Late S corporation election may be treated as timely

Plain-English summary

The IRS considered a corporation's request for relief after its Form 2553, Election by a Small Business Corporation, was not timely filed. The corporation represented that its sole shareholder intended an S corporation election to be effective on a specified date and that the late filing resulted from an error. The IRS concluded that the corporation had established reasonable cause and granted 60 days from the letter date to file a completed Form 2553 for the election to be treated as timely. The ruling did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Can a corporation's late S corporation election be treated as timely when reasonable cause is established?
• Outcome: approved
• Key authorities: IRC § 1362(b)(5); Form 2553

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201010022
Third Party Communication: None
Release Date: 3/12/2010
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03
---------------------, ID No. -----------------
Telephone Number:
---------------------
-------------------------
Refer Reply To:
---------------------------------------
CC:PSI:B03
-------------------------------------------- PLR-138069-09
--------------------------
Date:
November 19, 2009

LEGEND

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

A = ------------------------------------------------------------------------------------------------------
--------------------------

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

Date = -----------------------

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

This letter responds to a letter dated August 12, 2009, submitted on behalf of X by its authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code (Code).

FACTS

X was incorporated under the laws of State on Date. A, X’s sole shareholder, intended for X to be an S corporation effective Date. However, X's Form 2553, Election by a Small Business Corporation, was not timely filed.

X requests a ruling that it will be recognized as an S corporation effective Date.
PLR-138069-09
2

LAW AND ANALYSIS

Section 1362(a)(1) provides that, except as provided in § 1362(g), a small business corporation may elect, in accordance with the provisions of § 1362, 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 taxable year, or (B) at any time during the taxable year and on or before the 15th day of the 3rd month of the taxable year.

Section 1362(b)(3) provides that if (A) a small business corporation makes an election under § 1362(a) for any taxable year, and (B) the election is made after the 15th day of the 3rd month of the taxable year and on or before the 15th day of the 3rd month of the following taxable year, then such election shall be treated as made for the following taxable year.

Section 1362(b)(5) provides that if (A) an election under § 1362(a) is made for any taxable year (determined without regard to § 1362(b)(3)) after the date prescribed by § 1362(b) for making such election for such taxable year or no § 1362(a) 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 the election as timely made for the taxable year (and § 1362(b)(3) shall not apply).

CONCLUSION

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

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, we express or imply no opinion concerning whether X is otherwise eligible to be an S corporation for federal tax purposes.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter to X's authorized representative.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
PLR-138069-09
3

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 ruling request, it is subject to verification on examination.

Sincerely,

/s/

Mary Beth Carchia
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: