PLR 201116016: IRS approved late S corporation election relief

Plain-English summary

The IRS considered a corporation's request to have a late Form 2553 treated as a timely S corporation election. The corporation had intended to elect S corporation status but did not file the form on time. The IRS concluded that the corporation established reasonable cause and was eligible for relief under IRC § 1362(b)(5). The relief was conditioned on filing a completed Form 2553 within 120 days after the ruling letter.

Ruling snapshot

• Question: May the corporation make a late S corporation election effective on the requested date?
• Outcome: Approved
• Key authorities: IRC § 1362(a), (b)(3), and (b)(5); Form 2553

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201116016
Third Party Communication: None
Release Date: 4/22/2011
Date of Communication: Not Applicable
Index Number: 1362.00-00, 1362.01-03
Person To Contact:
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Telephone Number:
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--------------------------------------------- Refer Reply To:
CC:PSI:B03
PLR-143140-10
Date:
December 14, 2010

LEGEND

X = ------------------------------------------------------------------------------------------------------
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A = ------------------------------------------------------------------------------------------------------
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B = ------------------------------------------------------------------------------------------------------
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State = ---------

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

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

This letter responds to a letter dated September 24, 2010, submitted on behalf of X by its authorized representative, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

X was incorporated under State law on Date. X's shareholders, A and B, intended for X to be an S corporation effective Date. However, a Form 2553, Election by a Small Business Corporation, was not filed timely. X requests a ruling that it will be recognized as an S corporation effective Date.
PLR-143140-10
2

LAW AND ANALYSIS

Section 1362(a)(1) provides that a small business corporation may elect 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 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 small business corporation makes an election under § 1362(a) for any taxable year, and 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 the election is treated as made for the following taxable year.

Section 1362(b)(5) provides that if 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 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 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 make a timely S corporation election. Thus, we conclude that X is eligible for relief under § 1362(b)(5). Accordingly, if X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective Date within 120 days following the date of this letter, then such election will be treated as timely made. A copy of this letter should be attached to the Form 2553 filed with the service center. 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 concerning whether X is otherwise eligible to be an S corporation for Federal tax purposes.
PLR-143140-10
3

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 a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.

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.

Sincerely,

/s/

Tara P. Volungis
Acting Branch Chief, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: