PLR 1228003: IRS recognizes a corporation as an S corporation after a late election

Plain-English summary

A corporation intended to be treated as an S corporation beginning on a specified date but did not timely file Form 2553. The IRS found reasonable cause for the late election. Provided the corporation otherwise qualified as an S corporation and filed a completed Form 2553 within 120 days, the IRS treated the election as timely made and recognized the corporation as an S corporation from the requested effective date. The ruling expressed no opinion on the corporation's other eligibility requirements or other federal tax consequences.

Ruling snapshot

• Question: Could the corporation receive relief for its late S corporation election?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201228003 Third Party Communication: None
Release Date: 7/13/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.00-00, 1362.01-03 ---------------------, ID No. -----------------
Telephone Number:
---------------------
------------------------------------ Refer Reply To:
------------------------------- CC:PSI:B03
----------------------- PLR-103594-12
-------------------------------- Date:
March 26, 2012

                                            LEGEND

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

State = ---------

Date 1 = ---------------------------

Date 2 = ----------------------

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

    This letter responds to a letter dated January 10, 2012, submitted on behalf of

Company by its authorized representative, requesting a ruling under § 1362(b)(5) of the
Internal Revenue Code (Code).

                                              FACTS

   Company was incorporated in State on Date 1. Company intended to be an S

corporation effective Date 2. However, Company’s 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 Date 2.
PLR-103594-12 2

                              LAW AND ANALYSIS

  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 the election is 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 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, the Secretary may treat such election as timely made
for such taxable year (and § 1362(b)(3) shall not apply).

                                 CONCLUSION

    Based solely on the facts submitted and the representations made, we conclude

that Company has established reasonable cause for failing to make an S corporation
election in a timely manner. Provided that Company otherwise qualifies as an S
corporation, we conclude that Company will be recognized as an S corporation effective
Date 2, and thereafter, if Company files a completed Form 2553 effective Date 2 with
the appropriate service center within 120 days from the date of this letter. A copy of this
letter should be attached to the Form 2553 filed with the service center. 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, we express or imply no opinion concerning
whether Company is otherwise eligible to be an S corporation for Federal tax purposes.

  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.
PLR-103594-12 3

  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.

   The ruling contained in this letter is 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 ruling request, it is subject to verification on examination.

                                  Sincerely,

                                  /s/

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

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

cc: