PLR 200919021: Corporation received relief for a late S election

Plain-English summary

A corporation's shareholders intended that it elect S corporation status from a specified effective date, but the election was not timely filed. The corporation requested relief under section 1362(b)(5). Based on the submitted facts and representations, the IRS found reasonable cause for the delay. It ruled that the election would be treated as timely if the corporation filed a completed Form 2553, effective on the requested date, with the proper service center within 60 days. The IRS did not determine whether the corporation in fact qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely?
• Outcome: Approved: the corporation received 60 days to file Form 2553 for the requested effective date.
• Key authorities: IRC § 1362(a), (b).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200919021
Third Party Communication: None
Release Date: 5/8/2009
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:B1
PLR-139456-08
Date:
January 30, 2009

Legend:

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

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

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

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

This responds to a letter dated September 2, 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 incorporated under the laws of State. X represents that the shareholders of X intended that X elect to be an S corporation effective on Date 1, but the election to be an S corporation was not timely filed. Accordingly, X requests a ruling that it will be treated as an S corporation effective Date 1.

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 in relevant part 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
PLR-139456-08
2

treated as an S corporation for the year in which the election is made. Under
§ 1362(b)(3), however, if an S election is made after the first two and one-half months of a corporation's taxable year, then that 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) 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 such election, then the Secretary may treat such an election as timely made for such taxable year and § 1362(b)(3) shall not apply.

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 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(s) 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,

Dianna K. Miosi
Dianna K. Miosi
Chief, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: