Corporation receives 120 days to file a late S election

Plain-English summary

A corporation's sole shareholder intended the company to be an S corporation from a specified date, but the company failed to file Form 2553 on time. The corporation requested relief under the statutory rule for late S elections. Based on the submitted facts and representations, the IRS found reasonable cause for the missed deadline. It granted 120 days to file Form 2553 and have the election treated as timely from the intended date. The corporation and its shareholder must file their federal income tax returns consistently with S corporation treatment.

Ruling snapshot

• Question: May the corporation's late S election be treated as timely from its intended effective date?
• Outcome: Approved, if Form 2553 is filed within 120 days and returns are consistent
• Key authorities: IRC §§ 1362(a), 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202447004 Third Party Communication: None
Release Date: 11/22/2024 Date of Communication: Not Applicable
Index Number: 1362.00-00, 1362.01-03
Person To Contact:
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----------------------------------- Refer Reply To:
CC:PSI:B03
PLR-103404-24
Date:
August 20, 2024

Legend:

X = ---------------------------------------------------------------------------------------------------
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Date1 = --------------------------

Date2 = ----------------------

A = ---------------------------------------------------------------------------------------------------
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State = -------------

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

  This letter responds to a letter dated March 7, 2024, and subsequent

correspondences, submitted on behalf of X by X’s authorized representatives,
requesting a ruling under § 1362(b)(5) of the Internal Revenue Code (Code).

                                               FACTS

   According to the information submitted, X was incorporated under the laws of

State on Date 1. A, X’s sole shareholder, intended for X to be an S corporation for
federal tax purposes effective Date 2, but X inadvertently failed to timely file a Form
2553, Election by a Small Business Corporation.
PLR-103404-24 2

                              LAW AND ANALYSIS


  Section 1362(a)(1) provides that, except as provided in § 1362(g), a small

business corporation may elect, in accordance with § 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 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) such election is made after the
15th day of the month of the taxable year and on or before the 15 th 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 (determined without regard to § 1362(b)(3)), after the date prescribed
by § 1362(b) for making the election for the taxable year or no § 1362(a) 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 the taxable year (and § 1362(b)(3) shall not apply).

                                 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 effective Date 2
by filing a completed Form 2553 with the appropriate service center within 120 days
from the date of this letter, the 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 filed with the service center.

  The rulings contained in this letter are 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 request for rulings, it is subject to verification on
examination.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.
PLR-103404-24 3

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representative.

                                                Sincerely,




                                                Richard T. Probst
                                                Senior Technician Reviewer, Branch 3
                                                Office of the Associate Chief Counsel
                                                (Passthroughs & Special Industries)

Enclosure:
Copy of this letter for § 6110 purposes

cc: ---------------------------
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