IRS granted relief for a late S corporation election

Plain-English summary

The IRS considered a corporation that intended to be an S corporation from its date of incorporation but did not timely file Form 2553. The corporation requested relief under IRC § 1362(b)(5). The IRS found reasonable cause for the late election and ruled that the corporation was eligible for relief. The election would be treated as timely if the corporation filed a completed Form 2553, effective on the requested date, within 60 days after the letter. The ruling did not express an opinion on the corporation's other eligibility requirements for S corporation status.

Ruling snapshot

• Question: Can the corporation's late S corporation election be treated as timely because it had reasonable cause for not filing Form 2553 on time?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a)(1), 1362(b)(1), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201025042 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:B03
PLR-149316-09
Date:
March 16, 2010

                                                 Legend

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

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

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

a = -----------------------------

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

   We received your letter dated November 2, 2009, submitted on behalf of

Company requesting a ruling under § 1362(b)(5) of the Internal Revenue Code (Code).
This letter responds to that request.

                                                  Facts

  Company was incorporated on a under State law. Company’s sole shareholder,

Shareholder, intended for Company to be an S corporation effective from its date of
incorporation. However, Company’s Form 2553, Election by a Small Business
Corporation, was not timely filed. Thus, Company requests a ruling that it will be
recognized as an S corporation effective a.

                                          Law and Analysis

PLR-149316-09 2

  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 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 (determined without regard to § 1362(b)(3)), after the date prescribed
by § 1362(b) for making such election for such 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 the taxable year (and § 1362(b)(3) shall not apply).

                                    Conclusion

    Based 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 a, 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 the Form 2553 filed with the service center. A copy is enclosed
for that purpose.

   Except as expressly provided herein, we express or imply no opinion concerning

the federal 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 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.
PLR-149316-09 3

    Under a power of attorney on file with this office, we are sending a copy of this

letter to Company’s authorized representatives.

                                   Sincerely,

                                   /s/

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

Enclosures (2)
A copy of this letter
A copy for § 6110 purposes