached the ruling.
• Key authorities: IRC § 1362(a), (b), (b)(2), (b)(5)

Full text (IRS public release)

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Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200843028 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:
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----------------------------------- Refer Reply To:
--------------------------------------------------- CC:PSI:B01
-------------------------------- PLR-127513-08
---------------------------------------- Date:
July 23, 2008

LEGEND:

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

Date 1 = ----------------------

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

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

   This responds to a letter dated March 18, 2008, submitted on behalf of X,

requesting relief under § 1362(b)(5) of the Internal Revenue Code.

FACTS

The information submitted states that X was formed on Date 1 as a limited liability
company under the laws of State. X subsequently timely filed a Form 8832, Entity
Classification Election, to elect to be classified as an association taxable as a
corporation, effective Date 1. X intended to elect to be an S corporation for Federal tax
purposes effective Date 1. However, X failed to timely file a Form 2553, Election by a
Small Business Corporation.

LAW AND ANALYSIS

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 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
PLR-127513-08 2

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 election as timely made for such taxable
year and effective as of the first day of that 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 Date 1. Accordingly, provided that X makes an election to be an S corporation
by filing a completed Form 2553, effective Date 1, 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 1.

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. Specifically, no opinion is expressed or implied concerning whether X
otherwise qualifies as an S corporation for federal tax purposes.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) 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 sent to the taxpayer's authorized representative.

                                       Sincerely,

                                       Audrey W. Ellis

                                       Audrey W. Ellis
                                       Senior Counsel, Branch 1
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

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

cc:
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