PLR 9943035: Late S corporation election accepted with timely filing

Plain-English summary

A newly formed corporation intended to elect S corporation status for its first tax year, but its president believed the incorporation attorney would file the election. The company filed an S corporation return without a timely Form 2553. The IRS found reasonable cause for the missed election and agreed to treat it as timely if the company filed a completed Form 2553 within 60 days of the letter. The ruling did not decide whether the company otherwise qualified as a small business corporation.

Ruling snapshot

• Question: Could the company obtain relief for a late S corporation election?
• Outcome: Approved if Form 2553 was filed within 60 days.
• Key authorities: IRC §§ 1361(b), 1362(b)(5).

Full text (IRS public release)

INTERNAL REVENUE SERVICE
Index No.: 1362.01-03
Number: 199943035
Release Date: 10/29/1999

CC:DOM:P&SI:2 - PLR-106950-99

August 4, 1999

X =

A =

Date 1 =

Year 1 =

Dear

This is in reply to your letter dated March 30, 1999, submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was formed on Date

1. A, as X's president, represents that it was A’s intent that X
   elect to be an S corporation effective for Year 1, X's first taxable year. This intent is evidenced in X’s board of directors consent to certain resolutions. However, a Form 2553, Election by a Small Business Corporation, was not timely filed for that year by X because A believed that the attorney incorporating X would handle the election. X filed a Form 1120S for Year 1.

   Section 1362(b)(5) of the Code 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.

   Based solely on the facts and the representations submitted,
   we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation for X's first taxable year. Accordingly, provided X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective for its Year 1 taxable year,

                          2
   

within 60 days following the date of this letter, then such

election will be treated as timely made for X’s Year 1 taxable year. A copy of this letter should be attached to the Form 2553.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code, including whether X was or is a small business corporation under § 1361(b) of the Code.

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

Sincerely yours,

J. THOMAS HINES
Senior Technician Reviewer
Branch 2
Office of the Assistant
Chief Counsel
(Passthroughs and
Special Industries)

Enclosures: 2
Copy of this letter
Copy for section 6110 purposes