PLR 201112006: Corporation received relief for a late S corporation election

Plain-English summary

A corporation asked the IRS for relief after it failed to timely file an election to be treated as an S corporation. The corporation established reasonable cause for the late election. The IRS ruled that the corporation would be treated as an S corporation effective as of the requested date under section 1362(b)(5), provided it otherwise qualified and submitted Form 2553 with the ruling attached within 120 days.

Ruling snapshot

• Question: May the corporation make a late S corporation election effective as of the requested date?
• Outcome: Approved.
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201112006
Third Party Communication: None
Release Date: 3/25/2011
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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Refer Reply To:
CC:PSI:B01
PLR-134635-10
Date:
December 01, 2010

Legend:

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

State = ---------

Date1 = -----------------

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

This responds to the letter dated August 6, 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 under the laws of State on Date1. The shareholder of X intended that X be treated as an S corporation effective on Date1, but the election to be treated as an S corporation was not timely filed. Accordingly, X requests a ruling that it will be treated as an S corporation effective Date1.

Law and Analysis

Section 1362(a) provides that a small business corporation may elect to be an S corporation.

Section 1362(b) 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

PLR-134635-10
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§ 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 (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, then the Secretary may treat such an election as timely made for such taxable year (and § 1362(b)(3) shall not apply).

X did not timely file an election to be treated as an S corporation under § 1362(a). X has, however, established reasonable cause for not making a timely S election and is entitled to relief under § 1362(b)(5).

Conclusion

Based solely on the facts submitted and the representations made, and provided that X otherwise qualifies as an S corporation, we conclude that X will be treated as an S corporation effective Date1. Within 120 days from the date of this letter, X should submit a properly completed Form 2553, with a copy of this letter attached, to the appropriate service center.

Except as specifically set forth above, no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether X is, in fact, 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.

Pursuant to the power of attorney on file with this office, a copy of this letter will be sent to X’s authorized representative.

Sincerely,

Barbara J. Campbell
Barbara J. Campbell
Senior Technician Reviewer, Branch 1
Office of Associate Chief Counsel
(Passthroughs and Special Industries)

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

cc: