CORPORATION'S S STATUS RECOGNIZED.

Index Number: 1362.01-03

[1] This letter responds to a letter dated, July 15, 1999, and subsequent correspondence, submitted on behalf of X by its authorized representative, requesting a ruling under section 1362(b)(5) of the Internal Revenue Code.

[2] The information submitted states that X was incorporated on D1 of Year 1. A, B, C, and D (Shareholders) are the shareholders of X. Shareholders represent that they intended X to be an S corporation beginning Year 1, its first taxable year. The Minutes of the Organizational Actions Taken by the Incorporator and Board of Directors of X evidence this intent. Shareholders relied on X's attorney to file the appropriate documents. However, the attorney failed to file timely a Form 2553, Election by a Small Business Corporation, for X. For Year 1 X filed a Form 1120S, U.S. Income Tax Return for an S Corporation. Shareholders also filed their individual tax returns for Year 1 consistent with X being an S corporation.

[3] Section 1362(b)(5) of the Code provides that if -- (A) an election under section 1362(a) is made for any taxable year after the date prescribed by section 1362(b) 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.

[4] Based solely on the facts and the representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation for X's first taxable year. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective for its Year 1 taxable year, within 60 days following the date of this letter, then such election will be treated as timely made for X's Year 1 taxable year. A copy of this letter should be attached to the Form 2553.

[5] 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, including whether X was or is a small business corporation under section 1361(b) of the Code.

[6] 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.

[7] In accordance with the power of attorney on file with this office, a copy of this letter is being sent to X's authorized representative.

                                   Sincerely yours,