PLR 1237009: 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 to elect S corporation status. Based on the submitted facts and representations, the IRS found reasonable cause for the late election. The corporation could make the election effective on the stated date by filing the completed form with the appropriate service center within 120 days after the ruling letter. The ruling did not determine whether the corporation was otherwise eligible to be an S corporation.

Ruling snapshot

• Question: Could the corporation’s late S corporation election be treated as timely made?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201237009 Third Party Communication: None
Release Date: 9/14/2012 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
--------------------------------------------------------- -----------, ID No. -----------------
-------------------------- Telephone Number:
------------------------- ---------------------
---------------------------------- Refer Reply To:
CC:PSI:3
PLR-112155-12
Date:
May 14, 2012

                                                LEGEND

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

Shareholder = ---------------------------------------------------------------------------------------------
-------------------------

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

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

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

   This letter responds to a letter dated March 6, 2012, and subsequent

correspondence, written on behalf of Company requesting a ruling under § 1362(b)(5) of
the Internal Revenue Code (Code).

                                                 FACTS

   Company incorporated in State on Date 1. Company’s Shareholder intended for

Company to be an S corporation effective Date 1. 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 1.
PLR-112155-12 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 an 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. Thus, we conclude that Company is eligible for relief under
§ 1362(b)(5). Accordingly, if Company makes an election to be an S corporation
effective Date 1 by filing a completed Form 2553 with the appropriate service center
within 120 days from the date of this letter, then such election will be treated as timely
made. A copy of this letter should be attached to the Form 2553 filed with the service
center.

   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.
PLR-112155-12 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,



                                     Mary Beth Carchia
                                     Senior Technician Reviewer, Branch 3
                                     Office of the Associate Chief Counsel
                                     (Passthroughs & Special Industries)

Enclosures (2)
A copy of this letter
A copy for § 6110 purposes