IRS grants relief for a late S corporation election

Plain-English summary

The IRS granted a corporation relief for failing to timely file Form 2553 to elect S corporation status. The corporation's sole shareholder intended the election to be effective on the specified date, but the form was not filed on time. The IRS found reasonable cause and allowed the corporation to make the election within 120 days after the letter date, provided it filed a properly completed Form 2553 and any required original or amended returns. The ruling did not express an opinion on whether the corporation otherwise qualified as an 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 and consistent returns within 120 days.
• Key authorities: IRC § 1362(a), (b), and (b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201335011 Third Party Communication: None
Release Date: 8/30/2013 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
--------------------- -----------------------, ID No. -------------------
----------------------------- ---------------------------------------------------
-------------------------------------------------- Telephone Number:
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-------------------------------- Refer Reply To:
CC:PSI:02
PLR-147704-12
Date:
April 11, 2013

                                                 LEGEND

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X = --------------------------------------------------
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A =
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Year = -------
Date = ----------------------
State = ---------

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

  This letter responds to your letter dated October 29, 2012 requesting relief under

§ 1362(b)(5) of the Internal Revenue Code regarding X’s late S corporation election.

   The information submitted states that X was incorporated in Year under the laws

of State. A, the sole shareholder of X, intended for X to be an S corporation for federal
tax purposes effective Date; however, X failed to timely file Form 2553, Election by a
Small Business Corporation.

  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.

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 beginning in the year for which the election is made.
 2

   Section 1362(b)(5) provides that if 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, then the Secretary may treat the election as timely made for
such taxable year.

    Based solely on the information submitted and representations made, we

conclude that X has established reasonable cause for failing to make a timely election
to be an S corporation effective Date 1. Accordingly, if X makes an election to be an S
corporation by filing a properly completed Form 2553 with the appropriate service center
effective Date 1 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 and is
enclosed for that purpose. In addition, this ruling is contingent on X and A filing, within
120 days following the date of this letter, any original or amended federal income tax
returns necessary to be consistent with the treatment of X as an S Corporation for each
of the tax years affected by this letter. A copy of this letter should be attached to each
return.

   Except as expressly provided herein, we neither express nor imply any opinion

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we neither express nor imply any opinion
concerning whether X is 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. In accordance with the
Power of Attorney on file with this office, a copy of this letter is being sent to your
authorized representative. The rulings contained in this letter are 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 request for rulings, it is subject to
verification on examination.

                                   Sincerely,


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

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