PLR 201236018: Late S corporation election treated as timely

Plain-English summary

A corporation's sole shareholder intended to elect S corporation status effective on a specified date, but Form 2553 was not filed on time. The corporation asked the IRS to treat the election as timely under IRC § 1362(b)(5). The IRS found reasonable cause for the late filing and granted relief, provided the corporation files the completed form with the appropriate service center within 120 days of the letter. The ruling does not address whether the corporation otherwise qualifies to be an S corporation.

Ruling snapshot

• Question: May the corporation's late S corporation election be treated as timely effective on the specified date?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201236018
Third Party Communication: None
Release Date: 9/7/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03
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Telephone Number:
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CC:PSI:3
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PLR-119570-12
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Date:
June 04, 2012

LEGEND

X = ---------------------------------------------------------------------------------------------
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State = -------------

Shareholder = ---------------------------------------------------------------------------------------------
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D1 = ----------------------

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

This letter responds to a letter dated March 15, 2012, and subsequent correspondence, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

X was incorporated under State law on D1. X's sole shareholder, Shareholder, intended for X to be an S corporation effective D1. However, a Form 2553, Election by a Small Business Corporation, was not filed timely. X requests a ruling that it will be recognized as an S corporation effective D1.

LAW AND ANALYSIS

Section 1362(a)(1) provides that a small business corporation may elect to be an S corporation.
PLR-119570-12
2

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 small business corporation makes an election under § 1362(a) for any taxable year, and 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 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 § 1362(a) election is made for any taxable year, and the 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 the taxable year (and § 1362(b)(3) shall not apply).

CONCLUSION

Based on the facts submitted and representations made, we conclude that X has established reasonable cause for failing to timely make an S corporation election. Thus, we conclude that X is eligible for relief under § 1362(b)(5). Accordingly, if X makes an election to be an S corporation effective D1 by filing a completed Form 2553 with the appropriate service center within one hundred twenty (120) days following the date of this letter, then such election shall be treated as timely made. 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 X is otherwise eligible to be an S corporation for federal tax purposes.

We direct this ruling only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
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We based the ruling contained in this letter upon information and representations the taxpayer submitted, which was 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,

Stacy L. Short
Senior Technician Advisor, Branch 3
Office of the Associate Chief Counsel
Passthroughs and Special Industries

Enclosures (2):

Copy of this letter
Copy for § 6110 purposes

cc: