PLR 1049011: Corporation receives relief for a late S election

Plain-English summary

This ruling concerns a corporation whose sole member intended S corporation treatment effective on a specified date, but whose election was not timely filed. The IRS found reasonable cause for the late election and granted relief under IRC § 1362(b)(5). The corporation will be recognized as an S corporation from the requested effective date if it otherwise qualifies and submits a completed Form 2553 with the ruling attached within 120 days. The ruling did not determine whether the corporation otherwise qualifies as an S corporation.

Ruling snapshot

• Question: May the corporation receive relief for its late S corporation election?
• Outcome: approved
• Key authorities: IRC § 1362.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201049011 Third Party Communication: None
Release Date: 12/10/2010 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
------------------------ ----------------------------, ID No. --------------
-------------------------- ----------------------------------------------------
--------------------------- Telephone Number:
---------------------- ---------------------
------ Refer Reply To:
CC:PSI:B01
PLR-112294-10
Date:
August 16, 2010

LEGEND

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

A: =-------------------------

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

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

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

  This responds to a letter dated March 19, 2010, submitted on behalf of X,

requesting relief under § 1362(b)(5) of the Internal Revenue Code.

Facts

   According to the information submitted, X was incorporated on Date under the

laws of State. A, the sole member of X, intended that X be treated as an S corporation
for Federal tax purposes effective Date, but the proper election was not timely filed.
Accordingly, X requests a ruling that it will be treated as an S corporation effective Date.

Law and Analysis

  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.

Section 1362(b)(2) provides that if an S election is made within the first two and one-half
PLR-112294-10 2

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. If the 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 no election is made pursuant to § 1362(a), or,

if made, the election is made after the date prescribed for making such an election, and
the Secretary determines there was reasonable cause for the failure to timely make the
election, then the Secretary may treat such election as timely made for such taxable
year and effective as of the first day of that year.

    X did not file a timely election to be treated as an S corporation under § 1362(a)

effective Date. X has, however, established reasonable cause for not making a timely
election and is entitled to relief under § 1362(b)(5).

Conclusion

    Based solely on the facts submitted and representations made, and provided that

X otherwise qualifies as a subchapter S corporation, we conclude that X will be
recognized as an S corporation effective Date if, within 120 days from the date of this
letter, X submits a properly completed Form 2553, with a copy of this letter attached, to
the appropriate service center.

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

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, no opinion is expressed or implied concerning
whether X otherwise qualifies as an S corporation for federal tax purposes.

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

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

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

letter is being sent to the taxpayer’s authorized representatives.

                                    Sincerely,

                                    David R. Haglund
                                    David R. Haglund
                                    Branch Chief, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

PLR-112294-10 3

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