IRS written determination 201431021

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201431021
Release Date: 8/1/2014
Index Number: 1295.02-02
----------------------------------------
---------------------------
----------------------------------------
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
-----------------------, ID No. -------------------
--------------------------------------------------
Telephone Number:
--------------------
Refer Reply To:
CC:INTL:B02
PLR-103719-13
Date:
April 21, 2014
TY:------
Legend
Taxpayer=--------------------
----------------
Taxpayer=--------------------
----------------
FC=------------------------------------------
Country A=----------
Year 1=------
Year 2=-------
Year 3=-------
Tax Firm B=----------------------------------------
Tax Firm C=-------------------------------
Tax Firm D=----------------------------------
Dear ----------------------------------------:
This is in response to a letter dated January 11, 2013, and supplemental
documentation, submitted by Taxpayers’ authorized representative, that requested the
consent of the Commissioner of the Internal Revenue Service (“Commissioner”) for

PLR-103719-13
2
Taxpayers to make a retroactive qualified electing fund ("QEF") election under section
1295(b) of the Internal Revenue Code ("Code") and Treas. Reg. §1.1295-3(f) with
respect to Taxpayers’ investment in FC.
The ruling contained in this letter is based upon information and representations
submitted on behalf of Taxpayers by their authorized representatives, and accompanied
by a penalties of perjury statement executed by an appropriate party. While this office
has not verified any of the material submitted in support of this request for ruling, such
material is subject to verification on examination. The information submitted in the
request is substantially as set forth below.
FACTS
Taxpayers are married U.S. citizens who own an interest in FC, a publicly-traded foreign
corporation incorporated in Country A that constitutes a passive foreign investment
company (PFIC) within the meaning of section 1297 of the Code. Taxpayers initially
acquired their interest in FC (both directly and indirectly) in Year 1.
From Year 1 to Year 2, Taxpayers engaged Tax Firm B for the preparation of their U.S.
tax return. Since Year 2, Taxpayers have engaged Tax Firm C for the preparation of
their U.S. tax return. Tax Firm B and Tax Firm C are qualified to provide tax advice on
international tax matters, including issues related to PFICs. Tax Firm B and Tax Firm C
advised Taxpayers with regard to U.S. federal income tax matters, including with
respect to Taxpayers’ ownership of FC. Taxpayers relied on Tax Firm B and Tax Firm
C to provide advice with respect to filing and reporting requirements in general, as well
as any elections or statements that would be necessary to elect specific tax treatment.
Neither Tax Firm B nor Tax Firm C identified FC as a PFIC and, as such, did not advise
Taxpayers regarding any potential PFIC reporting requirements or available elections.
In Year 3, another shareholder in FC contacted Taxpayers about the potential PFIC
status of FC, which led them to consult further with Tax Firm C. After discussing the
issue with their tax advisors, Taxpayers retained Tax Firm D to help them come into
compliance. Based on the determination that FC had likely been a PFIC since before
Year 1, Taxpayers requested Tax Firm D to submit a private letter ruling request on
their behalf to make a retroactive QEF election with respect to FC under Treas. Reg.
§1.1295-3(f), retroactive to Year 1.
Taxpayers have submitted an affidavit, under penalties of perjury, describing the events
that led to the failure to make the QEF election by the election due date, including the
roles of Tax Firm B and Tax Firm C. Taxpayers provided information regarding their
ownership of FC to Tax Firm B and Tax Firm C, and Tax Firm B and Tax Firm C had
access to all relevant information with respect to FC. Taxpayers represent that, in the
relevant years: (1) FC was not identified as a PFIC; and (2) Taxpayers did not receive
any advice regarding the availability of a QEF election with respect to FC. Taxpayers

PLR-103719-13
3
have submitted affidavits from Tax Firm B and Tax Firm C corroborating the
representations made by the Taxpayers with respect to the discovery of FC’s PFIC
status.
Taxpayers have paid an amount sufficient to eliminate any prejudice to the United
States government as a consequence of an inability to file amended returns, in
accordance with a closing agreement between Taxpayers and the Commissioner.
Further, Taxpayersfiled an amended return for each of their subsequent taxable years
affected by the retroactive election, if any.
Taxpayers represent that, as of the date of this request for ruling, the PFIC status of FC
has not been raised by the IRS on audit for any of the taxable years at issue.
RULING REQUESTED
Taxpayers request the consent of the Commissioner to make a retroactive QEF election
with respect to FC under Treas. Reg. §1.1295-3(f), retroactive to Year 1.
LAW
Section 1295(a) of the Code provides that a PFIC will be treated as a QEF with respect
to a taxpayer if (1) an election by the taxpayer under section 1295(b) applies to such
PFIC for the taxable year and (2) the PFIC complies with such requirements as the
Secretary may prescribe for purposes of determining the ordinary earnings and net
capital gains of such company.
Under section 1295(b)(2), a QEF election may be made for any taxable year at any time
on or before the due date (determined with regard to extensions) for filing the return for
such taxable year. To the extent provided in regulations, such an election may be made
after such due date if the taxpayer failed to make an election by the due date because
the taxpayer reasonably believed the company was not a PFIC.
Under Treas. Reg. §1.1295-3(f), a shareholder may request the consent of the
Commissioner to make a retroactive QEF election for a taxable year if:
1. the shareholder reasonably relied on a qualified tax professional, within the
meaning of Treas. Reg. §1.1295-3(f)(2);
2. granting consent will not prejudice the interests of the United States
government, as provided in Treas. Reg. §1.1295-3(f)(3);
3. the request is made before a representative of the Internal Revenue Service
raises upon audit the PFIC status of the corporation for any taxable year of
the shareholder; and
4. the shareholder satisfies the procedural requirements of Treas. Reg. §1.1295-
3(f)(4).

PLR-103719-13
4
The procedural requirements include filing a request for consent to make a retroactive
election with, and submitting a user fee to, the Office of the Associate Chief Counsel
(International). Treas. Reg. §1.1295-3(f)(4)(i). Additionally, affidavits signed under
penalties of perjury must be submitted that describe:
1. the events that led to the failure to make a QEF election by the election due
date;
2. the discovery of such failure;
3. the engagement and responsibilities of the qualified tax professional; and
4. the extent to which the shareholder relied on such professional.
Treas. Reg. §§1.1295-3(f)(4)(ii) and (iii).
CONCLUSION
Based on the information submitted and representations made with Taxpayers’ ruling
request, we conclude that Taxpayers have satisfied Treas. Reg. §1.1295-3(f).
Accordingly, consent is granted to Taxpayers to make a retroactive QEF election with
respect to FC for Year 1, provided that Taxpayers comply with the rules under Treas.
Reg. §1.1295-3(g) regarding the time and manner for making the retroactive QEF
election.
We will, accordingly, approve a closing agreement with Taxpayers with respect to those
issues affecting their tax liability on the basis set forth above. The necessary closing
agreement for Taxpayers has been prepared in triplicate and is enclosed. In pursuance
of our practice with respect to such agreements, the agreement contains a stipulation to
the effect that any change or modification of applicable statutes enacted subsequent to
the date of this agreement and made applicable to the taxable period involved will
render the agreement ineffective to the extent that it is dependent upon such statutes.
Except as specifically set forth above, no opinion is expressed or implied concerning the
U.S. federal tax consequences of the facts described above under any other provision
of the Code.
This private letter ruling is directed only to the taxpayers who requested it. Section
6110(k)(3) provides that it may not be used or cited as precedent.

PLR-103719-13
5
A copy of this letter ruling must be attached to any federal income tax return to which it
is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.
In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to Taxpayers’ authorized representative.
Sincerely,
Jeffery G. Mitchell
Branch Chief, Branch 2
Office of Associate Chief Counsel
(International)