IRS written determination 201515010

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: 201515010
Release Date: 4/10/2015
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:B01
PLR-125251-14
Date:
December 16, 2014
LEGEND:
X=-----------------------------------------------------------------------------------------------------------------
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A=---------------------------
B=-----------------------------------------------------------------------------------------------------------------
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Trust 1=-----------------------------------------------------------------------------------------------------------------
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Trust 2= -----------------------------------------------------------------------------------------------------------------
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State=--------------
Date 1=----------------------
Date 2=--------------------
Date 3=-------------------
Date 4=------------------------
$n=
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Dear--------------------

PLR-125251-14
2
This responds to a letter dated June 17, 2014, and subsequent correspondence,
submitted on behalf of X, requesting inadvertent termination relief pursuant to § 1362(f)
of the Internal Revenue Code (the Code).
Facts
The information submitted states that X was incorporated under the laws of State. X
elected to be taxed as an S corporation effective Date 1.
During A’s life, A owned shares in X through Trust 1, a grantor trust. A died on Date 2.
Pursuant to the terms of Trust 1, after A’s death, the X shares were transferred from
Trust 1to Trust 2on Date 3. X represents thatTrust 2was qualified to be an Electing
Small Business Trust (ESBT), within the meaning of § 1361(e). However, no election
was made under § 1361(e)(3) to treat Trust 2as an ESBT. Consequently, Trust 2was
an ineligible shareholder, and, as a result, X’s S corporation election terminated on Date
3.
X represents that the circumstances resulting in the termination of X's S corporation
election were inadvertent and were not motivated by tax avoidance or retroactive tax
planning. Additionally, X represents that X and its shareholders have filed their federal
income tax returns consistent with having a valid S corporation election in effect for X.
X and its shareholders have agreed to make any adjustments consistent with the
treatment of X as an S corporationas may be required by the Secretary
with respect to the period specified by § 1362(f).
Law and Analysis
Section 1362(f) provides that if (1) an election under § 1362(a) by any corporation was
terminated under § 1362(d)(2) or (3); (2) the Secretary determines that the
circumstances resulting in such termination were inadvertent; (3) no later than a
reasonable period of time after discovery of the circumstances resulting in the
termination, steps were taken so that the corporation is a small business corporation;
and (4) the corporation, and each person who was a shareholder of the corporation at
any time during the period specified under § 1362(f), agrees to make the adjustments
(consistent with the treatment of the corporation as an S corporation) as may be
required by the Secretary for that period, then, notwithstanding the circumstances
resulting in such termination, the corporation shall be treated as an S corporation during
the period specified by the Secretary.
Section 1.1362-4(d) of the Income Tax Regulations provides that the Commissioner
may require any adjustments that are appropriate. In general, the adjustments required
should be consistent with the treatment of the corporation as an S corporation during
the period specified by the Commissioner.

PLR-125251-14
3
Conclusion
Based solely on the facts submitted and representation made, we conclude X’s S
election terminated on Date 3upon the failure to timely file an ESBT election for Trust 2.
We further conclude that the termination was inadvertent within the meaning of
§ 1362(f). Pursuant to the provisions of § 1362(f), X will continue to be treated as an S
corporation on and after Date 3, unless X’s S corporation is otherwise terminated under
§ 1362(d). The trustee of Trust 2must file an ESBT election effective Date 3with 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.
Accordingly, the shareholders of X must include in their income their pro rata share of
separately stated and nonseparately computed items of X as provided in § 1366 and
make any adjustments to basis as provided in § 1367, and take into account any
distributions made by X as provided in § 1368. This ruling is contingent upon X and
each of its shareholders filing any original and amended returns and making such
adjustment that are necessary to properly reflect the reporting of X's items of S
corporation income. Specifically, Trust 2must file income tax returns and make
adjustments that are necessary toproperly reflect the treatment of Trust 2as an ESBT.
Additionally, as an adjustment under § 1362(f)(4), this ruling is conditioned on the
payment of $n and a copy of this letter ruing must be sent to the address: Internal
Revenue Service, Cincinnati Service Center, ---------------------------------------------------------
-----------------------------------------------------------------. X must send the payment no later
than Date 4.
A copy of this letter must be attached to any 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.
Except for the specific ruling above, no opinion is expressed or implied concerning the
federal tax consequences of the facts of this case under any other provision of the
Code. Specifically, no opinion is expressed or implied regarding X’s eligibility to be an S
corporation or Trust 2’s ability to be an ESBT.
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
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.
This ruling is directed only to the taxpayer who requested it. According to §6110(k)(3),
this ruling may not be used or cited as precedent.

PLR-125251-14
4
In accordance with a power of attorney on file with this office, a copy of this letter is
being sent to X’s authorized representative.
Sincerely,
Joy C. Spies
Joy C. Spies
Senior Technician Reviewer, Branch 1
(Passthroughs & Special Industries)
Enclosures (2)
Copy of this letter
Copy for § 6110 purposes