IRS Rules That S Corporation Not Terminated By State Administrative Dissolution

The IRS has ruled (PLR 2012-37-001) that a corporation's status as an S corporation did not terminate even though the corporation was administratively dissolved under state law when the corporation failed to file a required report with the state.

The facts of the private letter ruling state that an entity organized as a corporation under state law (Corporation X) elected in Year 1 should be treated as an S corporation for U.S. federal income tax purposes. In Year 2, the state administratively dissolved Corporation X for failure to file a report as required by the state. Corporation X was unaware that its corporate status had been dissolved and continued to file U.S. federal income tax returns as an S corporation in Year 2 and Year 3. Corporation X eventually discovered that it had been administratively dissolved and upon such discovery reincorporated with the state. Thus, Corporation X was not a corporation under state law for all or part of Year 2 and Year 3, and