IRS grants late S corporation election relief for reasonable cause

Plain-English summary

The IRS granted a corporation relief for a late S corporation election. The corporation intended the election to take effect on a redacted date but did not timely file Form 2553. The IRS found reasonable cause for the delay and allowed the election to be treated as timely made and effective as of that date, provided the corporation filed a properly completed Form 2553 with a copy of the letter within 120 days. The ruling did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely made?
• Outcome: Approved
• Key authorities: IRC § 1362(a), (b)(2), (b)(3), and (b)(5); IRC § 6110(k)(3); Form 2553.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201215004
Third Party Communication: None
Release Date: 4/13/2012
Date of Communication: Not Applicable
Index Number: 1362.00-00
Person To Contact:
--------------------------------
--------------------------, ID No. ------------
----------------------------------------- Telephone Number:
-----------------
--------------------
-------------------------------------------- Refer Reply To:
CC:PSI:B01
PLR-135968-11

December 06, 2011

LEGEND

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

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

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

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

This responds to a letter dated August 16, 2011, submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue Code.

FACTS
According to the information submitted, X intended to be treated as an S corporation effective D1, but the Form 2553, Election by a Small Business Corporation, was not timely filed. Accordingly, X requests a ruling that it will be treated as an S corporation effective D1.

LAW AND ANALYSIS
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 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. Section 1362(b)(3) provides that if the 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
PLR-135968-11
2

taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if no election is made pursuant to § 1362(a), or, if made, the election is made after the date prescribed for making such an election, and the Secretary determines there was reasonable cause for the failure to timely make the election, then the Secretary may treat such election as timely made for such taxable year and effective as of the first day of that year.

X did not file a timely election to be treated as an S corporation under § 1362(a) effective D1. X has, however, established reasonable cause for not making a timely election and is entitled to relief under § 1362(b)(5).

CONCLUSION
Based solely on the facts submitted and representations made, and provided that X otherwise qualifies as a subchapter S corporation, we conclude that X will be recognized as an S corporation effective D1 if, within 120 days from the date of this letter, X submits a properly completed Form 2553, with a copy of this letter attached, to the appropriate service center.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, no opinion is expressed or implied concerning whether X otherwise qualifies as an S corporation for federal tax purposes.

This rule is directed only to the taxpayer requesting it. Section 6110(k)(3) 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 the taxpayer’s authorized representative.

Sincerely,

Faith P. Colson
Faith P. Colson
Senior Counsel
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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