PLR 1337002: Corporation receives relief for a late S election

Plain-English summary

A newly incorporated company intended to elect S corporation status effective on its incorporation date but did not timely file Form 2553. The IRS found that the company had reasonable cause for the late filing and granted relief under section 1362(b)(5). If the company otherwise qualified as an S corporation, it would be recognized as an S corporation effective on the requested date. The company had 120 days from the ruling date to send the original Form 2553 and a copy of the ruling to the relevant IRS service center.

Ruling snapshot

• Question: May the corporation's late Form 2553 be treated as timely for the requested effective date?
• Outcome: Approved, subject to the corporation otherwise qualifying as a subchapter S corporation.
• 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: 201337002 Third Party Communication: None
Release Date: 9/13/2013 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
------------------------------------------------- ----------------------, ID No. --------------
--------------------------------------- Telephone Number:
----------------- ----------------------
--------------------------- Refer Reply To:
CC:PSI:B01
PLR-104301-13
Date:
May 09, 2013

Legend:

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

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

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

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

   This letter is in response to your request, on behalf of X, dated December 21,

2012, for a written determination granting relief under section 1362(b)(5) of the Internal
Revenue Code.

                                                  Facts

  X was incorporated under the laws of State on Date 1. The shareholder of X

intended X elect to be treated as an S corporation effective Date 1. However, Form
2553, Election by a Small Business Corporation, electing to be treated as an S
corporation, effective Date 1, was not timely filed.

                                          Law and Analysis

    Section 1362(a) of the Code provides that a small business corporation can elect

to be treated as an S corporation.

    Section 1362(b) of the Code provides guidance on when the S election becomes

effective. If an S election is made within the first two and one-half months of a
PLR-104301-13 2

corporation’s taxable year, then that corporation will be treated as an S corporation for
the year in which the election was made. If the corporation makes an election after the
first two and one-half months of a corporation’s taxable year, then the corporation will
generally not be treated as an S corporation until the following taxable year.

    Section 1362(b)(5) of the Code provides that if no election is made pursuant to

section 1362(a), or if the election is made after the date prescribed for making such an
election, and the Secretary determined reasonable cause existed for the failure to timely
make the election, then the Secretary can treat such an election as being timely made
for that taxable year and effective as of the first day of that taxable year.

   X did not file a timely election to be treated as an S corporation under section

1362(a). X has, however, established reasonable cause for not making a timely S
election. Therefore, X is entitled to relief under section 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 Date 1. An original Form 2553 along with a
copy of this letter must be forwarded to the relevant 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.

  This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.

                                  Sincerely,


                                  David R. Haglund
                                  David R. Haglund
                                  Branch Chief, Branch 1
                                  Office of Chief Counsel
                                  (Passthroughs & Special Industries)

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