PLR 1346004: IRS grants late S-corporation election relief

Plain-English summary

The IRS granted relief to a corporation whose Form 2553, used to elect S-corporation status, was filed late. The corporation showed reasonable cause for missing the deadline and intended to be an S corporation as of the requested effective date. The IRS allowed the corporation 120 days from the ruling date to file a completed Form 2553 with that effective date, after which the election would be treated as timely. The ruling did not determine whether the corporation was otherwise eligible for S-corporation status.

Ruling snapshot

• Question: May the corporation receive relief for its late S-corporation election under IRC § 1362(b)(5)?
• Outcome: Approved, late-election relief granted
• Key authorities: IRC §§ 1362(a), 1362(b)(1), 1362(b)(3), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201346004 Third Party Communication: None
Release Date: 11/15/2013 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-113468-13
Date:
July 23, 2013

                                              LEGEND

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

A = -------------------------------------------------------------------------------------------------------------------------
--------------------------

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

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

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

   This letter responds to a letter dated February 6, 2013, and subsequent

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

                                                FACTS

    X was incorporated under State law on Date. X’s sole shareholder, A, intended

for X to be an S corporation as of Date. However, X’s Form 2553, Election by a Small
Business Corporation, was not filed timely.

     X requests a ruling that it will be recognized as an S corporation effective Date.

                                                 LAW

PLR-113468-13 2

  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 at any time during the preceding taxable
year, or 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 small business corporation makes an

election under § 1362(a) for any taxable year, and 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 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 the Secretary determines that there was reasonable cause for the
failure to timely make the election, then 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 in a timely
manner. Therefore, 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 with an effective date of Date, within 120 days
following 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. A
copy is enclosed for that purpose.

   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.

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

copy of this letter to X’s authorized representative.

  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-113468-13 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,

                                 /s/

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

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

cc: