PLR 1222025: IRS allows a late S corporation election

Plain-English summary

The IRS ruled that a corporation may make a late election to be treated as an S corporation effective from its formation date. The corporation's shareholders intended to make the election but failed to timely file Form 2553. The IRS found reasonable cause for the delay and gave the corporation 120 days from the ruling letter date to file the completed form. The corporation must attach the ruling letter, or an electronic-filing statement with its date and control number, to relevant returns.

Ruling snapshot

• Question: May the corporation make a late S corporation election effective from its formation 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: 201222025 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:02
------------------------------- PLR-140622-11
---------------------------------- Date:
------------------------------- February 07, 2012

                                                  LEGEND

                -------------------------------

X =
----------------------------

                ------------------

A =
------------------------------

                -------------------

B =
------------------------------

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

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

    This letter responds to a letter dated September 21, 2011 submitted on behalf of

X by X’s authorized representative and requesting relief under § 1362(b)(5) of the
Internal Revenue Code.

     The information submitted states that X incorporated on Date. X’s sole

shareholders, A and B, intended for X to be treated as an S corporation effective on
Date; however, X failed to timely file Form 2553, Election by a Small Business
Corporation. Accordingly, X requests ruling that it will be treated as an S corporation
effective Date.

PLR-140622-11 2

                                LAW & 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 S election will be effective for the taxable

year if a small business corporation makes the election during the preceding taxable
year or within the first two and one-half months of the corporation’s taxable year.
Section 1362(b)(3) provides that an S election made after the first two and one-half
months of the corporation’s taxable year will be treated as made for the following
taxable year.

    Section 1362(b)(5) authorizes the Secretary to treat an election as timely made 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 the election.

                                  CONCLUSION

    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 completed Form 2553 with the appropriate service center
effective Date within 120 days from the date of this letter, then such election will be
treated as timely made. A copy of this letter should be attached to the Form 2553 and
is enclosed for that purpose.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the 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.

   A copy of this letter must be attached to any income tax return to which it is

relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.

  The rulings contained in this letter are 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 request for rulings, it is subject to verification on
examination.

  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.

   Pursuant to the power of attorney on file with this office, a copy of this letter is

being sent to X’s authorized representative.

                                    Sincerely,



                                    Bradford R. Poston
                                    Senior Counsel, Branch 2
                                    (Passthroughs & Special Industries)

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

cc: