CCA considers relief for a rejected S corporation election

Number

200929006

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Election by Small Business Corporation

Topics

S corporations

Code sections

§ 1362, § 6110

Ruling dated

June 17, 2009

Publicly released

July 17, 2009

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

Chief Counsel Advice considers whether taxpayers may receive relief after the IRS rejected their Form 2553 S corporation election on a technicality. The memorandum describes taxpayers who formed and dissolved a small business, filed returns treating it as an S corporation, and did not learn of the rejection until later. It states that the office routinely grants relief under section 1362(b)(5) in similar cases and views the taxpayers as having a strong case, but notes that they could not pay the private letter ruling fee because they were bankrupt.

Ruling snapshot

Question: Do taxpayers whose S corporation election was rejected on a technicality appear eligible for private letter ruling relief?
Outcome: Advice given, the memorandum views the taxpayers as having a strong case under section 1362(b)(5), subject to separate review.
Key authorities: IRC § 1362(b)(5); IRC § 6110(k)(3).

Full text (IRS public release)

ID: CCA_2009061712001939 Number: 200929006
Release Date: 7/17/2009
Office: ----------
UILC: 1362.00-00

From: -----------------
Sent: Wednesday, June 17, 2009 12:00:26 PM
To: ---------------------
Cc:
Subject: RE: S corp issue regarding PLR

------

As we discussed earlier, here are my thoughts on the -----------case:

The taxpayers have a very sympathetic case. They sought to be entrepreneurial and started a small business in ------- or ------- but the business failed, and dissolved in -------. The business was formed as a corporation, and the taxpayers sent in a Form 2553 to have to business treated as an S corp as of -------, and filed subsquent tax returns assuming that the business was an S corp. They did not have any reason to think otherwise until -------, when the IRS informed them that their Form 2553 had been rejected on a technicality.
My office routinely grants PLR relief under Section 1362(b)(5) to similarly situated taxpayers. While every case needs to be reviewed separately, it appears to me that the taxpayers have a very clear cut case for PLR relief. Unfortunately, they cannot pay the PLR fee since they are bankrupt. ----------------------
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Many thanks,
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