PLR 201310017: Corporation receives relief for a late S corporation election and incorrect EINs

Plain-English summary

The IRS considered a corporation that intended to elect S corporation status but did not timely file Form 2553. The corporation had also filed Forms 1120S under incorrect employer identification numbers during two periods. The IRS found reasonable cause and allowed the corporation to make the S election effective from its incorporation date if it filed Form 2553 within 120 days. It also said the corporation did not need to file amended returns solely because it had used the incorrect numbers, but future filings had to use the proper EIN. The ruling did not decide whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the corporation make a late S election effective from its incorporation date despite prior returns using incorrect EINs?
• Outcome: Approved, subject to filing Form 2553 within 120 days and using the proper EIN thereafter.
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201310017
Third Party Communication: None
Release Date: 3/8/2013
Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B02
PLR-127238-12
Date:
November 20, 2012

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

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

Year 1 = -------

Year 2 = -------

a = -----------------------

b = -----------------------

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

This responds to a letter dated June 2, 2012, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated in State on D1. A, the president and sole shareholder of X, intended for X to be an S corporation effective D1; however, a Form 2553, Election by a Small Business Corporation, was not timely filed for X. For the period from D1 through Year 1, X filed Forms 1120S, U.S. Income Tax Return for an S Corporation, under a, an incorrect employer identification number (EIN). Following Year 1 and through Year 2, X filed Forms 1120S under b, an incorrect EIN.
PLR-127238-12
2

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

Section 1362(b) provides the rule on when an S election will be effective. Generally, if an S election is made within the first two and one-half months of a corporation's taxable year, then the corporation will be treated as an S corporation for the year in which the election is made. Section 1362(b)(3) provides that if an S election is made after the first two and one-half months of a corporation’s taxable year, then the corporation will not be treated as an S corporation until the taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if (1) an election under § 1362(a) is made for any taxable year 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 (2) 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 such taxable year and § 1362(b)(3) shall not apply.

Based solely on the facts and the representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation effective D1. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective D1 within 120 days following the date of this letter, then such election will be treated as timely made for X’s taxable year beginning D1. A copy of this letter should be attached to the Form 2553. X is not required as a condition for this relief to file amended returns for Year 2 and previous taxable years because of the use of a or b, incorrect EINs, but it must file the Form 2553 and all subsequent returns using the proper EIN.

Except as specifically set forth above, no opinion is expressed or implied as to the federal income tax consequences of the transaction described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether X is, in fact, an S corporation for federal tax purposes.

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.
PLR-127238-12
3

Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

Bradford R. Poston
Senior Counsel, Branch 2
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes

cc: