PLR 1243002: Company gets relief for a late S corporation election

Plain-English summary

The IRS granted a company relief after it failed to timely file Form 2553 to elect S corporation status. The company had been incorporated in its state and intended the election to be effective on the requested date. The IRS found that the company had reasonable cause for the late filing and allowed the election to be treated as timely made if the company filed the completed form within 120 days of the ruling. The letter did not express an opinion on whether the company otherwise qualified to be an S corporation.

Ruling snapshot

• Question: Could the company make a late S corporation election effective on the requested date?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5) and § 6110

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201243002 Third Party Communication: None
Release Date: 10/26/2012 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
---------------------------- --------------------, ID No. -------------
------------------------------- Telephone Number:
------------------------------ ---------------------
----------------------------- Refer Reply To:
CC:PSI:3
PLR-101509-12
Date:
June 27, 2012

                                                LEGEND

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

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

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

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

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

 This letter responds to a letter dated December 21, 2011, written on behalf of

Company requesting a ruling under § 1362(b)(5) of the Internal Revenue Code (Code).

                                                 FACTS

  Company was incorporated in State on Date. Company’s sole Shareholder

intended for Company to be an S corporation effective Date. 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.
PLR-101509-12 2

                              LAW AND ANALYSIS

  Section 1362(a)(1) provides that a small business corporation may elect 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 at any time during the preceding taxable
year, or 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 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 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 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.

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter to Company’s authorized representative.
PLR-101509-12 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,



                                     Stacy L. Short
                                     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