PLR 201217016: IRS grants relief for a late S corporation election

Plain-English summary

An incorporated company asked the IRS to treat its late Form 2553 filing as a timely election to be taxed as an S corporation. The company stated that it intended to make the election effective on a redacted date but did not timely file the form. The IRS concluded that the company had reasonable cause for the late election and allowed it to make the election effective for the applicable tax year if it filed a completed Form 2553 within 120 days of the letter. The company must attach a copy of the ruling to the filing.

Ruling snapshot

• Question: Could the company make a late S corporation election effective on the requested date?
• Outcome: Approved
• Key authorities: IRC §§ 1361(b), 1362(a), 1362(b), 1362(b)(5), and 6110.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201217016
Third Party Communication: None
Release Date: 4/27/2012
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:3
PLR-151247-11
Date: January 4, 2012

LEGEND

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

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

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

This letter responds to a letter dated December 7, 2011, written on behalf of Company requesting a ruling under § 1362(b)(5) of the Internal Revenue Code (Code).

FACTS

Company was incorporated in State on Date. Company’s sole Shareholder intended for Company to be an S corporation effective Date. However, Company’s 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 Date.

PLR-151247-11
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 at any time during the preceding taxable year, or 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 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 the representations made, we conclude that Company has established reasonable cause for failing to make a timely election to be an S corporation effective Date. Accordingly, provided that Company makes an election to be an S corporation effective Date by filing a completed Form 2553 with the appropriate service center within 120 days from the date of this letter, then such election will be treated as timely made for Company’s taxable year beginning Date. A copy of this letter should be attached to the Form 2553 filed with the service center.

Except as expressly provided herein, we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the Code, including whether Company was or is a small business corporation under § 1361(b).

In accordance with a power of attorney on file with this office, we are sending a copy of this letter to Company’s authorized representative.

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.

PLR-151247-11
3

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,

Richard T. Probst
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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