PLR 1103034: Corporation receives relief for a late S election

Plain-English summary

A corporation intended to elect S corporation status effective on a specified date but did not timely file Form 2553. The IRS found reasonable cause for the missed election. It ruled that the election would be treated as timely if the corporation filed a complete Form 2553, effective on the requested date, with a copy of the ruling within 120 days. The ruling did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation make a late S election effective on its intended date?
• Outcome: approved
• Key authorities: IRC §§ 1361(b) and 1362(a), (b), and (b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

                                             Third Party Communication: None

Number: 201103034 Date of Communication: Not Applicable
Release Date: 1/21/2011
Person To Contact:
Index Number: 1362.01-03 ------------------------, ID No. -------------
Telephone Number:
------------------------------------ ---------------------
---------------------------- Refer Reply To:

---------------------------------- CC:PSI:B02
------------------------------ PLR-134465-10
Date:
September 28, 2010

Legend

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

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

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

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

This responds to a letter dated July 12, 2010, and subsequent correspondence,
submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue
Code.

The information submitted states that X was formed on Date under the laws of State. X
represents that X intended to be an S corporation effective Date. However, no Form
2553, Election by a Small Business Corporation, was timely filed for X.

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 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. Under § 1362(b)(3),
however, if an S election is made after the first two and one-half months of a
corporation’s taxable year, then that corporation will not be treated as an S corporation
until the taxable year after the year in which the S election is filed.
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 such election for such
PLR-134465-10 2

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 such election,
then the Secretary may treat such an election as timely made for such taxable year.

Based solely on the facts submitted and the representations made, we conclude that X
has established reasonable cause for failing to make a timely election to be an S
corporation effective Date. Accordingly, provided that X makes an election to be an S
corporation by filing a complete Form 2553 effective Date, along with a copy of this
letter, with the appropriate service center within 120 days from the date of this letter,
then such election will be treated as timely made for Date.

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 was or is a small business corporation under
§ 1361(b) of the Code.

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.

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,



                                    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