Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Revoking S Corp Election

Posted by taxguru on March 25, 2009

Q:

Subject:  article on S Corp termination (converted to C Corp)

Thanks, informative.
 
2 1/2 month rule, 5 years, etc.
 
My question, if you’d be so gracious to answer…
 
It is a “formal request” to the IRS?
Just a letter??
No Form (reverse 2553 form)???
 
Thanks!

 

A:

Surprisingly, there is no official IRS form for revoking the S election.  A statement including certain info is required to be submitted to IRS.

Your own personal professional tax advisor may already have a template to use.  There are also other ones available from tax reference publishers, such as the following ones I copied and pasted here.

From Page 19-5 of TheTaxBook:   

Shareholder revocation. The S corporation election may be revoked with the consent of shareholders holding more than 50%  of the shares of stock of the corporation. A revocation made on or before the 15th day of the third month of the taxable year is effective as of the first day of the taxable year (March 15 for a calendar year corporation).

Revocation made after the 15th day of the third month of the tax year is effective for the following taxable year.

Revocation can be made for a prospective date which is on or after the date the revocation is made. [IRC §1362(d)(1)]

Corporation statement. The corporation files a statement of revocation, signed by an officer who is authorized to sign Form 1120S, with the IRS Service Center where the original election was filed.
Include the following information:
• A statement that the corporation is revoking its S corporation election under IRC Section 1362(a).
• The corporation’s name, address, and EIN.
• The number of shares of outstanding stock.
• The effective date of the revocation.

Shareholder statement. A statement signed by the shareholders, under penalty of perjury, which includes:
• The name, address, and EIN of the consenting shareholder.
• The number of shares owned by the shareholder.
• The date the shareholder acquired the stock.
• The shareholder’s tax year end.

From the CFS Tax Corresponder program:   

Statement to Revoke Sub chapter S Election (IRC Section 1362(d))

To:  Internal Revenue Service
    

Re:  [Client: Taxpayer & Spouse name(s)/Company Name]
[Client: Street address, Apt/Ste/PMB #, plus line 2 (if any)]
    [Client: City, State  Zip]
    ID: [Client: Taxpayer's SSN/Company FEIN]

The above mentioned company hereby revokes its election under IRC Section 1362(a) in accordance with IRC Code Section 1362(d).  As of  , there are shares of issued and outstanding shares of stock in [Client: Taxpayer & Spouse name(s)/Company Name].  Attached are signed consents by all shareholders holding more than one-half of the issued and outstanding stock in [Client: Taxpayer & Spouse name(s)/Company Name].

[Client: Taxpayer & Spouse name(s)/Company Name]

By: ____________________________
             (Title)

Date: _____________________

Attachment of Shareholders to Statement of Consent to Subchapter S Revocation

The undersigned shareholders in accordance with IRC Section 1362(d) hereby consent to the revocation by the [Client: Taxpayer & Spouse name(s)/Company Name], ID# [Client: Taxpayer's SSN/Company FEIN] of its election under IRC Section 1362(a).  Such revocation is effective .

By:  _____________________________________    ___________________
        Date
    
    
    ID:

By:  _____________________________________    ___________________
        Date
    
    
    ID:

By:  _____________________________________    ___________________
        Date
    
    
    ID:

At the time of this revocation, the issued and outstanding shares of the  [Client: Taxpayer & Spouse name(s)/Company Name] are held as follows:

       
       
       

As I have mentioned on several occasions, before you take the step of revoking the S election and subjecting your corp to the limitations that entails (12/31 year end, etc), you should work with your own professional tax advisor to see if setting up a new C corp in addition to the existing S corp would be a better plan.

I hope this helps.  Good luck,

Kerry Kerstetter

 

Follow-Up:

Really cool of u.  Actually its a smllc to c corp.  Form 8832.  And I am a tax advisor.  Pleasure to make your acquintance!

 

 

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One Response to “Revoking S Corp Election”

  1. Thank you so much. The letter worked beautifully and the information was quite complete and up to date for 2012!

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