IRS written determination 201423004

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: 201423004
Release Date: 6/6/2014
Index Number: 1295.02-02
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:INTL:B02
PLR-135245-13
Date: January 23, 2014
TY: -------
Legend
Taxpayers = -----------------------------------------------------
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Trust = ---------------------------------------------------------------------------------
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Corporation=--------------------------------------------
Accountant=-----------------------------
Attorney=-------------------------
Year 1=-------
Year 2=-------
Year 3=-------
Month 4=---------------
Dear ---------------------------------:
This is in response to a letter dated August 13, 2013, submitted by your
authorized representative, that requested the consent of the Commissioner of the
Internal Revenue Service (“Commissioner”) to make a retroactive qualified electing fund

PLR-135245-13
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(“QEF”) election under section 1295(b) of the Internal Revenue Code and Treas. Reg.
§1.1295-3(f) with respect to Corporation.
Taxpayers were shareholders of Corporation from Year1 through Year 6.
Taxpayers acquired their shares of Corporation in a series of transactions beginning in
Year 1and ending in Year 5.
Taxpayers were not aware that Corporation was a passive foreign investment
company (“PFIC”) until Month 7, and were unaware of the availability of a qualified
electing fund (“QEF”) election until Month 4. Taxpayers are not professionals and have
relied on Accountant as their tax advisor concerning all applicable U.S. tax and filing
obligations since Year 1. When Taxpayers received a notice in Year 3 from Corporation
notifying them of the likelihood that it was a PFIC, they asked Accountant if they needed
to take any action. Although Accountant asked if a QEF election had been made,
Accountant did not advise them regarding such an election. In Month 4, Taxpayers
engaged Attorney for advice regarding a QEF election.
Taxpayers have submitted affidavits, under penalties of perjury, that describe the
events that led to their failure to make a QEF election with respect to Corporation by the
election due date, including the roles of Accountant and Attorney. Taxpayers submitted
an affidavit from Accountant, describing Accountant’s engagement and responsibilities
and failure to advise Taxpayers to make a QEF election for Corporation. Taxpayers
also submitted an affidavit from Attorney explaining Attorney’s engagement by
Taxpayers and the advice provided regarding the availability of a retroactive QEF
election for Corporation.
Taxpayers represent that, as of the date of this request for ruling, the PFIC status
of Corporation 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 of the Internal Revenue
Service to make a retroactive QEF election with respect to Corporation for Year and all
subsequent years under Treas. Reg. §1.1295-3(f).
LAW AND ANALYSIS
Section 1295(a) of the Code provides that any PFIC shall be treated as a QEF
with respect to a taxpayer if (1) an election by the taxpayer under section 1295(b)
applies to such company for the taxable year and (2) the company complies with such
requirements as the Secretary may prescribe for purposes of determining the ordinary
earnings and net capital gains of such company.

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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 taxpayer 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 §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 which 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, we conclude that
Taxpayers have satisfied Treas. Reg. §1.1295-3(f). Consent is granted to Taxpayers
to make a retroactive QEF election with respect to Corporation for Year 1 and all
subsequent years under Treas. Reg. §1.1295-3(f), provided that they comply with the
rules under Treas. Reg. §1.1295-3(g) regarding the time and manner for making the
retroactive QEF election.
A copy of this ruling must be attached to any tax return to which it is relevant
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of
the Code provides that it may notbe used or cited as precedent.

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In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to your authorized representative.
Sincerely,
Jeffery G. Mitchell
Branch Chief, Branch 2
(International)