PLR 1324012: IRS grants relief for a late S corporation election

Plain-English summary

The IRS granted a corporation relief for failing to timely file its S corporation election. The corporation intended to be treated as an S corporation effective on the specified date, but Form 2553 was not filed on time. The IRS found reasonable cause and allowed the corporation to be recognized as an S corporation effective on that date if it submitted a properly completed Form 2553 within 120 days after the letter date. The relief was conditioned on the corporation otherwise qualifying as a Subchapter S corporation.

Ruling snapshot

• Question: Could the corporation make a late S corporation election under IRC § 1362(b)(5)?
• Outcome: Approved, subject to filing Form 2553 within 120 days and otherwise qualifying.
• Key authorities: IRC § 1362(a), (b), (b)(2), and (b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201324012 Third Party Communication: None
Release Date: 6/14/2013 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
-------------------------------------- ----------------, ID No. ------------------
------------------------------------- Telephone Number:
----------------------------- ----------------------
------------------------------- Refer Reply To:
CC:PSI:B01
PLR-152309-12
Date:
February 19, 2013

LEGEND

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

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

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

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

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

This responds to a letter dated November 28, 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. X’s sole shareholder intended to treat X as an S corporation for Federal tax
purposes effective D2, but the Form 2553, Election by a Small Business Corporation,
was not timely filed.

LAW AND ANALYSIS

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.

PLR-152309-12 2

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. 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 if, within 120 days from the date of this
letter, X submits a properly completed Form 2553, with a copy of this letter attached, to
the appropriate service center.

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 ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.
PLR-152309-12 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 Fields
                                    Senior Technician Reviewer, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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

cc: