IRS grants relief for a late S corporation election

Plain-English summary

The IRS granted a corporation 120 days to file Form 2553 and make a late election to be treated as an S corporation. The corporation had intended the election to take effect on a specified date, but the form was not timely filed. The IRS found reasonable cause for the delay and said the election would be treated as timely if the completed form was filed with the appropriate service center within 120 days of the letter.

Ruling snapshot

• Question: Whether the corporation could obtain relief for a late election to be treated as an S corporation under IRC § 1362(b)(5).
• Outcome: Approved.
• Key authorities: IRC § 1362(b)(5); 26 U.S.C. § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201234019 Third Party Communication: None
Release Date: 8/24/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03 ----------------------, ID No. -------------
Telephone Number:
--------------------
------------------------------- Refer Reply To:
-------------------------------------- CC:PSI:B02
------------------------------------ PLR-148768-11
------------------------------ Date:
May 07, 2012

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

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

D1 = --------------------

D2 = ----------------------

Dear -------------

This responds to a letter dated October 31, 2011, submitted on behalf of X, requesting a
ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated in State on D1. It was
intended that X elect S corporation treatment effective D2; however, a Form 2553,
Election by a Small Business Corporation, was not timely filed for X.

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. Generally, 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 an S 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 (1) 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 (2) the
PLR-148768-11 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.
Based solely on the facts and the representations submitted, we conclude that X has
established reasonable cause for failing to make a timely election to be an S corporation
effective D2. Accordingly, provided that X makes an election to be an S corporation by
filing a completed Form 2553 with the appropriate service center effective D2 within 120
days following the date of this letter, then such election will be treated as timely made
for X's taxable year beginning D2. A copy of this letter should be attached to the Form
2553.

Except as specifically set forth above, no opinion is expressed or implied as to the
federal income tax consequences of the transaction described above under any other
provision of the Code. Specifically, no opinion is expressed concerning whether X is, in
fact, 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.

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,



                                    Melissa C. Liquerman
                                    Chief, Branch 2
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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

cc: