IRS grants relief for a late S corporation election

Plain-English summary

The IRS considered a corporation's request for relief after its Form 2553, Election by a Small Business Corporation, was filed late. The corporation intended to elect S corporation status for a specified effective date and established reasonable cause for missing the deadline. The IRS granted relief under section 1362(b)(5), provided that the corporation otherwise qualified as a subchapter S corporation. It directed the corporation to submit the original Form 2553 and a copy of the ruling to the relevant Service Center within 120 days.

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely made?
• Outcome: Approved, late election relief granted
• 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: 201408027 Third Party Communication: None
Release Date: 2/21/2014 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
-------------------------------------- -----------------, ID No. --------------
------------------------------------------ Telephone Number:
---------------------------------- ----------------------
----------------------- Refer Reply To:
CC:PSI:B01
PLR-140648-13
Date:
November 15, 2013

Legend

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

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

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

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

   This responds to a letter dated August 21, 2013, and subsequent

correspondence, submitted on behalf of X, requesting relief under section 1362(b)(5) of
the Internal Revenue Code (the Code).

FACTS

  X was incorporated under the laws of State on Date. X’s sole shareholder

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

LAW AND ANALYSIS

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

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-140648-13 2

corporation’s taxable year, then the corporation will be treated as an S corporation for
the year in which the election is 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 determines there was reasonable cause for the failure to
timely make the election, then the Secretary may treat such election as timely made for
such taxable year and effective as of the first day of that 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
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. An original Form 2553 along with a copy of
this letter must be submitted 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 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 the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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

cc: