PLR 201013020: IRS grants late S corporation election relief

Plain-English summary

The IRS ruled that a corporation could be treated as an S corporation from its intended effective date even though its election was not timely filed. The IRS found that the corporation had reasonable cause for the missed election, subject to the corporation otherwise qualifying as an S corporation. The corporation had to submit Form 2553 with a copy of the ruling to the appropriate service center within 60 days. The ruling expressed no opinion on whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Can a corporation receive relief for a late S corporation election when the missed filing resulted from reasonable cause?
• Outcome: Approved
• Key authorities: IRC § 1362(a), (b), and (b)(5); Form 2553

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201013020
Third Party Communication: None
Release Date: 4/2/2010
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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-------------------, ID No. -------------
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-132508-09
Date: December 2, 2009

Legend:

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

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

D1 = ------------------

D2 = ------------------------------

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

This responds to the letter dated June 26, 2009, submitted on behalf of X, requesting relief under §1362(b)(5) of the Internal Revenue Code.

Facts

According to the information submitted, X was incorporated under the laws of State on D1. The shareholder of X intended that X be treated as an S corporation effective on D2, 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 D2.

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-132508-09
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 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 § 362(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).

Conclusion

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 treated as an S corporation effective D2. Within 60 days from the date of this letter, X should submit a properly completed Form 2553, with a copy of this letter attached, to the appropriate service center.

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,

David R. Haglund

David R. Haglund
Chief, Branch 1
Office of Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2):
Copy of this letter;
Copy for § 6110 purposes