IRS written determination 201429002

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: 201429002
Release Date: 7/18/2014
Index Number: 1295.02-02
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
-------------------------, ID No. -----------------
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Telephone Number:
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Refer Reply To:
CC:INTL:B02
PLR-103648-13
Date: April 9, 2014
TY: ------
Legend
Taxpayers= --------------------------------------------
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Trust= ---------------------------------------------------------------
Partnership= ------------------------------------------------------------------
Corporation=----------------------------------------------------------------------
Country X= ---------------------
Firm= -------------------------------------
Year 1= ------
Date 2= --------------------
Year 3= ------
Month 4= ------------------
Dear --------------------------:
This is in response to a letter dated November 26, 2012 requesting the consent
of the Commissioner of the Internal Revenue Service (“Commissioner”) to make a
retroactive qualified electing fund (“QEF”) election under section 1295(b) of the Internal

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Revenue Code and Treas. Reg. §1.1295-3(f) with respect to Taxpayers’ investment in
Corporation.
The ruling provided in this letter is based upon information and representations
submitted by Taxpayers and accompanied by a penalty of perjury statement executed
by appropriate parties. While this office has not verified the material submitted in
support of this request for ruling, such material is subject to verification on examination.
The information submittedin the request is substantially as set forth below.
FACTS
Trust is a domestic trust that was settled by Taxpayers via a trust document
executed on Date 2. The Trust is a grantor trust and all of the income, gains, losses and
other tax items of the Trustare reportable on Taxpayers’ federal income tax returns.
In Year 1, Trust acquired an interest in Partnership, a limited partnership
organized under the laws of Country X. To the best of Taxpayers’ knowledge,
Partnership has never made an entity classification under Treas. Reg. §301.7701-3 and
is classified as a partnership under the default entity classification rules of Treas. Reg.
§301.7701-3(b)(2)(i)(A). Partnership invested in Corporation, a foreign entity that is
understood to be a PFIC within the meaning of sections 1291-1298 of the Code.
The Schedule K-1 provided by the Partnership to the Trust discloses that
Partnership has invested in a PFIC, and states that, as a foreign partnership, the
Partnership cannot elect to treat the PFIC as a QEF under section 1295 of the Code.
The K-1 provided the necessary information to permit Taxpayers to make a valid QEF
election, including their share (through the Trust) of Corporation’s ordinary earnings and
net capital gains for the year.
Taxpayers had reliedupon Firm for over 20 years to advise them with respect to
all applicable tax consequences and filing requirements including their investment in
Corporation through Trust and to prepare their returns. Firm has been a well-respected
accounting firm for over 50 years with ample expertise in providing tax advice pertaining
to the ownership of stock in a foreign corporation. Taxpayers had no professionals other
than their tax preparer review their tax returns before filing.
In the course of preparing Taxpayers’ Year 3 federal income tax return (on
extension), Firm discovered, upon review of the K-1, that Taxpayers owned a PFIC
through their ownership of Partnership. Taxpayers were informed of the PFIC issue for
the first time in Month 4. Until that time, they were unaware that Corporation was a
PFIC.
Taxpayers have each submitted an affidavit, under penalties of perjury, that
describe the events that led to the failure to make a QEF election with respect to

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Corporation by the election due date, including the role of Firm. Taxpayers also
submitted an affidavit from Firm, which describes Firm’s engagement and
responsibilities, and Firm’s failure to provide advice regarding the tax consequences of
Taxpayers’ ownership of Corporation until Firm was preparing Taxpayers’ Year 3
income tax returns.
Taxpayers represent that, as of the date of this request for ruling, the PFIC status
of Corporation has not been raised by the IRS on audit for any of the taxable years at
issue.
RULING REQUESTED
Taxpayers request the consent of the Commissioner of the Internal Revenue
Service to make a retroactive QEF election with respect to Corporation for Year 1 under
Treas. Reg. §1.1295-3(f).
LAW AND ANALYSIS
Section 1295(a) of the Code provides that any PFIC shall be treated as a QEF
with respect to a taxpayer if (1) an election by the taxpayer under section 1295(b)
applies to such company for the taxable year and (2) the company complies with such
requirements as the Secretary may prescribe for purposes of determining the ordinary
earnings and net capital gains of such company.
Under section 1295(b)(2), a QEF election may be made for any taxable year at
any time on or before the due date (determined with regard to extensions) for filing the
return for such taxable year. To the extent provided in regulations, such an election may
be made after such due date if the taxpayer failed to make an election by the due date
because the taxpayer reasonably believed the company was not a PFIC.
Under Treas. Reg. §1.1295-3(f), a taxpayer may request the consent of the
Commissioner to make a retroactive QEF election for a taxable year if:
1.the shareholder reasonably relied on a qualified tax professional, within the
meaning of Treas. Reg. §1.1295-3(f)(2);
2.granting consent willnot prejudice the interests of the United States government,
as provided in Treas. Reg. §1.1295-3(f)(3);
3.the request is made before a representative of the Internal Revenue Service
raises upon audit the PFIC status of the corporation for any taxable year of the
shareholder; and
4.the shareholder satisfies the procedural requirements of §1.1295-3(f)(4).
The procedural requirements include filing a request for consent to make a
retroactive election with, and submitting a user fee to, the Office of the Associate Chief

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Counsel (International). Treas. Reg. §1.1295-3(f)(4)(i). Additionally, affidavits signed
under penalties of perjury must be submitted that describe:
1.the events which led to the failure to make a QEF election by the election due
date;
2.the discovery of such failure;
3.the engagement and responsibilities of the qualified tax professional; and
4.the extent to which the shareholder relied on such professional.
Treas. Reg. §§1.1295-3(f)(4)(ii) and (iii).
CONCLUSION
Based on the information submitted and representations made we conclude that
Taxpayers have satisfied the requirements of Treas. Reg. §1.1295-3(f). Consent is
granted to Taxpayers to make a retroactive QEF election with respect to Corporation for
Year 1 under Treas. Reg. §1.1295-3(f), provided that they comply with the rules under
Treas. Reg. §1.1295-3(g) regarding the time and manner for making the retroactive
QEF election.
A copy of this ruling must be attached to any tax return to which it is relevant.
This rulingis 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.
In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to your authorized representative.
Sincerely,
Jeffery G. Mitchell
Branch Chief, Branch 2
(International)