PLR 1338012: IRS grants relief for a late S corporation election

Plain-English summary

A corporation's sole shareholder intended for the corporation to be an S corporation, but Form 2553 was not timely filed. The corporation asked the IRS to treat the election as timely made under IRC § 1362(b)(5). The IRS found that the corporation had reasonable cause for the late filing and granted relief, provided it filed a completed Form 2553 with the appropriate service center within 120 days. The ruling did not decide whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the corporation receive relief for its late S corporation election?
• Outcome: Approved, election treated as timely if Form 2553 is filed within 120 days.
• Key authorities: IRC §§ 1362(a), 1362(b), 1362(b)(1), 1362(b)(3), 1362(b)(5), and 6110.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201338012 Third Party Communication: None
Release Date: 9/20/2013 Date of Communication: Not Applicable
Index Numbers: 1362.00-00, 1362.01-00,
1362.01-03 Person To Contact:
-----------------------, ID No. -------------------
---------------- ---------------------------------------------------
-------------------------------------- Telephone Number:
------------------------------------------ ----------------------
---------------------------- Refer Reply To:
CC:PSI:B03
PLR-106405-13
Date:
June 06, 2013

                                               LEGEND

Company = ----------------------------------------------------------------------------------------------------------------

Shareholder = ----------------------------------------------------------------------------------------------------------------

State = ---------

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

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

   This letter responds to a letter dated September 19, 2012, and subsequent

correspondence, written on behalf of Company requesting a ruling under § 1362(b)(5) of
the Internal Revenue Code (Code).

                                                FACTS

   Company was incorporated under State law on Date. Company’s sole

shareholder, Shareholder, intended for Company to be an S corporation effective Date.
However, Company’s Form 2553, Election by a Small Business Corporation, was not
timely filed.

     Company requests a ruling that it will be recognized as an S corporation effective

Date.
PLR-106405-13 2

                              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.

   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 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 solely on the facts submitted and representations made, we conclude that

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

    Except as expressly provided herein, we express or imply no opinion 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 Company
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) of

the Code provides that it may not be used or cited as precedent.
PLR-106405-13 3

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter to your authorized representative.

   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,



                                 Mary Beth Carchia
                                 Acting Branch Chief, Branch 3
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

Enclosures (2)

  A copy of this letter
  A copy for § 6110 purposes