PLR 1032027: The IRS granted relief for a late S corporation election

Plain-English summary

The IRS ruled that a corporation's late S corporation election could be treated as timely made because the corporation established reasonable cause for missing the filing deadline. The relief applies to the requested effective date if the corporation files a completed Form 2553 with the appropriate service center within 60 days and attaches a copy of the ruling letter. The ruling did not address whether the corporation otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely made for the requested tax year?
• Outcome: Approved
• Key authorities: IRC §§ 1361(b), 1362(b)(5), and 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201032027 Third Party Communication: None
Release Date: 8/13/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03 ------------------------- -------------------
Telephone Number:
---------------------
------------------------------------- Refer Reply To:
------------------------------------------- CC:PSI:B2
---------------------- PLR-149826-09
------------------------------- Date:
April 08, 2010

Legend

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

State = ------

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

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

Dear ---------------------

    This responds to the letter dated October 15, 2009, and subsequent

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

     The information submitted states that X was incorporated in State on D1. It was

intended for X to be an S corporation effective D2. However, no Form 2553, Election by
a Small Business Corporation, was timely filed for X. Accordingly, X requests a ruling
that it will be treated as an S corporation effective D2.

   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.

Generally, 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

PLR-149826-09 2

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 (A) 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 (B) 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 D2. Accordingly, provided that X makes an election to be an S
corporation by filing a completed Form 2553 with the appropriate service center
effective D2 within 60 days following the date of this letter, then such election will be
treated as timely made for X’s taxable year beginning D2 . A copy of this letter should
be attached to the Form 2553.

   Except as specifically set forth above, no opinion is expressed concerning the

federal tax consequences of the facts described above under any other provision of the
Code, including whether X was or is a small business corporation under § 1361(b).

  This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

   Pursuant to a power of attorney on file with this office, a copy of this letter is

being sent to X's authorized representative.

                                    Sincerely,



                                    Bradford R. Poston
                                    Senior Counsel, Branch 2
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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