PLR 201222020: IRS allows a late S corporation election

Plain-English summary

The IRS ruled that a corporation may be treated as an S corporation from a specified effective date even though it did not timely file Form 2553. The corporation established reasonable cause for the missed election. Relief is conditioned on the corporation otherwise qualifying as an S corporation and filing the completed form within 120 days after the ruling letter date. The ruling does not decide whether the corporation otherwise qualifies for S corporation status.

Ruling snapshot

• Question: May the corporation make a late S corporation election effective from the requested date?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a)(1), 1362(b)(1), 1362(b)(3), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201222020
Third Party Communication: None
Release Date: 6/1/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.00-00, 1362.01-00,
---------------------, ID No. -------------
Telephone Number:
1362.01-03
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Refer Reply To:
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CC:PSI:B03
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PLR-137911-11
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Date:
February 02, 2012

Legend

Company = ------------------------------------
---------------------------------------------------

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

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

D2 = ----------------------

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

This letter responds to a letter dated August 1, 2011, submitted on behalf of Company, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

Facts

Company was incorporated under the laws of State on D1. Company's sole shareholder intended that Company be treated as an S corporation as of D2. However, a 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 D2.

PLR-137911-11
2

Law

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 (A) at any time during the preceding taxable year, or (B) 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) 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 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 § 1362(a) 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, 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 representations made, we conclude that Company has established reasonable cause for failing to make a timely election to be an S Corporation. Provided that Company otherwise qualifies as an S corporation, we conclude that Company will be recognized as an S corporation effective D2, and thereafter, if Company files a completed Form 2553 effective D2 with the appropriate service center within 120 days following the date of this letter. A copy of this letter should be attached to Form 2553. A copy is enclosed for that purpose.

Except as expressly provided herein, we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, no opinion is expressed or implied as to whether Company is otherwise eligible to be 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.

PLR-137911-11
3

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.

Sincerely,

Tara P. Volungis
Chief, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)

Copy of this letter
Copy of this letter for § 6110 purposes

cc: