PLR 200944025: Late S corporation election allowed for reasonable cause

Plain-English summary

The IRS determined that a company had reasonable cause for failing to timely file its S corporation election. The company had intended to file Form 2553 for a stated effective date but did not file the election because of inadvertence. The IRS allowed the company to obtain relief under IRC § 1362(b)(5) by filing a completed Form 2553 with the appropriate service center within 60 days after the ruling date. The company was directed to attach a copy of the ruling to the form, and the IRS expressed no opinion on whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the company make a late S corporation election effective on the requested date?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200944025
Third Party Communication: None
Release Date: 10/30/2009
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:03
PLR-131728-09
Date:
July 27, 2009

LEGEND

Company = -------------------------------------------------------
--------------------------------------------------

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

Date1 = --------------------------

Date2 = ----------------------

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

This responds to a letter dated June 16, 2009, submitted on behalf of Company, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

Company incorporated in State on Date1. Company intended to file Form 2553, Election by a Small Business Corporation, effective Date2. Due to inadvertence, Company never filed the election.

LAW AND ANALYSIS

Section 1362(a) provides, in general, that a small business corporation may elect to be an S corporation.

Section 1362(b)(1) provides that an election under § 1362(a) may be made by a small business corporation for any taxable year (A) at any time during the preceding
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taxable year, or (B) at any time during the taxable year and on or before the 15th day of the third month of the taxable year.

Section 1362(b)(5) provides that if (A) an election under § 1362(a) is made for any taxable year after the date prescribed by § 1362(b) for making the election for that taxable year or no such election is made for any taxable year, and (B) the Secretary determines that there was reasonable cause for the failure to timely make the election, the Secretary may treat such an election as timely made for that taxable year.

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that Company has established reasonable cause for failing to make a timely S corporation election. Thus, we conclude that Company is eligible for relief under § 1362(b)(5). Accordingly, if Company makes an election to be an S corporation by filing with the appropriate service center a completed Form 2553 effective Date2, within 60 days following the date of this letter, the election shall be treated as timely made. A copy of this letter should be attached to Form 2553.

Except as specifically set forth above, we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether Company is, in fact, an S corporation for federal tax purposes.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for a ruling, it is subject to verification on examination.
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Pursuant to a power of attorney on file with this office, a copy of this letter will be sent to your authorized representative.

Sincerely,

/s/

Tara P. Volungis
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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