PLR 1310019: Company may make a late S corporation election

Plain-English summary

The IRS considered a company's request to be treated as an S corporation from an earlier date. The company had intended to elect S corporation status but did not timely file Form 2553. The IRS found reasonable cause for the late filing and granted relief under IRC § 1362(b)(5), provided the company filed the completed form with the appropriate service center within 120 days after the ruling letter. The ruling did not address whether the company otherwise met the requirements to be an S corporation.

Ruling snapshot

• Question: May the company make a late S corporation election effective on the requested date?
• Outcome: Approved, subject to filing Form 2553 within 120 days.
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201310019 Third Party Communication: None
Release Date: 3/8/2013 Date of Communication: Not Applicable
Index Numbers: 1362.00-00, 1362.01-00,
1362.01-03 Person To Contact:
----------------------, ID No. -----------------
------------------------------------------ Telephone Number:
---------------------------------------------------------- ---------------------
------------------------- Refer Reply To:
---------------------------------------- CC:PSI:B03
PLR-130334-12
Date:
November 07, 2012

                                                LEGEND

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

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

Date 1 = ---------------------

Date 2 = ----------------------

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

This letter responds to a letter dated February 5, 2012, and subsequent
correspondence, 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 1. Company’s shareholders
intended for Company to be treated as an S corporation as of Date 2. However, a Form
2553, Election by a Small Business Corporation, was not filed timely. Company
requests a ruling that it will be recognized as an S corporation effective Date 2.

                                       LAW AND ANALYSIS

Section 1362(a) provides that a small business corporation may elect to be an S
corporation.
PLR-130334-12 2

Section 1362(b)(1) provides that an election under § 1362(a) may be made by a small
business corporation for any taxable year 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 § 1362(a) election is made for any
taxable year, and 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. Thus, we conclude that Company is eligible for relief under
§ 1362(b)(5). Accordingly, if Company files a completed Form 2553 effective Date 2
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 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.
PLR-130334-12 3

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):

Copy of this letter
Copy for § 6110 purposes

cc: