PLR 201222024: IRS allows another 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 the election. The corporation established reasonable cause for the delay and otherwise must qualify as a subchapter S corporation. Relief is conditioned on filing a properly completed Form 2553 with a copy of the ruling letter within 120 days. The IRS did 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), 1362(b), 1362(b)(3), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201222024
Third Party Communication: None
Release Date: 6/1/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03
----------------------, ID No. -----------------
Telephone Number:
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Refer Reply To:
--------------------------------------------------------------- CC:PSI:B01
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PLR-139672-11
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Date:
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February 28, 2012

Legend

X = -------------------------------------------------------------------
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Date1 = --------------------------

Date2 = ----------------------

State = --------

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

This responds to a letter dated June 23, 2011, and subsequent correspondence, submitted on behalf of X by X’s authorized representative, requesting relief under
§ 1362(b)(5) of the Internal Revenue Code.

FACTS

According to the information submitted, X was incorporated on Date1 under the laws of State. X intended to be treated as an S corporation for Federal tax purposes effective Date2, but the proper election was not timely filed.

LAW AND ANALYSIS

Section 1362(a) provides that a small business corporation may elect to be an S corporation.

Section 1362(b) 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. 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 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 Date2. 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 Date2 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 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,

Faith P. Colson
Faith P. Colson
Senior Counsel, Branch 1
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: