IRS written determination 201541003

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: 201541003
Release Date: 10/9/2015
Index Number: 1362.04-00, 1362.02-03
---------------------------------
---------------------------
-----------------------------------
-----------------------------
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
----------------, ID No. ------------------
Telephone Number:
----------------------
Refer Reply To:
CC:PSI:B01
PLR-104475-15
Date:
June 09, 2015
LEGEND
X=----------------------------
-----------------------------------------------------
A=----------------------
Trust=-------------------------------------------
-----------------------------------------------------
Date 1=-----------------------
Date 2=------------------------
Date 3=------------------------
Date 4 = ------------------------------------------------
State=-------------
Dear ------------:
This responds to a letter dated January 8, 2015, submitted on behalf of X by X’s
authorized representative, requesting relief under section 1362(f) of the Internal
Revenue Code (the Code).
FACTS
According to the information submitted and representations within, X was incorporated
on Date 1, under the laws of State. Effective Date 1, X elected to be taxed as an S

PLR-104475-15
2
corporation. A was a shareholder of X. On Date 2, A died. On Date 3, A’s shares of X
stock were transferred Trust, pursuant to the terms of A’s will. Trustqualified under
§ 1361(c)(2)(A)(iii) as an eligible shareholder for a two-year period beginning on the day
the shares of X were transferred to it. A timely election to treat Trustas an Electing
Small Business Trust (ESBT) was not made, thus causing X’s S election to terminate on
Date 4.
X represents that Trusthas at all times met the requirements of an ESBT within the
meaning of § 1361(d)(3). Throughout the period that Trusthas been a shareholder of
X, it has filed its federal income tax returns consistent with being an ESBT. X
represents that X and its shareholders have filed consistently with X being an S
corporation. X further represents that its S corporation election termination was
inadvertent and was not motivated by tax avoidance or retroactive tax planning.
Further, X represents that X and its shareholders agree to make any adjustments
required as a condition of obtaining relief under the inadvertent termination rule as
provided under § 1362(f) of the Code that may be requiredby the Secretary.
LAW AND ANALYSIS
Section 1361(a)(1) of the Code 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)(iii) provides that a trust with respect to stock transferred to it
pursuant to the terms of a will, but only for the 2-year period beginning on the day on
which such stock is transferred to it.
Section 1361(c)(2)(A)(v) provides that, for purposes of § 1362(b)(1)(B), an electing
small business trust (ESBT) may be an S corporation shareholder.
Section 1361(e)(1)(A) an ESBT 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 paragraph (2), (3), (4), or (5) of § 170(c), 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.

PLR-104475-15
3
Section 1361(e)(1)(B) provides that the term “electing small business trust” shall not
include (i) any qualified subchapter S trust (as defined in § 1361(d)(3)) if an election
under § 1361(d)(2) applies to any corporation the stock of which is held by such trust,
(ii) any trust exempt from tax under subtitle A, and (iii) any charitable remainder annuity
trust or charitable remainder unitrust (as defined in § 664(d)).
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 1.1361-1(m)(2)(i) provides that the trustee of an ESBT must make theESBT
election by signing and filing, with the service center where the S corporation files its
income tax return, a statement that meets the requirements of § 1.1361-1(m)(2)(ii).
Section 1362(f) provides, in relevant part, that if (1) an election under §1362(a) by any
corporation 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); (2)
the Secretary determines that the circumstances resulting in such ineffectiveness or
termination were inadvertent; (3) no later than a reasonable period of time after
discovery of the circumstances resulting in such ineffectiveness or 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 the 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
ineffectiveness or termination, such corporation shall be treated asan S corporation
during the period specified by the Secretary.
CONCLUSION
Based solely on the facts submitted and the representations made, we conclude that
X’s S election inadvertently terminated within the meaning of § 1362(f) on Date 4.
Pursuant to the provisions of § 1362(f), X will be treated as an S corporation from Date
4 and thereafter, provided X’s S corporation election is not otherwise terminated under §
1362(d).
Within 120 days from the date of this letter, an election to treat Trustas an ESBT
effective Date 4, must be made with the appropriate service center. A copy of this letter
should be attached to the ESBT election.
Except as specifically ruled upon above, we express or imply no opinion concerning the
federal tax consequences of thefacts of this case under any other provision of the

PLR-104475-15
4
Code. Specifically, we express or imply no opinion regarding X’s eligibility to be an S
corporation.
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.
Pursuant to the power of attorney on file with this office, we are sending a copy of this
letter to your authorized representative.
Sincerely,
Laura C. Fields
Laura C. Fields
Senior Technician Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)
Enclosures (2)
Copy of this letter
Copy of this letter for section 6110 purposes