Corporation gets 120 days to file its late S corporation election

Plain-English summary

A corporation and its sole shareholder intended the company to be an S corporation from its formation date, but the company inadvertently failed to file Form 2553 on time. The corporation asked the IRS to treat the election as timely under IRC § 1362(b)(5). Based on the submitted facts and representations, the IRS found reasonable cause for the missed deadline. It granted the corporation 120 days to file Form 2553, conditioned on both the corporation and its shareholder filing federal returns consistently with S corporation treatment. The ruling did not decide whether the corporation otherwise qualified as a valid S corporation.

Ruling snapshot

• Question: May the corporation's late S corporation election be treated as timely?
• Outcome: Approved, if Form 2553 is filed within 120 days and the corporation and shareholder report consistently
• 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: 202420010
Third Party Communication: None
Release Date: 5/17/2024
Date of Communication: Not Applicable
Index Numbers: 1362.00-00, 1362.01-00,
1362.01-03
Person To Contact:
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Refer Reply To:
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CC:PSI:B03
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PLR-116547-23
Date:
February 09, 2024

X = ----------------------------------------------------------------------------------------------------
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A = -----------------------------------
State = --------------
Date = ------------------

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

This letter responds to a letter dated August 15, 2023, and subsequent correspondence, submitted on behalf of X, by its authorized representative, requesting relief under § 1362(b)(5) of the Internal Revenue Code (Code).

FACTS

Based on the information submitted, X was incorporated under the laws of State on Date. A, X‘s sole shareholder, 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.
PLR-116547-23
2

LAW

Section 1362(a)(1) provides that, except as provided in § 1362(g), a small business corporation may elect, in accordance with the provisions of § 1362, 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 3rd 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) such 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 such 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, then 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 election to be an S corporation 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, Election by a Small Business Corporation, 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. Further, this ruling is contingent on X and its shareholder, A, filing federal income tax returns consistent with the treatment of X as an S corporation. A copy of this letter should be attached to the Form 2553.

Except as specifically ruled 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 was otherwise a valid S corporation.

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-116547-23
3

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter ruling to your authorized representative.

Sincerely,

Robert D. Alinsky
Branch Chief, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure:
Copy of this letter for § 6110 purposes

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