PLR 1336003: IRS permits a late S corporation election

Plain-English summary

The taxpayer intended to become an S corporation but did not timely file Form 2553. It asked the IRS to allow the election to be effective on the intended date. Based on the submitted facts and representations, the IRS found reasonable cause for the late filing and granted relief under IRC § 1362(b)(5). The election would be treated as timely if the taxpayer filed a completed Form 2553 within 120 days after the ruling date, subject to the taxpayer otherwise qualifying as an S corporation.

Ruling snapshot

• Question: May the corporation make a late S corporation election effective on its intended date?
• Outcome: Approved, with a 120-day period to file Form 2553.
• Key authorities: IRC §§ 1362 and 6110.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201336003 Third Party Communication: None
Release Date: 9/6/2013 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
------------------------------------ -----------------------, ID No. -------------------
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------------------------ Telephone Number:
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Refer Reply To:
CC:PSI:B03
PLR-110098-13
Date:
May 14, 2013

                                              LEGEND

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

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

Date = ------------------------

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

   This letter responds to a letter dated December 28, 2012, and subsequent

correspondence, submitted on behalf of X by X’s authorized representative, requesting
a ruling under § 1362(b)(5) of the Internal Revenue Code.

                                                FACTS

  X was incorporated under the laws of State on Date. X intended to be an S

corporation effective Date. However, X’s Form 2553, Election by a Small Business
Corporation, was not timely filed. X requests a ruling that it be permitted to file a late S
corporation election effective Date.

                                       LAW AND ANALYSIS

  Section 1362(a)(1) provides that, except as provided in § 1362(g), a small

business corporation may elect, in accordance with the provisions of § 1362, to be an S
corporation.

    Section 1362(b)(1) provides that an election under § 1362(a) may be made by a

small business corporation for any taxable year (A) at any time during the preceding
taxable year, or (B) at any time during the taxable year and on or before the 15th day of
the third month of the taxable year.
PLR-110098-13 2

   Section 1362(b)(3) provides that if (A) a small business corporation makes an

election under § 1362(a) for any taxable year, and (B) 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 (A) 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 (B) 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 on the facts submitted and representations made, we conclude that X has

established reasonable cause for failing to make an S corporation election. Thus, we
conclude that X is eligible for relief under § 1362(b)(5). Accordingly, if X makes an
election to be an S corporation by filing with the appropriate service center a completed
Form 2553 effective Date within 120 days following the date of this letter, the election
shall be treated as timely made. A copy of this letter should be attached to the Form
2553 filed with the service center. A copy is enclosed for that purpose.

   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, we express or imply no opinion concerning
whether X 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-110098-13 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,



                                 James A. Quinn
                                 Senior Counsel, Branch 3
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

Enclosures (2):

A copy of this letter
A copy for § 6110 purposes

cc: