PLR 1246001: IRS grants late S corporation election relief for reasonable cause

Plain-English summary

The IRS ruled that a company had reasonable cause for failing to timely file Form 2553 to elect S corporation status. The company could file the completed form within 120 days after the ruling, using the requested effective date. If it did so, the election would be treated as timely made. The ruling did not decide whether the company otherwise qualified to be an S corporation.

Ruling snapshot

• Question: Could the company receive relief for its late S corporation election?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201246001 Third Party Communication: None
Release Date: 11/16/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1362.01-03 ------------------------, ID No. -------------------
----------------------------------------------------
Telephone Number:

                                                            ---------------------

----------------------------------------------------- Refer Reply To:
------------------- CC:PSI:B03
----------------------- PLR-103547-12
Date:
June 28, 2012

                                                    Legend

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

A = --------------------------------------------
-------------------------

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

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

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

  This letter responds to a letter dated January 6, 2012, submitted on behalf of

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

                                                    Facts

   Company was incorporated under the laws of State on D1. Company's

shareholder, A, intended that Company be treated as an S corporation as of D1.
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 D1.

                                            Law and Analysis

   Section 1362(a)(1) provides that a small business corporation may elect to be an

S corporation.
PLR-103547-12 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) a small business corporation makes an

election under § 1362(a) for any taxable year, and (B) such 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 shall be 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 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 representations made, we conclude that

Company has established reasonable cause for failing to make a timely election to be
an S Corporation. Thus, we conclude that Company is eligible for relief under
§ 1362(b)(5). Accordingly, if Company files a completed Form 2553 effective D1 with
the appropriate service center within 120 days following the date of this letter, then such
election will be treated as timely made. A copy of this letter should be attached to Form
2553. 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 Company is otherwise eligible to be an S corporation for federal tax purposes.

   This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)

of the Code 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.

  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
PLR-103547-12 3

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

cc: