PLR 1222034: IRS allows a late S corporation election for reasonable cause

Plain-English summary

The IRS ruled that a corporation could make a late election to be treated as an S corporation because it established reasonable cause for missing the filing deadline. The corporation intended the election to be effective on a redacted date but did not timely file Form 2553. The IRS will treat the election as timely made for that tax year if the corporation files a completed Form 2553 with the appropriate service center within 120 days after the letter date. The corporation must attach a copy of the ruling to Form 2553. The ruling expressed no opinion on other federal tax consequences, including whether the corporation qualifies as a small business corporation.

Ruling snapshot

• Question: May the corporation's late S corporation election be treated as timely under IRC § 1362(b)(5)?
• 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: 201222034 Third Party Communication: None
Release Date: 6/1/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03 ----------------------------, ID No. ---------------
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Telephone Number:

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-------------------------------------------- Refer Reply To:
-------------------------- CC:PSI:02
---------------------- PLR-152760-11
Date:
February 22, 2012

Legend
X = ------------------------------------------------------------------------------------------------------
------------------------
State = --------------------
D1 = -----------------------

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

    This responds to a letter dated December 16, 2011, and subsequent

correspondence submitted on behalf of X by X’s authorized representative, requesting a
ruling under § 1362(b)(5) of the Internal Revenue Code.

   The information submitted states that X was formed in State on D1. X’s sole

shareholder intended for X to be an S corporation effective D1. However, no Form
2553, Election by a Small Business Corporation, was timely filed for X. Accordingly, X
requests a ruling that it will be treated as an S corporation effective D1.

   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) 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 section
1362(b)(3), an S election made after the first two and one-half months of a corporation’s
taxable year, results in the corporation not being treated as an S corporation until the
taxable year following the year in which the S election is filed.

    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 the election for the
taxable year or no § 1362(a) election is made for any taxable year, and (B) the

PLR-152760-11 2

Secretary determines that there was reasonable cause for the failure to timely make the
election, then the Secretary may treat the election as timely made for such taxable year
and § 1362(b)(3) shall not apply.

    X did not timely file an election under § 1362(a) to be treated as an S corporation

for X’s taxable year beginning D1. Based solely on the facts and the representations
submitted, we conclude that X established reasonable cause for failing to make a timely
election to be an S corporation effective D1. Accordingly, provided that X makes an
election to be an S corporation by filing a completed Form 2553 with the appropriate
service center effective D1 within 120 days following the date of this letter, then such
election will be treated as timely made for X’s taxable year beginning D1. A copy of this
letter should be attached to the Form 2553.

   Except as expressly set forth above, no opinion is expressed or implied

concerning the federal 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).

                                  Sincerely,



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

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

cc: