IRS written determination 201532015

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: 201532015
Release Date: 8/7/2015
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-133916-14
Date:
March 02, 2015
LEGEND
Company=---------------------------------------------------------------------------------------------
Trust 1=---------------------------------------------------------------------------------------------
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Trust 2=---------------------------------------------------------------------------------------------
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Trust 3=---------------------------------------------------------------------------------------------
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Trust 4=---------------------------------------------------------------------------------------------
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State=-----------
Date 1=------------------
Date 2=---------------------
Date 3=--------------------------
Dear -------------------:

PLR-133916-14
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This letter responds to a letter dated July 25, 2014, and subsequent
correspondence, submitted on behalf of Companyby its authorized representative,
requesting a ruling under § 1362(f) of the Internal Revenue Code (Code).
FACTS
Companywas incorporated under Statelaw on Date 1. Companyelected to be
an S corporation as of Date 2. On Date 3, Trust 1, Trust 2, Trust 3, andTrust 4
(collectively the “Trusts”) received shares of Company. The beneficiaries of the Trusts
failed to make timely elections for the Truststo be treated as Qualified Subchapter S
Trusts (QSSTs). As a result, Company’sS corporation election terminated as of Date 3.
Companyrepresents that the termination was inadvertent and not motivated by
tax avoidance or retroactive tax planning. For all relevant taxable years, Companyand
Company’sshareholders filed their Federal income tax returns consistent with Company
qualifying as an S corporation, and the Trustshave filed consistent with the Trusts
having valid QSST elections in effect as of Date 3. In addition, Companyand
Company’sshareholders agree to make any adjustments consistent with the treatment
of Companyas an S corporation as may be required by the Secretary with respect to
the period specified by § 1362(f).
LAW AND ANALYSIS
Section 1361(a)(1) 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)(i) provides that, for purposes of § 1361(b)(1)(B), a trust all
of which is treated (under subpart E of part I of subchapter J of chapter 1 of the Internal
Revenue Code) as owned by an individual who is a citizen or resident of the United
States may be a shareholder.
Section 1361(d)(1) provides, in pertinent part, that in the case of a QSST with
respect to which a beneficiary makes an election under §1361(d)(2): (A) the trust is
treated as a trust described in §1361(c)(2)(A)(i) and (B) for purposes of § 678(a), the
beneficiary of the trust is treated as the owner of that portion of the trust which consists

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of stock in an S corporation with respect to which the election under §1361(d)(2) is
made.
Section 1361(d)(2)(A) provides that a beneficiary of a QSST (or his legal
representative) may elect to have §1361(d) apply.
Section 1.1361-1(j)(6)(ii) of the Income Tax Regulations provides that the current
income beneficiary of the trust must make the election under § 1361(d)(2) by signing
and filing with the service center with which the corporation files its income tax return
the applicable form or statement including the information listed in § 1.1361-1(j)(6)(ii).
Section 1362(a) provides that, except as provided in §1362(g), a small business
corporation may elect, in accordance with theprovisions of §1362, to be an S
corporation.
Section 1362(d)(2)(A) provides that an election under § 1362(a) shall be
terminated whenever (at any time on or after the first day of the first taxable year for
which the corporation is an S corporation) such corporation ceases to be a small
business corporation.
Section 1362(f) provides, in pertinent part, 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 such
termination, steps were taken so that the corporation for which the termination occurred
is a small business corporation, and (4) the corporation for which the termination
occurred, and each person who was a shareholder in such corporation at any time
during the period specified pursuant to §1362(f), agrees to make such adjustments
(consistent with the treatment of such corporation as an S corporation) as may be
required by the Secretary with respect to such period, then, notwithstanding the
circumstances resulting in such termination, such corporation shall be treated as an S
corporation during the period specified by the Secretary.
CONCLUSION
Based solely on the facts submitted and representations made, we conclude that
Company’sS corporation election terminated on Date 3because the beneficiaries of the
Trustsfailed to make elections under §1361(d)(2)(A)for the Trusts. We also conclude
that the termination of Company’sS corporation election was inadvertent within the
meaning of § 1362(f).
Accordingly, under §1362(f), Companywill be treated as continuing to be an S
corporation from Date 3and thereafter, provided that Company’sS corporation election
was valid and was not otherwise terminated under §1362(d), and provided that the

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beneficiaries of the Trustsfile an election under § 1361(d)(2)(A) for their respective trust
with an effective date of Date 3 with the appropriate service center within 120 days from
the date of this letter. A copy of this letter should be attached to the elections under
§ 1361(d)(2)(A).
Except as expressly provided herein, we express or imply no opinion concerning
the Federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we express or imply no opinion concerning
whether the Trustsare otherwise eligible to be QSSTs or whether Companyis
otherwise eligible to be an S corporation for Federal tax purposes.
In accordance with a power of attorney on file with this office, we are sending a
copy of this letter to Company’sauthorized representatives.
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.
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/
Holly Porter
Chief, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)
Enclosures (2)
Copy of this letter
Copy for §6110 purposes
cc: