IRS written determination 201548018

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: 201548018
Release Date: 11/27/2015
Index Number: 1295.02-02
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
-------------------, ID No. ----------------
Telephone Number:
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Refer Reply To:
CC:INTL:B02
PLR-132164-12
Date:
August 13, 2015
Legend
Shareholder = ---------------
TIN = ----------------
FC = ----------------------------------
Accounting Firm A = ------------------------------
Accounting Firm B = ---------------
Country 1 = ------------
State = ------------
Date 1 = --------------------------
Year 1 = ------
Year 16 = ------
Year 17 = ------
Year 18 = ------
Year 19 = ------
Dear --- --------:
This is in response to a letter dated July 12, 2012 submitted by your authorized
representative that requested the consent of the Commissioner of the Internal Revenue
Service (“Commissioner”) for Shareholder to make a retroactive qualified electing fund
(“QEF”) election under section 1295(b) of the Internal Revenue Code (the “Code”) and
Treas. Reg. §1.1295-3(f) with respect to Shareholder’s investment in FC.
The ruling contained in this letter is based upon information and representations
submitted on behalf of Shareholder by its authorized representative, and accompanied
by a penalty 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

PLR-132164-12
2
material is subject to verification on examination. The information submitted in the
request is substantially as set forth below.
FACTS
Shareholder is a corporation organized in State. FC is an entity organized under the
laws of Country 1 that is treated as a corporation for U.S. federal income tax purposes.
FC qualified as a passive foreign investment company (“PFIC”) as defined in section
1297(a) of the Code in Year 1. Shareholder acquired shares of FC on Date 1.
From Year 1 through Year 18, Shareholder’s internal tax department prepared
Shareholder’s U.S. federal income tax returns. Accounting Firm A reviewed the tax
returns for Year 1 through Year 16. Accounting Firm B reviewed the tax returns for
Year 17 and Year 18. Shareholder’s internal tax department, Accounting Firm A, and
Accounting Firm B employ experienced tax professionals and advised Shareholder on
U.S. federal income tax matters regarding Shareholder’s operations and investments,
including Shareholder’s investment in FC. Shareholder relied on its internal tax
department, Accounting Firm A, and Accounting Firm B 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 a specific tax treatment.
In Year 19, it was discovered that FC was a PFIC and Shareholder requested that
Accounting Firm B prepare a request to make a retroactive QEF election. Until that
time, Shareholder was unaware that FC was a PFIC and thus unaware of the availability
to make a QEF election with respect to FC.
Shareholder has submitted affidavits, under penalties of perjury that describe the events
that led to its failure to make a QEF election with respect to FC by the election due date,
including the roles of its internal tax department, Accounting Firm A, and Accounting
Firm B.
Shareholder has paid an amount sufficient to eliminate any prejudice to the United
States government as a consequence of its inability to file amended returns, in
accordance with a signed closing agreement between Shareholder and the
Commissioner. Further, Shareholder has agreed to file an amended return for each of
its subsequent taxable years affected by the retroactive election, if any.
Shareholderrepresents 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
Shareholder requests the consent of the Commissioner to make a retroactive QEF
election with respect to FC for Year 1 under Treas. Reg. §1.1295-3(f).

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3
LAW
Section 1295(a) provides that a PFIC will be treated as a QEF with respect to a
shareholder if (1) an election by the shareholder under section 1295(b) applies to the
PFIC for the taxable year; and (2) the PFIC complies with the requirements prescribed
by the Secretary for purposes of determining the ordinary earnings and net capital gains
of the company.
Under section 1295(b)(2), a QEF election may be made for a taxable year at any time
on or before the due date (determined with regard to extensions) for filing the return for
the taxable year. To the extent provided in regulations, the election may be made after
the due date if the shareholder failed to make an election by the due date because the
shareholder 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 company for any taxable year of the
shareholder; and
4. the shareholder satisfies the procedural requirements of Treas. Reg. §1.1295-
3(f)(4).
Treas. Reg. §1.1295-3(f)(3)(ii) provides that, if granting relief would prejudice the
interests of the U.S. government, the Commissioner may grant consent to make a
section 1295 election if the shareholder enters into a closing agreement that requires
the shareholder to pay an amount sufficient to eliminate any prejudice to the U.S.
government as a consequence of the shareholder’sinability to file amended returns for
closed taxable years.
Treas. Reg. §1.1295-3(g)(1)(i)(B) provides that, if the Commissioner grants consent to
file a retroactive QEF election, the election is due on the due date, as extended, for the
shareholder’s return for the taxable year in which consent is granted.
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:

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1. the events that led to the failure to make a QEF election by the election due
date;
2. the discovery of the failure;
3. the engagement and responsibilities of the qualified tax professional; and
4. the extent to which the shareholder relied on the professional.
Treas. Reg. §§1.1295-3(f)(4)(ii) and (iii).
CONCLUSION
Based on the information submitted and representations made with Shareholder’s ruling
request, we conclude that Shareholderhas satisfied Treas. Reg. §1.1295-3(f).
Accordingly, consent is granted to Shareholderto make a retroactive QEF election with
respect to FC for Year 1, provided that Shareholdercomplies with the rules under
Treas. Reg. §1.1295-3(g) regarding the time and manner for making the retroactive
QEF election.
Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.
This private letter ruling is directed only to the taxpayer requesting it. Section
6110(k)(3) provides that it may not be used or cited as precedent.
In accordance with the Power of Attorney on file with this office, a copy of this letter
ruling is being sent to your authorized representative.
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.
Sincerely,
Jeffery G. Mitchell
Branch Chief, Branch 2
(International)
cc: