Late S corporation election receives reasonable-cause relief

Plain-English summary

A corporation intended S corporation treatment from its formation date but did not timely file Form 2553. The IRS concluded that the corporation established reasonable cause under § 1362(b)(5). Provided it otherwise qualified for S status, it would be recognized as an S corporation from the intended date if it filed a completed retroactive Form 2553 with the appropriate service center within 120 days.

Ruling snapshot

• Question: Did the corporation establish reasonable cause for relief from its late S election?
• Outcome: Approved
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201442038 Third Party Communication: None
Release Date: 10/17/2014 Date of Communication: Not Applicable
Index Number: 1362.00-00, 1362.01-03
Person To Contact:
----------------------------- -------------------, ID No. ----------------
----------------------------------------- Telephone Number:
----------------------------- --------------------
----------------------- Refer Reply To:
CC:PSI:B02
PLR-148956-13
Date:
April 10,2014

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

D1 = -----------------------

State = ------

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

   This responds to a letter dated September 20, 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.

   The information submitted states that X was formed on D1 as a corporation

under the laws of State. X intended to elect to be treated as an S corporation for federal
tax purposes effective D1. However, Form 2553, Election by a Small Business
Corporation, was not timely filed for X.

   Section 1362(b)(5) provides that if (A) an election under § 1362(a) is made for

any taxable year after the date prescribed by § 1362(b) for making the election for the
taxable year or no § 1362(a) 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, then the Secretary may treat the election as timely made for such taxable year
and § 1362(b)(3) shall not apply.

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

X established reasonable cause for failing to timely make an election to be an S
corporation and, thus, is eligible for relief under § 1362(b)(5). Provided that X otherwise
qualifies as an S corporation, we conclude that X will be recognized as an S corporation
effective D1, if X files a completed Form 2553 effective D1 with the appropriate service
center within 120 days from the date of this letter. A copy of this letter should be
PLR-148956-13 2

attached to the election.

   Except as expressly set forth herein, no opinion is expressed or implied

concerning the federal tax consequences of the facts described above under any other
provision of the Code, including whether X 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. Pursuant to a power of
attorney on file with this office, a copy of this letter is being sent to X’s authorized
representative.

                                   Sincerely,



                                  Bradford R. Poston
                                  Senior Counsel, Branch 2
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes