Late S corporation election was treated as timely

Plain-English summary

A corporation intended to be treated as an S corporation from a specified date but did not timely file Form 2553. The IRS found reasonable cause for the late election and granted relief under section 1362(b)(5). The election will be treated as effective on the intended date if the corporation files Form 2553 within 120 days. The corporation and its owner must also file all required returns for open years consistently with S corporation treatment within that period.

Ruling snapshot

• Question: Could the corporation's late Form 2553 be treated as a timely S corporation election?
• Outcome: approved
• Key authorities: IRC §§ 1362(a), 1362(b)(1), 1362(b)(3), and 1362(b)(5)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202351002                                              Third Party Communication: None
Release Date: 12/22/2023                                       Date of Communication: Not Applicable
Index Number: 1362.00-00
                                                               Person To Contact:
--------------------------                                     ---------------------, ID No. -----------------
-------------------------                                      Telephone Number:
------------------------------------                           ---------------------
------------------------------------                           Refer Reply To:
                                                               CC:PSI:B03
                                                               PLR-105635-23
                                                               Date:
                                                               September 15, 2023




Legend

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


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

       This letter responds to a letter dated March 3, 2023, and subsequent
correspondence, submitted on behalf of X by its authorized representatives, requesting
relief under § 1362(b)(5) of the Internal Revenue Code (Code) to treat its S corporation
election as timely made.

                                                    FACTS

      The information submitted states that X was formed as a corporation under the
laws of State. X represents that it intended to be treated as an S corporation effective
Date. However, X did not timely file Form 2553, Election by a Small Business
Corporation.

                                          LAW AND ANALYSIS

     Section 1362(a) 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 15th day of
the third month of the taxable year.

PLR-105635-23                                 2


      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 (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 the election, then the Secretary may treat such
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
and is eligible for relief under § 1362(b)(5). Accordingly, X's S corporation election will
be treated as timely made effective Date.

       This ruling is contingent on X filing Form 2553 with an effective date of Date with
the appropriate service center within 120 days from the date of this letter. A copy of this
letter should be attached to the Form 2553 filed with the service center.

       Further, this ruling is contingent on X and its owner filing within 120 days from the
date of this letter all required returns for all open years consistent with the requested
relief. A copy of this letter should be attached to any such returns.

      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.

     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 a Power of Attorney on file with this office, we are sending a
copy of this letter to your authorized representatives.

PLR-105635-23                                             3

      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 request for a ruling, it is subject to verification on examination.

                                                  Sincerely,




                                                  Richard T. Probst
                                                  Senior Technical Reviewer, Branch 3
                                                  (Passthroughs & Special Industries)




Enclosure
     Copy of this letter for § 6110(k)(3) purposes



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