Corporation received relief for a late S corporation election

Plain-English summary

A corporation intended to be treated as an S corporation from a specified tax year and filed returns consistently with that treatment. Its Form 2553 election, however, was not filed on time. The IRS found reasonable cause for the late filing and treated the election as timely for the intended year. Relief was conditioned on the corporation filing Form 2553 with the proper service center within 120 days. The IRS did not decide whether the corporation otherwise met all S corporation requirements.

Ruling snapshot

• Question: Could the corporation's late S election be treated as timely from its intended effective date?
• Outcome: Approved, conditioned on filing Form 2553 within 120 days.
• Key authorities: IRC § 1362(a), (b)(3), (b)(5)

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201743016                                             Third Party Communication: None
Release Date: 10/27/2017                                      Date of Communication: Not Applicable
Index Number: 1362.01-03
                                                              Person To Contact:
-----------------------------                                 --------------------, ID No. ------------------
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--------------------------------                              Telephone Number:
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------------------------------------                          Refer Reply To:
                                                              CC:PSI:B03
                                                              PLR-121151-17
                                                              Date:
                                                              August 01, 2017


                                                    LEGEND

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

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

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

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

A             =       ----------------------------------------------------------------------------------------------
                      ---------------------------------



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

       This letter responds to your request dated June 26, 2017, and subsequent
correspondence submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the
Internal Revenue Code (Code).

                                                    FACTS

        X was incorporated under the laws of State on Date 1. The sole shareholder of X
is A. It is represented that X intended to be an S corporation effective Date 2. Since
Date 2 X has filed tax returns consistent with S corporation treatment.

       However, X’s Form 2553, Election by a Small Business Corporation, was not
timely filed. X requests a ruling under § 1362(b)(5) that its § 1362(a) election will be
treated as timely made for its tax year that began on Date 2.
PLR-121151-17                                2




                                           LAW

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

       Section 1362(b) provides when an S corporation election will be effective.
Generally, if an S corporation election is made within the first two and one half months
of a corporation’s taxable year, then that corporation will be treated as an S corporation
beginning the year in which the election is made.

        Section 1362(b)(3) provides that if an S corporation 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 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 for making the election 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.

                                     CONCLUSIONS

        Based upon the facts submitted and representations made, we conclude that X
has established reasonable cause for not making a timely election and is eligible for
relief under § 1362(b)(5). Accordingly, X’s S corporation election will be treated as
timely made for its taxable year that began on Date 2.

      This ruling is contingent on X filing Form 2553, Election by a Small Business
Corporation, with an effective date of Date 2, with the appropriate Service Center within
120 days from the date of this ruling. A copy of this letter should be attached to the
Form 2553 filed with the Service Center.

        Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the Code. Specifically, we express or imply no opinion concerning whether X otherwise
qualifies as an S corporation for federal tax purposes.

      This rule is directed only to the taxpayer who requested it. According to
§ 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.
PLR-121151-17                                3



        This ruling contained in this letter is based upon 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 the support of the ruling request, it is subject to verification on examination.



                                      Sincerely,




                                      Bradford Poston
                                      Senior Counsel, Branch 3
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)


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