IRS written determination 201436035

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: 201436035
Release Date: 9/5/2014
Index Number: 1362.04-00
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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:PSI:B02
PLR-143699-13
Date:
April 8, 2014
LEGEND
X = ---------------------
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A = -----------------------
Trust =-----------------------------------------------------------------------------------------
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State=-------------------
Date 1=------------------------
Date 2=---------------------
Date 3= ----------------
Date 4= ----------------------
Dear ----- ------------
This responds to a letter dated October4, 2013, submitted on behalf of X,
requesting a ruling under § 1362(f) of the Internal Revenue Code.
The information submitted states that X was incorporated in Stateon Date 1and
elected to be treated as an S corporation effective Date 2. Trust, a trust that was
treated under subpart E of part I of subchapter J of chapter 1 of the Code as entirely
owned by A, became a shareholder of X on Date 3. On Date 4, Trust’sgrantor trust
status terminated.

PLR-143699-13
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Trustqualified under § 1361(c)(2)(A)(i) as an eligible X shareholder after Date 3.
X represents that Trustwas eligible to be an electing small business trust (“ESBT”)
within the meaning of § 1361(e) effective Date 4. However, the trustee of Trustfailed to
properly file the ESBT election. As a result, Trustwas not a permissible shareholder
and X’s S corporation election terminated on Date 4.
X represents that the failure to file the ESBT election for Trustand the resulting
termination of X’s S corporation election was not motivated by tax avoidance or
retroactive tax planning. X represents that after it discovered the possible terminating
event, X initiated corrective action. 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.
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 to obtain 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.
Based solely on the facts submitted and the representations made, we conclude
that the termination of X’s S corporation election on Date 4was inadvertent within the
meaning of § 1362(f). Accordingly, pursuant to the provisions of § 1362(f), X will be
treated as continuing to be an S corporation fromDate 4and thereafter, provided X’s S
corporation election was valid and provided that the election was not otherwise
terminated under §1361(d). This ruling is contingent on the trustee of Trustfiling an
electing small business trust (ESBT) election pursuant to the procedures in §1.1361-
1(m)(2) with an effective date of Date 4with the appropriate service center within 120
days of the date of this letter. A copy of this letter should be attached to the ESBT
election. If X or its shareholders fail to treat themselves as described above, this letter
ruling shall be null and void.
Except as specifically ruled above, we express no opinion concerning the federal
tax consequences of the transactions described above under any other provisions of the

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Code. Specifically, we express no opinion as to whether X is otherwise eligible to be
treated as an S corporation or Trustis eligible to be treated as an ESBT.
This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3)
provides that itmay not be used or cited as precedent.
Pursuant to a power of attorney on file, a copy of this letter is being sent to X’s
authorized representative.
Sincerely,
Bradford R. Poston
Senior Counsel, Branch 2
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)
Enclosures (2):
Copy of this letter
Copy for § 6110 purposes