IRS grants late S corporation election relief

Plain-English summary

The IRS granted a corporation relief for failing to timely file Form 2553 to elect S corporation status. The corporation showed reasonable cause for the late election. The IRS will recognize the corporation as an S corporation from the requested effective date, provided it otherwise qualifies. The corporation must send the original Form 2553 and a copy of the ruling to the appropriate Service Center within 120 days.

Ruling snapshot

• Question: Whether the corporation could receive relief for a late S corporation election.
• Outcome: Approved, effective on the requested date.
• Key authorities: IRC §§ 1362(a), 1362(b), and 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201316012 Third Party Communication: None
Release Date: 4/19/2013 Date of Communication: Not Applicable
Index Number: 1362.00-00
Person To Contact:
----------------- ----------------------------, ID No. --------------
----------------------------------------- ----------------------------------------------------
--------------------------- Telephone Number:
----------------------------------- ----------------------
Refer Reply To:
CC:PSI:B01
PLR-137848-12
Date:
January 08, 2013

LEGEND

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

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

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

D2 = ----------------------

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

This responds to a letter dated August 30, 2012, submitted on behalf of X, requesting
relief under § 1362(b)(5) of the Internal Revenue Code.

FACTS

According to the information submitted, X was incorporated on D1 under the laws of
State. The sole shareholder of X intended that X elect to be treated as an S corporation
effective D2. However, the properly completed Form 2553, Election by a Small
Business Corporation, was not timely filed. Accordingly, X requests a ruling that it will
be treated as an S corporation effective D2.

LAW AND ANALYSIS
PLR-137848-12 2

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

Section 1362(b) provides the rule as to when an S election will be effective. Section
1362(b)(2) provides that 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 the
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 no election is made pursuant to § 1362(a), or, if
made, the election is made after the date prescribed for making such an election, and
the Secretary determines there was reasonable cause for the failure to timely make the
election, then the Secretary may treat such election as timely made for such taxable
year and effective as of the first day of that year.

X did not file a timely election to be treated as an S corporation under § 1362(a)
effective D2. X has, however, established reasonable cause for not making a timely
election and is entitled to relief under § 1362(b)(5).

CONCLUSION

Based solely on the facts submitted and representations made, and provided that X
otherwise qualifies as a subchapter S corporation, we conclude that X will be
recognized as an S corporation effective D2. An original Form 2553 along with a copy
of this letter must be forwarded to the appropriate Service Center within 120 days from
the date of this letter.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. Specifically, no opinion is expressed or implied concerning whether X
otherwise qualifies as an S corporation for federal tax purposes.

This rule is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that
it may not be used or cited as precedent.
PLR-137848-12 3

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

                                       Sincerely,

                                       Laura C. Fields
                                       Laura C. Fields
                                       Senior Technician Reviewer
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

Enclosures (2)

Copy of this letter
Copy of this letter for section 6110 purposes

cc: