SECTION 2. BACKGROUND

Section 1361(a)(1) of the Internal Revenue Code defines an “S corporation,” with respect to any taxable year, as a small business corporation for which an S corporation election under section 1362(a) is in effect for that year.

Section 1362(a)(2) provides that an election to be an S corporation shall be valid only if all persons who are shareholders in the corporation on the day on which the election is made consent to the election.

Section 1.1362–6(b)(2)(i) of the Income Tax Regulations provides that when stock of the corporation is owned by husband and wife as community property (or the income from the stock is community property), each person having a community interest in the stock or income therefrom must consent to the election.

Section 1.1362–6(b)(3)(iii) provides that an election that is timely filed for any taxable year and that would be valid except for the failure of any shareholder to file a timely consent is not invalid if consents are filed and it is shown to the satisfaction of the service center with which the corporation files its income tax return that (1) there was reasonable cause for the failure to file the consent, (2) the request for the extension of time to file a consent is made within a reasonable time under the circumstances, and (3) the interests of the Government will not be jeopardized by treating the election as valid.