IRS granted late S corporation election relief

Plain-English summary

The IRS granted a corporation relief for failing to timely file Form 2553 to elect S corporation status. The corporation had intended for its election to be effective on its formation date, but the form was not filed on time. The IRS found reasonable cause under IRC § 1362(b)(5) and allowed the election to be treated as timely made if the corporation filed a completed Form 2553 within 60 days after the ruling date. The ruling did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation make a late Form 2553 filing and have its S corporation election treated as timely?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a), 1362(b)(1), 1362(b)(3), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201025023 Third Party Communication: None
Release Date: 6/25/2010 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
----------------- -------------------, ID No. ------------
----------------------------------------- Telephone Number:
----------------------------- --------------------
-------------------------------------------- Refer Reply To:
CC:PSI:03
PLR-139311-09
Date:
February 26, 2010

                                                LEGEND

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

Shareholder = -------------------

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

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

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

  This responds to a letter dated July 23, 2009, written on behalf of Company, and

subsequent correspondence, requesting a ruling under § 1362(b)(5) of the Internal
Revenue Code.

                                                 FACTS

  Company incorporated in State on Date. Shareholder intended to elect S

corporation status for Company effective Date, but Form 2553, Election by a Small
Business Corporation, was not timely filed. Company requests a ruling that it will be
recognized as an S corporation effective Date.

                                        LAW AND ANALYSIS


  Section 1362(a) 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
PLR-139311-09 2

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 third 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 third month of the taxable year and on or before the 15th day of the third
month of the following taxable year, then the election is 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 the election for the 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

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 Date, within 60 days
following the date of this letter, then the election will be treated as timely made. A copy
of this letter should be attached to the Form 2553.

    Except as expressly provided herein, we express or imply no opinion 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 as to whether Company is
otherwise eligible to be 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 ruling request, it is subject to verification on examination.
PLR-139311-09 3

   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