IRS written determination 201423002

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: 201423002
Release Date: 6/6/2014
Index Number: 1295.02-02
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[Third Party Communication:
Date of Communication: Month DD, YYYY]
Person To Contact:
------------------, ID No. --------------
Telephone Number:
----------------------
Refer Reply To:
CC:INTL:B02
PLR-105509-12
Date:
February 11, 2014
TY: -------
Legend
Individual A = -------------------
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Individual B=-------------------------
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Accountant C=----------------------------------
FC = --------------
Country X = -----------------
Year 1 =-------
Year 2 = -------
Year 3 =-------
Dear ----------------------------:
This is in response to a letter dated January 31, 2012, submitted by your
authorized representative that requested the consent of the Commissioner of the Internal
Revenue Service (“Commissioner”) for Taxpayers to make a retroactive qualified electing
fund ("QEF") election under section 1295(b) of the Internal Revenue Code and Treas.
Reg. §1.1295-3(f) with respect to the Taxpayers’ investment in FC.
The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed

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by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.
FACTS
Individual A and Individual B (“Taxpayers”) are married and have filed a joint
federal income tax return since Year 1 and for all subsequent taxable years. Individual B
was a U.S. resident and became a U.S. citizen in Year 3. Individual B inherited one-third
of the shares of FC, a Country X corporation, upon the death of Individual B’s father, in
Year 2. FC’s principal assets consisted of a family vacation property in Country X and a
bank account that was used in connection with the payment of expenses for that
property. Accordingly, FC is a passive foreign investment company (“PFIC”) as defined
under section 1297 of the Code.

At all times since Individual B became a shareholder in FC, Taxpayers engaged
the services of Accountant C, a certified public accountant, to prepare their income tax
returns, including forms, statements, election, and other tax compliance related items.
Taxpayers made available to Accountant C all information necessary to prepare their
income tax return. Consequently, Taxpayer relied on the advice of Accountant C with
regards to complying with U.S. tax laws.
Accountant C is competent render tax advice with respect to the ownership of
shares of a foreign corporation. While Accountant C identified FC as a PFIC in Year 3,
Accountant C failed to advise Taxpayers of the tax consequences of such investment and
of the possibility of making a QEF election under section 1295(b) with respect to FC and
of the consequences of making, or failing to make, such an election.
Taxpayers have submitted affidavits, under penalties of perjury, that describe the
events that led to Taxpayers’ failure to make a QEF election with respect to FC by the
election due date, including the role of Accountant C.
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 for Year 2 under Treas. Reg. §1.1295-3(f).
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 undersection 1295(b) applies to the
PFIC for the taxable year; and (2) the PFIC complies with the requirements prescribed by

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the Secretary for purposes of determining the ordinary earnings and net capital gains of
the company.
Under section 1295(b)(2), a QEFelection 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).
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 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 Taxpayers’
ruling request, we conclude that the Taxpayers have satisfied Treas. Reg. §1.1295-3(f).
Accordingly, consent is granted to the Taxpayers to make a retroactive QEF election with
respect to FC for Year 2, provided that Taxpayers comply with the rules underTreas.
Reg. §1.1295-3(g) regarding the time and manner for making the retroactive QEF
election.

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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 ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the
Code 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 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
(Chief Counsel)