PLR 201015014: IRS grants late relief for an S corporation election

Plain-English summary

The IRS granted a corporation relief after it failed to timely file an election to be treated as an S corporation. The corporation established reasonable cause for the failure and was allowed 60 days from the ruling date to submit a properly completed Form 2553 with a copy of the letter. The relief was conditioned on the corporation otherwise qualifying as an S corporation. The ruling did not express an opinion on that underlying eligibility.

Ruling snapshot

• Question: Could the corporation make a late S corporation election effective on its intended date?
• Outcome: Approved
• Key authorities: IRC §§ 1362 and 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201015014
Third Party Communication: None
Release Date: 4/16/2010
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:B01
PLR-133613-09
Date:
December 23, 2009

LEGEND

X = ---------------------------------
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Date = ----------------------

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

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

This responds to a letter dated July 10, 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 on Date under the laws of State. A, the sole shareholder of X, intended that X be treated as an S corporation for Federal tax purposes effective Date, but the proper election was not timely filed. Accordingly, X requests a ruling that it will be treated as an S corporation effective Date.

Law and Analysis

Section 1362(a) provides that a small business corporation may elect to be an S corporation.
PLR-133613-09
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Section 1362(b) provides the rule on when an S election will be effective.
Section 1362(b)(2) provides 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. If the election is made after the first two and one-half months of a corporation's taxable year, then the corporation will not be treated as an S corporation until the taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if no election is made pursuant to § 1362(a), or, if made, the election is made after the date prescribed for making such an election, and the Secretary determines there was reasonable cause for the failure to timely make the election, then the Secretary may treat such election as timely made for such taxable year and effective as of the first day of that year.

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

Conclusion

Based solely on the facts submitted and representations made, and provided that X otherwise qualifies as a subchapter S corporation, we conclude that X will be recognized as an S corporation effective Date if, within 60 days from the date of this letter, X submits a properly completed Form 2553, with a copy of this letter attached, to the appropriate service center.

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, no opinion is expressed or implied concerning whether X otherwise qualifies as 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.
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In accordance with the power of attorney on file with this office, a copy of this letter is being sent to the taxpayer’s authorized representatives.

Sincerely,

David R. Haglund
David R. Haglund
Chief, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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