PLR 1341016: IRS grants relief for a late S corporation election

Plain-English summary

The IRS granted a corporation relief for failing to file Form 2553 on time to elect S corporation status. The corporation was incorporated under state law, and its sole shareholder intended the S election to take effect on a specified date. The IRS found reasonable cause for the late filing under section 1362(b)(5). The corporation must file a completed Form 2553 with the appropriate service center within 120 days after the ruling date, and the election will then be treated as timely. The ruling did not address whether the corporation otherwise qualifies as an S corporation.

Ruling snapshot

• Question: Can the corporation's late S corporation election be treated as timely under section 1362(b)(5)?
• Outcome: Approved
• Key authorities: IRC §§ 1362(a)(1), 1362(b)(1), 1362(b)(5), and 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201341016 Third Party Communication: None
Release Date: 10/11/2013 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:B03
PLR-104450-13
Date: June 25, 2013

                                                       Legend

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

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

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

a = ----------------------------

b = -------------------------

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

   This letter responds to a letter dated January 16, 2013, and subsequent

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

                                                       Facts

  X was incorporated on a under State law. X’s sole shareholder, Shareholder,

intended for X to be an S corporation effective b. However, a Form 2553, Election by a
Small Business Corporation, was not timely filed. Thus, X requests a ruling that it will be
recognized as an S corporation effective b.
PLR-104450-13 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)(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 such election for such taxable year or no such 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 such an 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 a timely 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 b, 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.

   Except as expressly provided herein, we express or imply no opinion concerning

the federal 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 who requested it. Section 6110(k)(3)

of the Code provides that it may not be used or cited as precedent.
PLR-104450-13 3

    Under a power of attorney on file with this office, we are sending a copy of this

letter to X’s authorized representative.

                                   Sincerely,

                                   /s/
                                   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