Corporation receives relief for a late S election

Plain-English summary

A corporation was eligible to elect S corporation treatment from its intended effective date but did not timely file Form 2553. The IRS concluded that the corporation had reasonable cause for missing the deadline under IRC § 1362(b)(5). It granted the corporation 120 days to file a completed Form 2553, after which the election would be treated as timely for the requested tax year. The ruling did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the corporation's late S election be treated as timely from its intended effective date?
• Outcome: Approved. The corporation received 120 days to file Form 2553.
• Key authorities: IRC §§ 1362(a), 1362(b)(3), 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201724006 Third Party Communication: None
Release Date: 6/16/2017 Date of Communication: Not Applicable
Index Number: 1362.01-03
Person To Contact:
--------------------------------------------- -----------------------, ID No. --------------
---------------------------- Telephone Number:
----------------- ----------------------
---------------------------------------- Refer Reply To:
CC:PSI:B01
PLR-127362-16
Date:
March 03, 2017

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

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

Date 1 = -----------------------

Date 2 = ----------------------

Dear ---------------------------

This responds to a letter dated July 21, 2016, and subsequent correspondence,
submitted on behalf of X by its authorized representative, requesting a ruling under
§ 1362(b)(5) of the Internal Revenue Code.

FACTS

The information submitted states that X was incorporated in State on Date 1. X was
eligible to elect S corporation treatment effective Date 2; however, a Form 2553,
Election by a Small Business Corporation, was not timely filed for X.

LAW AND ANALYSIS

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. Generally, 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. Section 1362(b)(3) provides that if an S election is made after the first
two and one-half months of a corporation's taxable year, then the corporation will not be

PLR-127362-16 2

treated as an S corporation until the taxable year after the year in which the S election is
made.

Section 1362(b)(5) provides that if (1) 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 (2) 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.

CONCLUSION

Based solely on the facts and the representations submitted, we conclude that X has
established reasonable cause for failing to make a timely election to be an S corporation
effective Date 2. Accordingly, provided that X makes an election to be an S corporation
by filing a completed Form 2553 with the appropriate service center effective Date 2
within 120 days following the date of this letter, then such election will be treated as
timely made for X's taxable year beginning Date 2. A copy of this letter should be
attached to the Form 2553.

Except as specifically set forth above, no opinion is expressed or implied as to the
federal income tax consequences of the transaction described above under any other
provision of the Code. Specifically, no opinion is expressed concerning whether X is, in
fact, 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.

                                  Sincerely,

                                  Joy C. Spies

                                  Joy C. Spies
                                  Senior Technician Reviewer, Branch 1
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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