IRS written determination 201429008

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: 201429008
Release Date: 7/18/2014
Index Number: 1362.04-00
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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:PSI:B03
PLR-140643-13
Date: April 1, 2014
X=------------------------------------
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Trust=------------------------------------------------------------------
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State=---------------
D1=---------------------
D2=------------------
Dear --------------------:
This letter responds to a letter dated September 12, 2013, and subsequent
correspondence, submitted on behalf of X requesting a ruling under § 1362(f) of the
Internal Revenue Code (Code).
FACTS
X was incorporated on D1 under the laws of Stateand elected to be treated as
an S corporation on D1. X’s election was terminated on D2, when stock in X was
transferred to Trust, which failed to make an electing small business trust (“ESBT”)
election. X represents that the termination was not motivated by tax avoidance or
retroactive tax planning. X further represents that Trustwas qualified to be an ESBT,
within the meaning of § 1361(e). X and its shareholders have agreed to make any
adjustments that the Commissioner may require, consistent with the treatment of X as
an S corporation.

PLR-140643-13
2
LAW AND ANALYSIS
Section 1361(a) provides that the term "S corporation" means, with respect to
any taxable year, a small business corporation for which an election under § 1362(a) is
in effect for such year.
Section 1361(b)(1) defines a "small business corporation" as a domestic
corporation which is not an ineligible corporation and which does not (A) have more
than 100 shareholders, (B) have as a shareholder a person (other than an estate, a
trust described in § 1361(c)(2), or an organization described in § 1361(c)(6)) who is not
an individual, (C) have a nonresident alien as a shareholder, and (D) have more than 1
class of stock.
Section 1361(c)(2)(A)(v) provides that for purposes of § 1361(b)(1)(B), an ESBT
may be a shareholder.
Section 1361(e)(1)(A) provides that for purposes of § 1361, except as provided in
§ 1361(e)(1)(B), the term “electing small business trust” means any trust if (i) such trust
does not have as a beneficiary any person other than (I) an individual, (II) an estate, (III)
an organization described in § 170(c)(2), (3), (4), or (5), or (IV) an organization
described in § 170(c)(1) which holds a contingent interest in such trust and is not a
potential current beneficiary, (ii) no interest in such trust was acquired by purchase, and
(iii) an election under § 1361(e) applies to such trust. Section 1361(e)(3) provides that
an election under § 1361(e) shall be made by the trustee. Any such election shall apply
to the taxable year of the trust for which made and all subsequent taxable years of such
trust unless revoked with the consent of the Secretary.
Section 1362(f) provides that if (1) an election under § 1362(a) by any
corporation (A) was not effective for the taxable year for which made (determined
without regard to § 1362(b)(2)) by reason of a failure to meet the requirements of
§ 1361(b) or toobtain shareholder consents or (B) was terminated under § 1362(d)(2)
or (3), (2) the Secretary determines that the circumstances resulting in the
ineffectiveness or termination were inadvertent, (3) no later than a reasonable period of
time after discovery of the circumstances resulting in the ineffectiveness or termination,
steps were taken (A) so that the corporation is a small business corporation or (B) to
acquire the shareholder consents, and (4) the corporation and each person who was a
shareholder of the corporation at any time during the period specified pursuant to
§ 1362(f), agrees to make such adjustments (consistent with the treatment of the
corporation as an S corporation) as may be required by the Secretary with respect to
such period, then, notwithstanding the circumstances resulting in the ineffectiveness or
termination, the corporation will be treated as an S corporation during the period
specified by the Secretary.

PLR-140643-13
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CONCLUSION
Based solely on the facts submitted and the representations made, we conclude
that the termination of X’s S corporation election on D2 was inadvertent within the
meaning of § 1362(f). Pursuant to the provisions of § 1362(f), X will be treated as
continuing to be an S corporation from D2 and thereafter, provided thatX’s S
corporation election was otherwise valid and was not otherwise terminated under
§ 1362(d), and provided that the trustee of Trust files an ESBT election effective D2 with
the appropriate service center within 120 days following the date of this letter. A copy of
this letter should be attached to the ESBT election.
This ruling is conditioned upon X and all its shareholders treating X as having
been an S corporation for the termination period and thereafter. Moreover, the
shareholders of X must include their pro rata share of the separately stated and
nonseparately computed items of income, loss, deduction, or credit as provided in
§ 1366, make any adjustments to basis as provided in § 1367, and take into account
any distributions made by X as provided in § 1368. If X or its shareholders fail to treat
themselves as described above, this ruling is null and void.
Except as specifically ruled above, we express no opinion concerning the federal
tax consequences of the transactions described above underany other provisions of the
Code. Specifically, no opinion is expressed or implied regarding X’s eligibility to be an S
corporation or Trust’s eligibility to be an ESBT.
This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
Pursuant to a power of attorney on file, we are sending a copy of this letter to X’s
authorized representative.

PLR-140643-13
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The ruling contained in this letter is based upon information and representations
submitted by the taxpayer 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 the ruling request, it is subject to verification on examination.
Sincerely,
/s/
Stacy L. Short
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)
Enclosures (2)
Copy of this letter
Copy for § 6110 purposes