PLR 201213020: IRS allows a late S corporation election

Plain-English summary

The IRS granted a corporation 120 days to file Form 2553 and make a late S corporation election effective on the requested date. The corporation's sole shareholder intended to make the election, but the form was not timely filed. The IRS found that the corporation had reasonable cause for the late filing under IRC § 1362(b)(5). The ruling did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation make a late S corporation election under IRC § 1362(b)(5)?
• Outcome: Approved, with 120 days to file Form 2553.
• Key authorities: IRC §§ 1362(a), 1362(b), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201213020
Third Party Communication: None
Release Date: 3/30/2012
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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Telephone Number:
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----------------------------------------- Refer Reply To:
CC:PSI:B02
PLR-150554-11
Date:
December 13, 2011

Legend

X = ------------------
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State = --------

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

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

This responds to a letter dated November 30, 2011 submitted on behalf of X requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was formed under the law of State. The sole shareholder of X intended that X elect S corporation treatment effective Date; however, a Form 2553, Election by a Small Business Corporation, was not 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. Generally, 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. Section 1362(b)(3) provides that if an S 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 (1) an election under § 1362(a) is made for any taxable year after the date prescribed by § 1362(b) for making the election for such

PLR-150554-11
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taxable year or no § 1362(a) election is made for any taxable year, and (2) 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 such taxable year and § 1362(b)(3) shall not apply.

Based solely on the facts and the representations submitted, 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 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 for X's taxable year beginning Date. A copy of this letter should be attached to the Form 2553.

Except as specifically set forth above, no opinion is expressed or implied as to the federal income tax consequences of the transaction 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) of the Code provides that it may not be used or cited as precedent.

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