Corporation received 120 days to file a late S election

Plain-English summary

A corporation's shareholders intended the company to be an S corporation from a specified effective date, but the company inadvertently failed to file Form 2553 on time. Section 1362(b)(5) allows the IRS to treat a late election as timely when reasonable cause exists. Based on the submitted facts and representations, the IRS found reasonable cause for the failure. It granted 120 days to file a completed Form 2553 with the requested effective date and attach the ruling. The IRS did not decide whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: May the corporation's late Form 2553 be treated as timely under IRC § 1362(b)(5)?
• Outcome: Approved, with 120 days to file Form 2553
• Key authorities: IRC § 1362(a), § 1362(b)(1), § 1362(b)(3), and § 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202348003
Third Party Communication: None
Release Date: 12/1/2023
Date of Communication: Not Applicable
1362.00-00, 1362.01-03
Person To Contact:
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Telephone Number:
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--------------------------------------------- Refer Reply To:
CC:PSI:01
PLR-104684-23
Date:
September 01, 2023

LEGEND

X = -----------------------------------------------------------------------------------------------
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A = -----------------------------------------------------------------------------------------------
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B = -----------------------------------------------------------------------------------------------
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Date 1 = -----------------------

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

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

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

This letter responds to your letter dated February 3, 2023, 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 1. A and B, X's shareholder's, intended for X to be an S corporation effective Date 2, but X inadvertently failed to timely file a Form 2553, Election by a Small Business Corporation.
PLR-104684-23
2

LAW AND ANALYSIS

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 15th 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 2.

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 2 with the appropriate service center within 120 days from the date of this letter, 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.
PLR-104684-23
3

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.

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,

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

Enclosure:
Copy for § 6110 purposes

cc:
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