PLR 1032028: The IRS granted late-election relief for an LLC seeking S corporation status

Plain-English summary

The IRS ruled that a limited liability company could be recognized as an S corporation effective on the requested date. The LLC had timely elected to be classified as an association taxable as a corporation, but it had not timely filed Form 2553. The IRS found reasonable cause for the late S corporation election and granted relief under section 1362(b)(5), conditioned on filing Form 2553 within 60 days. The ruling did not address whether the LLC otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the LLC's late S corporation election be treated as timely made for the requested effective date?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5); IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201032028 Third Party Communication: None
Release Date: 8/13/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03 ------------------------, ID No. -------------------
----------------------------------------------------
Telephone Number:

                                                             ---------------------

----------------------------------------------------- Refer Reply To:
-------------------------------------------- CC:PSI:B03
--------------------------------- PLR-151922-09
Date:
April 30, 2010

Legend

X = -----------------------------------------------------------------------------------------------------
-----------------------
State = ------------
Date 1 = -------------------
Date 2 = ----------------

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

    This letter responds to a letter dated November 18, 2009, submitted on behalf of

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

                                                   Facts

    X was formed under the laws of State on Date 1 as a limited liability company.

X’s sole member intended X to be treated as an S corporation as of Date 2. X timely
filed Form 8832, Entity Classification Election, electing to be classified as an association
taxable as a corporation. However, a Form 2553, Election by a Small Business
Corporation, was not timely filed. X represents that it has acted consistently with X’s
intended status as an S corporation since Date 2. X requests a ruling that it will be
recognized as an S corporation effective Date 2.

                                           Law and Analysis

   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

PLR-151922-09 2

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 such election shall be 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 such 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

X has established reasonable cause for failing to timely make an election to be an S
corporation. Provided that X otherwise qualifies as an S corporation, we conclude that
X will be recognized as an S corporation effective Date 2, if X files a completed Form
2553 effective Date 2 with the appropriate service center within 60 days following the
date of this letter. A copy of this letter should be attached to the Form 2553. 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 as to whether X is
otherwise eligible to be an S corporation for federal tax purposes.

  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.

   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-151922-09 3

     In accordance with the power of attorney on file with this office, a copy of this

letter is being 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 of this letter for § 6110 purposes

cc: