Corporation receives late S election relief

Plain-English summary

A corporation's owners believed an S election had been filed before the intended effective date, but the IRS had no record of a timely Form 2553. The IRS found reasonable cause for the failure and granted relief under section 1362(b)(5). Assuming the corporation otherwise qualified for S status, it would be recognized as an S corporation from the intended date if it filed a completed Form 2553 with the appropriate service center within 120 days and attached the ruling.

Ruling snapshot

• Question: Should the corporation's late S election be treated as timely?
• Outcome: Approved; the corporation received 120 days to file Form 2553 effective on the intended date.
• Key authorities: IRC § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 201604006                                                Third Party Communication: None
Release Date: 1/22/2016                                          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-113799-15
                                                                 Date:
                                                                 August 27, 2015


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

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

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


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

       This responds to a letter dated January 30, 2015, 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 is a corporation formed under the laws of
State. The owners of X believed that, prior to D1, an election had been filed to treat X
as an S corporation for federal tax purposes. However, the Service does not have
record of Form 2553, Election by a Small Business Corporation, having been 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 has 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
PLR-113799-15                                 2

center within 120 days from the date of this letter. A copy of this letter should be
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 3
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

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