Corporation receives relief for late S election

Plain-English summary

A corporation intended to be an S corporation from its formation date but did not timely file Form 2553. The IRS found reasonable cause for the missed deadline based on the corporation's facts and representations. It agreed to treat the election as timely if the corporation filed a completed Form 2553, effective on the intended date, with a copy of the ruling within 120 days. The IRS did not decide whether the corporation otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the corporation's late S corporation election be treated as timely?
• Outcome: Approved, conditioned on filing Form 2553 and the ruling within 120 days
• Key authorities: IRC §§ 1361(b) and 1362(a), (b)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201502004 Third Party Communication: None
Release Date: 1/9/2015 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
----------------------------------- -----------------------, ID No. ----------------
-------------------------------------- Telephone Number:
---------------------------- --------------------
------------------------- Refer Reply To:
CC:PSI:B03
PLR-122064-14
Date:
August 14, 2014

Legend

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

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

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

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

This responds to a letter dated May 29, 2014, submitted on behalf of X, requesting relief
under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was formed on Date under the laws of State. X
represents that X intended to be an S corporation effective Date. However, a Form
2553, Election by a Small Business Corporation, was not timely filed for X.

Section 1362(a) provides that a small business corporation may elect to be an S
corporation.

Section 1362(b) provides the rule on when an S election will be effective. Section
1362(b)(2) provides in relevant part that if an S election is made within the first two and
one-half months of a corporation’s taxable year, then the corporation will be treated as
an S corporation for the year in which the election is made. Under § 1362(b)(3),
however, if an S election is made after the first two and one-half months of a
corporation’s taxable year, then that corporation will not be treated as an S corporation
until the taxable year after the year in which the S election is filed.
PLR-122064-14 2

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 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 such election,
then the Secretary may treat such an election as timely made for such taxable year.

Based solely on the facts submitted and the representations made, we conclude that X
has established reasonable cause for failing to make a timely election to be an S
corporation effective Date. Accordingly, provided that X makes an election to be an S
corporation by filing a completed Form 2553 effective Date, along with a copy of this
letter, with the appropriate service center within 120 days from the date of this letter,
then such election will be treated as timely made for Date.

Except as expressly provided herein, no opinion is expressed or implied concerning the
federal income tax consequences of the facts described above under any other
provision of the Code, including whether X was or is a small business corporation under
§ 1361(b) of the Code.

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.

In accordance with the power of attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

The ruling contained in this letter is based on 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,



                                    Holly A. Porter
                                    Branch Chief, Branch 3
                                    Office of Associate Chief Counsel
                                    (Passthroughs & Special Industries)

Enclosures (2):
Copy of the letter
Copy for § 6110 purposes

cc: