PLR 200931035: Entity receives relief for late corporation and S corporation elections

Plain-English summary

The IRS granted an entity additional time to file Form 8832 electing to be classified as an association taxable as a corporation for federal tax purposes. The extension lasts 60 days from the letter date and requires attaching a copy of the ruling to the election. Separately, provided the entity otherwise qualifies as an S corporation, the IRS ruled that it will be recognized as an S corporation effective on the specified date. The entity must file Form 2553 and attach a copy of the ruling within the same 60-day period. The ruling does not address whether the entity actually meets the other requirements for S corporation status.

Ruling snapshot

• Question: Can the entity receive relief for its late entity-classification and S corporation elections?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5); Treas. Reg. §§ 301.7701-3, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200931035
Third Party Communication: None
Release Date: 7/31/2009
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03
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Telephone Number:
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Refer Reply To:
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PLR-145352-08
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Date:
April 20, 2009

Legend:

X = -------------------------------------------
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D1 = ------------------------

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

This responds to the letter dated August 5, 2008, submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue Code and requesting relief under § 301.9100-3 of the Procedure and Administration Regulations that X be granted an extension of time to elect under § 301.7701-3(a) to be classified as a corporation for federal tax purposes.

Facts

X was intended to be treated as an S corporation effective on D1, but the election to be treated as an S corporation was not timely filed. Accordingly, X requests a ruling that it will be treated as an S corporation effective D1.

Law and Analysis

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8) (an eligible entity) can elect its classification for federal tax purposes as provided in § 301.7701-3.
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Section 301.7701-3(b)(1) provides that, except as provided in § 301.7701- 3(b)(3), unless the entity elects otherwise, a domestic eligible entity is (i) a partnership if it has two or more members; or (ii) disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under § 301.7701-3(b), or to change its classification, by filing Form 8832 with the service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701- 3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2. Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government. Section 301.9100-3(a).

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 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 filed.

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.

X did not timely file an election to be treated as an S corporation under § 1362(a). X has, however, established reasonable cause for not making a timely S election and is entitled to relief under § 1362(b)(5).
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Conclusion

Based solely on the facts submitted and the representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, X is granted an extension of time of 60 days from the date of this letter to file a properly executed Form 8832 with the appropriate service center, electing to be treated as an association taxable as a corporation for federal tax purposes effective Date 1. A copy of this letter should be attached to the election.

In addition, based solely on the facts submitted and the representations made, and provided that X otherwise qualifies as an S corporation, we conclude that X will be recognized as an S corporation effective Date 1. A Form 2553 along with a copy of this letter must be forwarded to the appropriate service center within 60 days from the date of this letter.

Except as specifically set forth above, no opinion is expressed or implied as to the federal tax consequences of the facts 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) 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 will be sent to X’s authorized representative.

Sincerely,

Curtis G. Wilson

Curtis G. Wilson
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures:
Copy of this letter
Copy for § 6110 purposes

cc: