PLR 9945018: Attorney's missed Form 2553 filing receives late election relief

Plain-English summary

A company and its sole shareholder intended S corporation status from the company's incorporation date. The shareholder hired an attorney to file Form 2553, but the attorney missed the filing deadline. The IRS found reasonable cause under § 1362(b)(5) and agreed to treat the election as timely if the company filed a completed Form 2553 within 60 days of the ruling, using the intended effective date. The IRS did not decide whether the company otherwise qualified as an S corporation.

Ruling snapshot

• Question: Can the company's S election be treated as timely despite the attorney's missed filing?
• Outcome: Approved if Form 2553 is filed within 60 days.
• Key authorities: IRC § 1362(a), (b)(5).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Index Number: 1362.01-03
Washington, DC 20224

Person to Contact:
Number: 199945018
Telephone Number:
Release Date: 11/12/1999
Refer Reply To:
CC:DOM:P&SI:3 PLR-112347-99
Date:
August 11, 1999

LEGEND:

X
=

A
=

D1
=

Dear

This letter responds to your letter, dated June 29, 1999, written on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code that X's S corporation status will be effective as of the taxable year beginning D1.

FACTS

According to the information submitted, X was incorporated on D1 and it was decided that X would be an S corporation. A, the sole shareholder of X, hired an attorney to file X's Form 2553, Election by a Small Business Corporation, with an effective date of D1. The attorney, however, failed to timely file X's Form 2553.

X requests a ruling that it will be recognized as an S corporation effective for the taxable year beginning D1 under § 1362(b)(5).

LAW AND ANALYSIS

Section 1362(a) provides that a small business corporation may elect to be an S corporation.

Section 1362(b) provides when an S election will be effective. If an S election is

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made within the first two and one half months of a corporation’s taxable year, then that corporation will be treated as an S corporation beginning the year in which the election is made. If an S election is made after the first two and one half months of a corporation’s taxable year, then that corporation will not be treated as an S corporation until the taxable year after the year in which the S election is made.

Section 1362(b)(5) provides that if: (1) an election under § 1362(a) is made for any taxable year after the date prescribed by § 1362 for making the election or no § 1362(a) election is made for any taxable year, and (2) the Secretary determines that there was reasonable cause for the failure to timely make the election, then the Secretary may treat the election as timely made for such taxable year.

CONCLUSIONS

Based solely on the facts submitted and representations made, we conclude that X has established reasonable cause for not making a timely election and is eligible for relief under § 1362(b)(5). Accordingly, if X makes an election to be an S corporation by filing with the appropriate Service Center a completed Form 2553, containing an effective date of D1 for the election, within 60 days following the date of this letter, then such election will be treated as timely made. A copy of this letter should be attached to the Form 2553 filed with the Service Center. A copy is enclosed for that purpose.

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. Specifically, no opinion is expressed concerning whether X is an S corporation for federal tax purposes.

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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.

Sincerely yours,

William P. O’Shea
Chief, Branch 3
Office of the Assistant Chief
Counsel
(Passthroughs and Special
Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes