Corporation received 120 days to file late S election

Plain-English summary

A corporation's four shareholders intended S corporation treatment from a specified effective date, but the corporation inadvertently failed to timely file Form 2553. Based solely on the submitted facts and representations, the IRS found reasonable cause for the missed election and granted relief under Section 1362(b)(5). The corporation has 120 days from the ruling date to file a completed Form 2553 for the intended effective date, with a copy of the ruling attached, and the election will then be treated as timely. The IRS did not determine whether the corporation otherwise qualified as an S corporation.

Ruling snapshot

• Question: Did the corporation establish reasonable cause for failing to timely file its S corporation election?
• Outcome: approved
• Key authorities: IRC §§ 1362(a), 1362(b)(1), 1362(b)(3), 1362(b)(5)

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202415002                                            Third Party Communication: None
 Release Date: 4/12/2024                                      Date of Communication: Not Applicable
 Index Number: 1362.00-00, 1362.01-03
                                                              Person To Contact:
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 ---------------------------------------------------          Refer Reply To:
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                                                              PLR-113893-23
                                                              Date:
                                                              January 05, 2024




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

This letter responds to a letter dated May 23, 2023, and subsequent correspondence,
submitted on behalf of X by its authorized representatives, requesting a ruling under
§ 1362(b)(5) of the Internal Revenue Code (“Code”).
PLR-113893-23                                2

                                          Facts

The information submitted states that X was incorporated under the laws of State on
Date 1. A, B, C, and D, X's shareholders, 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.

                                    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.
PLR-113893-23                                           3


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.

Pursuant to the power of attorney on file with this office, we are sending a copy of this
letter to X's authorized representatives.

                                                  Sincerely,



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




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