PLR 1310017: 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:
---------------------------------- ----------------------, ID No. -------------
------------------------- Telephone Number:
--------------------------------------------- ---------------------
------------------------ Refer Reply To:
CC:PSI:B02
PLR-127238-12
Date:
November 20, 2012

X = -------------------------------------------------------------------------------------------------------
-------------------------

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

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: