PLR 201238006: IRS grants a late S corporation election

Plain-English summary

The corporation intended to be treated as an S corporation but did not timely file Form 2553. It asked the IRS to recognize the S election from the intended effective date. The IRS found reasonable cause for the late filing and granted 120 days to file Form 2553. The relief was conditioned on the corporation otherwise qualifying as an S corporation and making the election effective on the specified date. The ruling is a straightforward example of late-election relief under § 1362(b)(5).

Ruling snapshot

• Question: Can a corporation make a late Form 2553 election effective as of its intended date?
• Outcome: Approved, subject to qualification and filing conditions.
• Key authorities: IRC § 1362.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201238006
Third Party Communication: None
Release Date: 9/21/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.00-00, 1362.01-00,
----------------------, ID No. -----------------
Telephone Number:
1362.01-03
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Refer Reply To:
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CC:PSI:B03
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PLR-103567-12
------------------------------------------- Date:
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June 07, 2012

LEGEND

Company = -------------------------------------------------------------------------------------------------
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State = --------

Date = -------------------

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

This letter responds to a letter dated January 17, 2012, submitted on behalf of Company, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

FACTS

Company incorporated under the laws of State on Date. Company intended that it be treated as an S corporation as of Date. However, a 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.

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

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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 § 1362(a) 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 the election as timely made for the taxable year (and § 1362(b)(3) shall not apply).

CONCLUSION

Based solely on the facts submitted and representations made, we conclude that Company has established reasonable cause for failing to make a timely election to be an S corporation. Provided that Company otherwise qualifies as an S corporation, we conclude that Company will be recognized as an S corporation effective Date, and thereafter, if Company files a completed Form 2553 effective Date with the appropriate service center within 120 days following the date of this letter. A copy of this letter should be attached to Form 2553. A copy is enclosed for that purpose.

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. Specifically, we express or imply no opinion as to whether Company is otherwise eligible to be an S corporation for federal tax purposes.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter to your authorized representative.
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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,

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

Enclosures (2)

A copy of this letter
A copy of this letter for § 6110 purposes

cc: