Corporation received 120 days to file a late S election

Plain-English summary

A corporation's two shareholders intended for the company to be an S corporation from its incorporation date, but the company inadvertently failed to timely file Form 2553. The IRS found reasonable cause for the missed deadline under section 1362(b)(5). It granted the corporation 120 days to file a completed Form 2553 with the intended effective date and attach the ruling. The IRS did not decide whether the corporation otherwise qualified for S corporation status.

Ruling snapshot

• Question: Could the corporation make a late S corporation election effective from its incorporation date?
• Outcome: approved, 120 days to file Form 2553
• Key authorities: IRC § 1362(a), (b)(1), (b)(3), and (b)(5)

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202249003                                             Third Party Communication: None
 Release Date: 12/9/2022                                       Date of Communication: Not Applicable
 Index Number: 1362.01-03, 1362.00-00
                                                               Person To Contact:
 ---------------------------------                             --------------, ID No. -----------------
 ------------------------------                                Telephone Number:
 --------------------------                                    --------------------
 ------------------------------------                          Refer Reply To:
 --------------------------------                              CC:PSI:B01
                                                               PLR-105536-22
                                                               Date:
                                                               September 12, 2022


LEGEND

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 X              =
                        -
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 A              =       ---------------------------
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 B              =       ---------------------------
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 Date           =       -----------------------

 State          =       --------


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

This letter responds to your letter dated March 16, 2022, and subsequent
correspondence, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the
Internal Revenue Code (Code).

                                                    FACTS

The information submitted states that X was incorporated under the laws of State on Date.
A and B, X's shareholder's, intended for X to be an S corporation effective Date, but X
inadvertently failed to timely file a Form 2553, Election by a Small Business Corporation.

                                          LAW AND ANALYSIS
PLR-105536-22                                 2

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

Section 1362(b)(1) provides that an election under § 1362(a) may be made by a small
business corporation for any taxable year (A) at any time during the preceding taxable
year, or (B) at any time during the taxable year and on or before the 15 th day of the third
month of the taxable year.

Section 1362(b)(3) provides that if (A) a small business corporation makes an election
under § 1362(a) for any taxable year, and (B) the election is made after the 15th day of
the third month of the taxable year and on or before the 15th day of the third month of the
following taxable year, then the election is treated as made for the following taxable year.

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

                                      CONCLUSION

Based solely on the facts submitted and representations made, we conclude that X has
established reasonable cause for failing to make a timely S corporation election
effective Date. Thus, we conclude that X is eligible for relief under § 1362(b)(5).
Accordingly, provided that X makes an election to be an S corporation by filing a
completed Form 2553 effective Date with the appropriate service center within 120 days
from the date of this letter, then such election will be treated as timely made. A copy of
this letter should be attached to the Form 2553.

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 and the regulations thereunder. Specifically, no opinion is expressed or implied
concerning whether X otherwise qualifies as an S corporation for federal tax purposes.

The 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 support of the ruling request, it is subject to verification on examination.

This ruling is directed to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
PLR-105536-22                                           3


Pursuant to a power of attorney on file with this office, a copy of this letter is being sent
to X’s authorized representatives.



                                                  Sincerely,



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



Enclosure:
      Copy for § 6110 purposes




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