You represent “Ilicita Construction Co.” (“Client”) a Construction company with close to thirty (30) years of operating history. It was formed in Homestead, Florida in 1998 and builds medium to large residential and commercial buildings. The company started out with very limited earnings but now has a top line of $100,000,000. It has six (6) shareholders who are members of the same family, three brothers and three sisters. The Company has been filing S corporation returns Form 1120S since it’s first Form 1120S in 1999 for TYE 1998. The Company was formed as a corporation in the State of Florida on June 30, 1998 according to Sunbiz.org and the original corporate filings there.
The Company was selected for a random Audit by the IRS in the summer of 2025. The IRS agent set an information request which included a request for the original S Corporation determination letter and the originally filed Form 2553, signed by all of the shareholders.
As the CPA, with primary authority for the engagement, you ask the Vice-President of the Client to check for the records in the Company’s corporate book or elsewhere for copies of the requested information. In addition, you send request letters to the Client’s prior Law Firm and CPA firm.
Unfortunately, the original accountant, a solo practitioner at the time, passed away 10 years ago and the accounting firm dissolved. No records were available. The Client has copies of S corp returns going back Seven (7) years and generally keys records that long as required by law.
The Corporate book, unfortunately is not well documented. Your review of the book indicates that there are no minutes and shares have never been properly issued or just aren’t present in the corporate book. The transfer records have not been filled out. Copies of the SS-4 and 2553 if any are not in the corporate book. None of the Corporate officers recalls or knows where these records are or if they were originally issued.
Each of the shareholders insists that they signed and filed the Form 2553 shortly after formation. but no shareholder or prior accountant had a copy of the original s Corp filing or the approval letter from the IRS. The IRS has no record of a 2553 being filed, but they did have the information on the SS-4 filed in 1998 that expressed a desire to be treated as an S corporation. Further, Construction co has filed an S corporation return for each year of its existence starting in 1999 and each shareholder has provided their ratable share of tax attributes on Schedule E of their returns and has included the income and paid tax on the amounts so reported,
The two oldest male shareholders recently completed some estate planning transactions and each created one or more irrevocable trusts for which an ESBT election was required and made. It is thought that the filing of the ESBT election may have triggered the audit. That is unclear.
In any event, you see that one of the trusts, should have field a QSST rather than an ESBT Election. You need to advise the Client that you need to change that.
As a result of the foregoing history, you are asked to request a private letter ruling in accordance with Revenue Procedure 2013-30 - Relief for Late S Corporation Election. Requesting that the IRS retroactively approve S corporation status for the entity.
You begin to get slightly nervous about the ruling request and Pull the appropriate Ruling request information available on Rev. Proc. 2025-1. I provided this to you in Modules and Teams
Your first task is to draft the facts you will believe are required to support a positive response from the IRS on your ruling request.
Draft a Client letter requesting the facts from the Client. The facts you need are those that the Rev Proc. IRM and general S corporation filings require. Start by accessing at least two AI sources and CCH answer Connect from the library and looking up Relief for Late S corporation elections.
Use at least two AI sources to give you any help with drafting a client letter. Choose the one that in your opinion is the best source and modify the letter into a format that “you” believe expresses how you would want to communicate the requests and potential solution to your client.
Your second task is to Convert the ESBT Election to a QSST election see Treas. Reg. §1.1361-1(m) for one of the Trusts. Look this up on your preferred AI and on CCH Answer Connect. It should give you support information.