LLC receives 120 days to file its late S corporation election

Plain-English summary

A state-law limited liability company had elected to be classified as an association taxable as a corporation. It also intended to elect S corporation status from a later date but failed to properly and timely file Form 2553. The company and its shareholders represented that they had consistently filed their federal returns as though the S election were effective. The IRS found reasonable cause under IRC § 1362(b)(5) and granted relief. The company had 120 days from the letter date to file a completed Form 2553 with the requested effective date and a copy of the ruling.

Ruling snapshot

• Question: May the LLC's late Form 2553 be treated as timely filed from its intended S corporation effective date?
• Outcome: Approved (120-day filing period)
• Key authorities: IRC §§ 1361(b) and 1362(a), (b)(1), and (b)(5)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202110006                                              Third Party Communication: None
Release Date: 3/12/2021                                        Date of Communication: Not Applicable
Index Number: 1362.01-03
                                                               Person To Contact:
---------------------------------------------------            -------------------, ID No. -----------------
-------------------------------------                          Telephone Number:
---------------------------                                    --------------------
----------------------------------                             Refer Reply To:
                                                               CC:PSI:03
                                                               PLR-113130-20
                                                               Date:
                                                               December 3, 2020




X                 =         --------------------------------------
--------------------------------------------------
State             =        ----------
Date 1            =        --------------------------
Date 2            =        ----------------------
Date 3            =        ----------------------


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

       This letter responds to a letter dated May 6, 2020, and subsequent
correspondence, submitted on behalf of X, requesting relief to file a late S corporation
election under § 1362(b)(5) of the Internal Revenue Code (“Code”).

                                                      FACTS

        The information submitted states that X was formed as a limited liability company
on Date 1 under the laws of State. X represents that it filed a Form 8832, Entity
Classification Election, to treat X as an association taxable as a corporation for federal
tax purposes effective for the taxable year beginning on Date 2. X represents that it
intended to elect to be treated as an S corporation for federal tax purposes beginning on
Date 3. However, X represents that it failed to properly and timely file Form 2553,
Election by a Small Business Corporation, effective for Date 3. X further represents that
it and its shareholders have filed their federal tax returns consistent with X's treatment
as an S corporation at all times since Date 3.

                                            LAW AND ANALYSIS
PLR-113130-20                            2

      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 of the
third month of the 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 the representations made, we conclude
that X has established reasonable cause for failing to make a timely election to be an S
corporation effective Date 3. Accordingly, provided that X makes an election to be an S
corporation by filing a completed Form 2553 effective Date 3, along with a copy of this
letter, with the appropriate service center within 120 days from the date of this letter,
then such election will be treated as timely made effective Date 3.

       Except as expressly provided herein, we express or imply no opinion concerning
the federal income tax consequences of the facts described above under any other
provision of the Code, including whether X qualifies as a small business corporation
under § 1361(b) of the Code.

      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.

      This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
PLR-113130-20                             3


         In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to X’s authorized representatives.



                                                  Sincerely,

                                                  Associate Chief Counsel
                                                  (Passthroughs and Special Industries)



                                           By:    ______________________________
                                                  Adrienne M. Mikolashek
                                                  Chief, Branch 3
                                                  Office of Associate Chief Counsel
                                                  (Passthroughs & Special Industries)

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


cc: