PLR 201230016: IRS grants relief for a late S corporation election

Plain-English summary

The IRS granted a corporation relief for failing to timely file Form 2553, the election to be treated as an S corporation. The corporation’s shareholders intended the election to take effect on the specified date, but the filing deadline was missed. The IRS determined that the corporation had reasonable cause and could be treated as an S corporation effective on that date, provided it otherwise qualified. The corporation was directed to file a properly completed Form 2553 within 120 days and attach a copy of the ruling.

Ruling snapshot

• Question: Could the corporation’s late S corporation election be treated as timely under IRC § 1362(b)(5)?
• Outcome: Approved, subject to the corporation otherwise qualifying as an S corporation and filing Form 2553 within 120 days.
• Key authorities: IRC §§ 1362(a), 1362(b), and 1362(b)(5); IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201230016
Third Party Communication: None
Release Date: 7/27/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03
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Telephone Number:
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Refer Reply To:
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PLR-148893-11
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Date:
April 09, 2012

Legend:

X = -----------------------------------------
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D = ------------------

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

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

This responds to the letter dated November 18, 2011, and related correspondence, submitted on behalf of X, requesting relief under § 1362(b)(5) of the Internal Revenue Code.

FACTS

X was incorporated on D under the laws of State. X’s shareholders intended that X be treated as an S corporation for federal tax purposes effective D, but the Form 2553, Election by a Small Business Corporation, 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 the rule on when an S election will be effective. 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. If the election is made after the first two and one-half months of a
PLR-148893-11
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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 an election as timely made for such taxable year and effective as of the first day of that tax year.

X did not file a timely election to be treated as an S corporation under § 1362(a) effective D. 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 an S corporation, we conclude that X will be recognized as an S corporation effective D. Within 120 days from the date of this letter, X should submit a properly completed Form 2553, with a copy of this letter attached, to the relevant 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.

This ruling is directed only to the taxpayer who requested 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 ruling will be sent to your authorized representative.

Sincerely,

Laura C. Fields
Senior Technician Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)

Copy of this letter
Copy for § 6110 purposes

cc: