PLR 201220001: Late S corporation election treated as timely

Plain-English summary

The IRS granted a newly formed corporation relief for failing to timely file its S corporation election. The corporation intended for the election to be effective on its formation date but did not timely file Form 2553. The IRS found reasonable cause under IRC § 1362(b)(5) and allowed the election to be treated as timely, provided the corporation filed a complete Form 2553 with a copy of the ruling within 120 days. The ruling did not address whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: May the corporation’s late S election be treated as timely based on reasonable cause?
• Outcome: Approved
• Key authorities: IRC §§ 1361, 1362, and 6110

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201220001
Third Party Communication: None
Release Date: 5/18/2012
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
------------------------, ID No. ------------------- ----------------------------------------------- ---------------------------------------------------- --------------------------------------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:B02
PLR-100656-12
Date:
January 23, 2012

Legend

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

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

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

This responds to a letter dated December 19, 2011, and subsequent correspondence submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was formed on Date under the laws of State. X represents that X intended to be an S corporation 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. Section 1362(b)(2) provides in relevant part 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. Under § 1362(b)(3), however, if an S election is made after the first two and one-half months of a corporation’s taxable year, then that corporation will not be treated as an S corporation until the taxable year after the year in which the S election is filed.
PLR-100656-12
2

Section 1362(b)(5) provides that if: (A) an election under § 1362(a) is made for any taxable year after the date prescribed by § 1362(b) for making such election for such 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 such election, then the Secretary may treat such an election as timely made for such taxable year.

Based solely on the facts submitted and the representations made, 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 complete Form 2553 effective Date, along with a copy of this letter, with the appropriate service center within 120 days from the date of this letter, then such election will be treated as timely made for Date.

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

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.

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,

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

cc: