IRS written determination 201423015

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: 201423015
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:
--------------------------, ID No. --------------
Telephone Number:
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Refer Reply To:
CC:INTL:B02
PLR-143254-13
Date:
January 30, 2014
TY:-------
Legend
Taxpayers = -------------------------------------------------
TINs = -------------------------------------
FC = --------------------------------
Country = ------------
State = --------------
Tax Preparer = ---------------------
Firm = ---------------------------
Year 1 = -------
Year 2 = -------
Year 3 = -------
Year 4= -------
Date 1 = ---------------------------
Date 2 = -------------------
Dear ----------------------------:
This is in response to a letter dated October 9, 2013, 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.

PLR-143254-13
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The ruling contained in this letter is based upon information and representations
submitted on behalf of the Taxpayers by their authorized representative, and
accompanied by penalty of perjury statements executed by Taxpayers. 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
During Year 1 and subsequent years, the Taxpayers were United States residents. In
Year 1, the Taxpayers purchased directly shares of FC, an entity organized under the
laws of Country that is treated as a corporation for Federal tax purposes. In Year 2 and
Year 4, the Taxpayers acquired additional shares of FC through an investment advisor.
The Taxpayers’ shares were sold at the end of Year 4.
The Taxpayers’ returns for the years in which the Taxpayers owned shares in FC were
prepared by Tax Preparer at Firm. Tax Preparer is a tax preparer in State that has, to
Taxpayer’s understanding, been preparing U.S. individual income tax returns for several
decades. Taxpayers provided Tax Preparer and other tax preparers working with Tax
Preparer at Firm with all relevant information and documentation necessary to prepare
the returns for Year 1 to Year 3. Taxpayers mentioned ownership of the FC shares
during discussions with tax preparers at Firm. Taxpayers did not receive any tax
documentation with respect to the FC shares from FC during Year 1 to Year 3. Tax
Preparer and other tax preparers at Firm failed to identify FC as a passive foreign
investment company (“PFIC”) within the meaning of section 1297(a). Tax Preparer
failed to advise Taxpayers of the possibility of making a QEF electionunder section
1295(b) with respect to FC and of the consequences of making, or failing to make, such
an election.
As part of a transaction, FC issued an Information Circular, dated Date 1, to all
shareholders. The Information Circular stated that FC believes it has been a PFIC for
each year of its existence. The Information Circular also included information regarding
the consequences of owning and disposing of PFIC shares and the ability to make a
retroactive QEF election. Taxpayers did not understand the implications of FC’s PFIC
status or the option to make a QEF election until it was explained to them by a fellow
investor on Date 2. Once Taxpayers became aware of FC’s PFIC status and the
implications, Taxpayers took immediate action to engage a law firm to assist with
requesting relief to make a retroactive QEF election.
Taxpayers have submitted affidavits, under penalties of perjury, that describe the events
that led to the failure to make a QEF election with respect to FC by the election due
date,including the role of Tax Preparer and Firm.

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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 1 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 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).
The procedural requirements include filing a request for consent to make a retroactive
election with, and submitting auser 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

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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 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.
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
Chief, Branch 2
(International)