PLR 201219014: Late S corporation election may be effective as of the intended date

Plain-English summary

The IRS granted relief to a small business corporation whose Form 2553, Election by a Small Business Corporation, was filed late. The corporation intended to be treated as an S corporation from a specified date and established reasonable cause for missing the filing deadline. The IRS agreed to recognize the corporation as an S corporation effective on that date, provided it otherwise qualified under the S corporation rules. The corporation had to file a properly completed Form 2553 with a copy of the ruling within 120 days.

Ruling snapshot

• Question: May the corporation's late S corporation election be treated as timely effective on the intended date?
• Outcome: Approved, subject to filing the required Form 2553
• Key authorities: IRC § 1362(b)(5); Form 2553

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Third Party Communication: None
Number: 201219014
Date of Communication: Not Applicable
Release Date: 5/11/2012
Person To Contact:
--------------------, ID No. -----------------
Index Number: 1362.00-00, 1362.01-03
Telephone Number:
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Refer Reply To:
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CC:PSI:B01
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PLR-149052-11
Date:
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January 19, 2012

LEGEND

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

d1 = ------------------------

d2 = ------------------------

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

This letter responds to a letter dated November 11, 2011, written on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

According to the information submitted, X was formed under State law on d1. X’s shareholder intended for X to be an S corporation as of d2. However, X’s Form 2553, Election by a Small Business Corporation, was not timely filed.

X requests a ruling that it will be recognized as an S corporation effective d2.
PLR-149052-11
2

LAW AND ANALYSIS

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 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) a small business corporation makes an election under § 1362(a) for any taxable year, and (B) such 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 such election is made for any taxable year, and (B) the Secretary determines that there was reasonable cause for the failure to timely make the election, the Secretary may treat the election as timely made for the taxable year (and § 1362(b)(3) shall not apply).

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 d2. Within 120 days from the date of this letter, X must submit a properly completed Form 2553, with a copy of this letter attached, to the appropriate service center.

Except as expressly provided herein, we express or imply no opinion concerning the 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 otherwise qualifies as an S corporation for federal tax purposes.
PLR-149052-11
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In accordance with the power of attorney on file with this office, a copy of this letter is being sent to X’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.

Sincerely,

Laura C. Fields
Laura C. Fields
Senior Tech. Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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