PLR 1027032: IRS granted a late S corporation election

Plain-English summary

The IRS granted a corporation additional time to elect S corporation status effective as of an earlier intended date. The corporation had been formed under state law and intended to be treated as an S corporation, but it did not timely file Form 2553. The IRS found reasonable cause for the late filing and allowed the corporation 60 days from the ruling date to file the form with the requested effective date. The corporation and its owners also had to file any required original or amended returns consistent with the relief. The ruling did not address whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation make a late S corporation election effective as of its intended date?
• Outcome: approved
• Key authorities: IRC § 1362

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201027032 Third Party Communication: None
Release Date: 7/9/2010 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
------------------------------------------ -------------------, ID No. -------------
---------------------------------- Telephone Number:
---------------------- ---------------------
---------------------------------- Refer Reply To:
CC:PSI:B02
PLR-148270-09
Date:
March 15, 2010

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

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

B = -----------------------------------------------------------------------------------------------------
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State = --------------------

Date = -------------------
1
Date = ----------------------
2

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

   This responds to a letter dated October 23, 2009, and subsequent

correspondence, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the
Internal Revenue Code.

   The information submitted states that X was incorporated on Date 1 under the

laws of State. A and B are the shareholders of X. X represents that it intended to be
treated as an S corporation effective Date 2. However, no Form 2553, Election by a
Small Business Corporation, was timely filed for X. X requests to be treated as an S
corporation effective Date 2.
PLR-148270-09 2

  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 corporation 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
treated as an S corporation for the year in which the election is made. Section
1362(b)(3) provides that if an S 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 (1) an election under § 1362(a) is made for

any taxable year 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 (2) the
Secretary determines that there was reasonable cause for the failure to timely make the
election, then the Secretary may treat the election as timely made for such taxable year
and § 1362(b)(3) shall not apply.

    Based solely on the facts and the representations submitted, we conclude that X

has established reasonable cause for failing to make a timely election to be an S
corporation effective Date 2. Accordingly, provided that X makes an election to be an S
corporation by filing a completed Form 2553 with the appropriate service center
effective Date 2 within 60 days following the date of this letter, then such election will be
treated as timely made for Date 2. A copy of this letter should be attached to the Form
2553.

    This ruling is contingent on X and the owners of X filing within 60 days of this

letter any required original and amended tax returns consistent with the requested relief
being effective on Date 2.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the federal income tax consequences of the facts described above under
any other provision of the Code, including whether X is, in fact, an S corporation for
federal tax purposes.
PLR-148270-09 3

  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.

                                  Sincerely,



                                  Melissa C. Liquerman
                                  Chief, Branch 2
                                  Office of Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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