PLR 1338008: IRS grants relief for a late S corporation election

Plain-English summary

A corporation intended to elect S corporation status effective on its incorporation date, but the election was not timely filed. The IRS found that the corporation had reasonable cause for the late election and granted relief under IRC § 1362(b)(5). The corporation will be recognized as an S corporation if it submits a properly completed Form 2553 with a copy of the ruling to the appropriate service center within 120 days. The ruling assumed that the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the corporation receive relief for its late S corporation election?
• Outcome: Approved, subject to filing Form 2553 within 120 days and otherwise qualifying as an S corporation.
• 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: 201338008 Third Party Communication: None
Release Date: 9/20/2013 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:B01
PLR-103503-13
Date:
May 13, 2013

Legend:

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

                                                   -------------------------

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

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

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

  This responds to a letter dated December 28, 2012, submitted on behalf of X,

requesting relief under section 1362(b)(5) of the Internal Revenue Code.

                                                   Facts

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

intended that X elect to be treated as an S corporation effective Date 1. However, the
election 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-103503-13 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 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.

  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 the taxpayer’s authorized representatives.

                                    Sincerely,


                                    David R. Haglund
                                    David R. Haglund
                                    Branch Chief, 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: