PLR 201134016: IRS grants late S corporation election relief for reasonable cause

Plain-English summary

A corporation missed the deadline to elect S corporation status and asked the IRS to treat the election as timely. The IRS found reasonable cause for the late filing and ruled that the corporation would be recognized as an S corporation from its requested effective date. The relief required the corporation to otherwise qualify as an S corporation, file a completed Form 2553 with the appropriate service center within 120 days after the ruling, and attach a copy of the ruling to the form.

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely under the reasonable-cause rules?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a), 1362(b), 1362(g), and 6110

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201134016
Third Party Communication: None
Release Date: 8/26/2011
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03
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Telephone Number:
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Refer Reply To:
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CC:PSI:B03
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PLR-149182-10
Date:
May 24, 2011

Legend

Company = -------------------------------------------------------------------------------------------------
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State = -------------

D1 = -----------------

D2 = ----------------------

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

This letter responds to a letter dated September 28, 2010, submitted on behalf of Company, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

Facts

Company was incorporated under the laws of State on D1. Company’s shareholders intended that Company be treated as an S corporation as of D2. However, a Form 2553, Election by a Small Business Corporation, was not timely filed. Company requests a ruling that it will be recognized as an S corporation effective D2.

Law and Analysis
PLR-149182-10
2

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 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 Company has established reasonable cause for failing to make a timely election to be an S Corporation. Provided that Company otherwise qualifies as an S corporation, we conclude that Company will be recognized as an S corporation effective D2, and thereafter, if Company files a completed Form 2553 effective D2 with the appropriate service center within 120 days following the date of this letter. A copy of this letter should be attached to 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 Company 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-149182-10
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

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

Enclosures (2)
A copy of this letter
A copy of this letter for § 6110 purposes

cc: