SECTION 4. RELIEF FOR LATE S

CORPORATION ELECTIONS UNDER THIS REVENUE PROCEDURE

.01 Relief When Late S Election is Sole Defect.

(1) Eligibility for Relief. A corporation is eligible for relief under section 4.03 of this revenue procedure if the following requirements are met:

(a) The corporation fails to qualify as an S corporation on the first day that S corporation status was desired solely because the Form 2553 (Election by a Small Business Corporation) was not filed timely pursuant to § 1362(b)(1),

(b) The due date for the tax return (excluding extensions) for the first year the corporation intended to be an S corporation has not passed, and

(c) The corporation has reasonable cause for its failure to timely make the S corporation election.

(2) Procedural Requirements for Re- lief. Within 12 months of the original due date for the S corporation election (but in no event later than the due date for the tax return (excluding extensions) for the first year the corporation intended to be an S corporation), the corporation must file with the applicable service center a completed Form 2553, signed by an officer of the corporation authorized to sign and all persons who were shareholders at any time during the period that began on the first day of the taxable year for which the election is to be effective and ends on the day the election is made. For purposes of signing the shareholder consent, any trust that qualifies for relief under section 6 of this revenue procedure, but did not hold stock on the first day the corporation in

(a) Late S Election and Late ESBT or QSST Election. A corporation is eligible for relief under section 4.03 of this revenue procedure, and the trustee of a trust that would otherwise qualify as an ESBT or the beneficiary of a QSST is eligible to make an ESBT or QSST election, respectively, effective on the first day of the relevant corporation’s first taxable year as an S corporation under section 4.04 of this revenue procedure, if the following requirements are met:

(i) The corporation fails to qualify as an S corporation because the Form 2553 was not filed timely pursuant to § 1362(b)(1);

(ii) The trust fails to qualify as an ESBT or to be taxable as described in § 1361(d)(1)(B) (relating to a QSST and its current income beneficiary) on the first day of the related corporation’s first taxable year as an S corporation solely because a proper ESBT or QSST election, whichever is applicable, was not filed timely;

(iii) The due date for the tax return of the corporation (excluding extensions) for the first taxable year the corporation intended to be an S corporation has not passed; and

(iv) The corporation has reasonable cause for its failure to timely make the S corporation election.

(b) Late S Election and Untimely QSub Election. A parent corporation is eligible for relief under section 4.03 of this revenue procedure, and may make a QSub election with respect to a subsidiary effective on the first day of the parent corporation’s first taxable year as an S corporation under section 4.04 of this revenue procedure, if the following requirements are met:

tended S corporation status, is considered an eligible shareholder. In this situation, the corporation must also file a request for relief pursuant to section 6 of this revenue procedure and attach it to the Form 2553. The Form 2553 must state at the top of the document “FILED PURSUANT TO REV. PROC. 98–55.” Attached to the Form 2553 must be a statement explaining the reason for the failure to file a timely S corporation election.

.02 Relief for Late S Election and Auto- matic Relief for Invalid Elections and Late Elections.

(1) Eligibility for Relief.

1998–46 I.R.B. 29 November 16, 1998

(i) The parent corporation fails to qualify as an S corporation because the Form 2553 was not filed timely pursuant to § 1362(b)(1);

(ii) The subsidiary corporation fails to qualify as a QSub on the first day of the parent corporation’s first taxable year as an S corporation solely because a proper QSub election was not filed timely (after giving effect to the relief provided in section 4.03 of this revenue procedure);

(iii) The due date for the parent S corporation’s tax return (excluding extensions) for the first taxable year the parent corporation intended to be an S corporation has not passed; and

(iv) The parent corporation has reasonable cause for its failure to timely make the S corporation election.

(2) Procedural Requirements for Re- lief. Within 12 months of the original due date for the S corporation election (but in no event later than the due date for the tax return (excluding extensions) for the first year the corporation intended to be an S corporation), the corporation must file with the applicable service center a completed Form 2553, signed by an officer of the corporation authorized to sign and all persons who were shareholders at any time during the period that began on the first day of the taxable year for which the election is to be effective and ends on the day the election is made. Accompanying the Form 2553 must be all applicable ESBT, QSST, or QSub elections, completed in accordance with the proper procedure for the election as provided in regulation, revenue procedure, or notice. All of the above elections must state at the top of the document “FILED PURSUANT TO REV. PROC. 98–55.” Attached to the Form 2553 must be a statement explaining the reason for the failure to file a timely S corporation election.

.03 Relief for Late S Corporation Elec- tion. Upon receipt of a completed application requesting relief under section 4.01 or 4.02 of this revenue procedure, the Service will determine whether the requirements for granting an additional time to file an S corporation election have been satisfied and will notify the corporation of the result of this determination.

.04 Automatic Relief for Late ESBT, QSST, and QSub Elections. If relief for a late S corporation election is granted pursuant to section 4.03 of this revenue pro

cedure, any request for relief submitted pursuant to the terms of section 4.02 of this revenue procedure will be automatically approved by the Service.

.05 Automatic Relief for Late S Corpo- ration Elections Provided in Other Docu- ments. Certain corporations may be eligible for automatic late S corporation election relief pursuant to Rev. Proc. 97–48.