IRS written determination 201423008

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: 201423008
Release Date: 6/6/2014
Index Number: 1295.02-02
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[Third Party Communication:
Date of Communication: Month DD, YYYY]
Person To Contact:
------------------, ID No. --------------
Telephone Number:
----------------------
Refer Reply To:
CC:INTL:B02
PLR-135635-13
Date:
February 10, 2014
TY: -------
Legend
Taxpayer = ------------------------------
-------------------------
FC = --------------------------------
Country X= ------------
Accountant Y= --------------------------
Accounting Firm Z= -----------------------------
Year 1 = -------
Year 2 = -------
Year 3 = -------
Year 4 = -------
Year 5=-------
Year 6=-------
Dear ---------------------:
This is in response to a letter dated August 9, 2013, submitted by your authorized
representative that requested the consent of the Commissioner of the Internal Revenue
Service (“Commissioner”) for Taxpayer to make a retroactive qualified electing fund
("QEF") election under section 1295(b) of the Internal Revenue Code (“Code”) and
Treas. Reg. §1.1295-3(f) with respect to the Taxpayer’s investment in FC.
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

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the material submitted in support of the request for rulings, it is subject to verification on
examination.
FACTS
Taxpayer is and has always been a U.S. citizen and resident for U.S. federal
income tax purposes. In Year 1, Taxpayer purchased shares of FC, an entity organized
under the laws of Country X that is treated as a corporation for U.S. federal income tax
purposes. Taxpayer purchased additional shares in Years 2 through 5. Taxpayer sold
his shares of FC at the end of Year 6. FC was a passive foreign investment company
(“PFIC”) as defined under section 1297 of the Code.
Taxpayer’s federal income returns for many years, including the years for which
Taxpayer owned shares in FC, were prepared by Accountant Y with Accounting Firm Z.
Taxpayer provided Accountant Y with all relevant information and documentation
necessary to prepare the returns for the years for which Taxpayer owned shares in FC.
Taxpayer relied on Accountant Y to prepare and file Taxpayer’s U.S. federal income tax
returns and to provide advice on U.S. income tax matters. Accountant Y was aware of
Taxpayer’s ownership ofshare in FC but failed to identify FC as a PFIC within the
meaning of section 1297(a). Consequently, Accountant Y failed to advise Taxpayer of
the possibility of making a QEF election under section 1295(b) with respect to FC and of
the consequences of making, or failing to make, such an election.
At the end of Year 6, FC issued an Information Circular to its shareholders. The
Information Circular stated that FC believes it has been a PFIC for each year of its
existence. The Information Circular also included information regarding the
consequences of owning and disposing of PFIC shares and the ability to make a
retroactive QEF election. Once Taxpayer became aware of FC’s PFIC status and the
implications, Taxpayer took immediate action to engage a law firm to assist with
requesting relief to make a retroactive QEF election.
Taxpayer has submitted affidavits, under penalties of perjury, that describe the
events that led to the failure to make a QEF election with respect to FC by the election
due date, including the role of Accountant Y.
Taxpayer represents that, as of the date of this request for ruling, the PFIC status
of FC has not been raised by the IRS on audit for any of the taxable years at issue.
RULING REQUESTED
Taxpayer requests the consent of the Commissioner to make a retroactive QEF
election with respect to FC for Year 1 under Treas. Reg. §1.1295-3(f).
LAW

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Section 1295(a) provides that a PFIC will be treated as a QEF with respect to a
shareholder if (1) an election by the shareholder under section 1295(b) applies to the
PFIC for the taxable year; and (2) the PFIC complies with the requirements prescribed
by the Secretary for purposes of determining the ordinary earnings and net capital gains
of the company.
Under section 1295(b)(2), a QEF election may be made for a taxable year at any
time on or before the due date (determined with regard to extensions) for filing the
return for the taxable year. To the extent provided in regulations, the election may be
made after the due date if the shareholder failed to make an election by the due date
because the shareholder reasonably believed the company was not a PFIC.
Under Treas. Reg. §1.1295-3(f), a shareholder may request the consent of the
Commissioner to make aretroactive 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 will not 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 company for any taxable year of the
shareholder; and
4. the shareholder satisfies the procedural requirements of Treas. Reg. §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
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 that led to the failure to make a QEF election by the election due
date;
2. the discovery of the failure;
3. the engagement and responsibilitiesof the qualified tax professional; and
4. the extent to which the shareholder relied on the professional.
Treas. Reg. §§1.1295-3(f)(4)(ii) and (iii).
CONCLUSION
Based on the information submitted and representations made with Taxpayer’s
ruling request, we conclude that the Taxpayer has satisfied Treas. Reg. §1.1295-3(f).
Accordingly, consent is granted to the Taxpayer to make a retroactive QEF election with

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respect to FC for Year 1, provided that Taxpayer complies with the rules under Treas.
Reg. §1.1295-3(g) regarding the time and manner for making the retroactive QEF
election.
Except as expressly provided herein, no opinion is expressed or implied
concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.
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.
In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to your authorized representatives.
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.
Sincerely,
Jeffery G. Mitchell
Branch Chief, Branch 2
(International)