February 7, 1991
TO: TAX MEMBERS NO. 2-91
INTERNATIONAL FUNDS TASK FORCE NO. 1-91
RE: RIC GRANTED EXTENSION TO MAKE RETROACTIVE QEF ELECTION
FOR TWO PFICs
__________________________________________________________
The attached letter ruling involves a request under
Treasury Regulation section 1.9100-1(a) for an extension of time
for a regulated investment company ("RIC") to make a retroactive
qualified electing fund ("QEF") election under section 1296(b)(2)
of the Internal Revenue Code ("Code"), as provided for by the
Technical and Miscellaneous Revenue Act of 1988 ("TAMRA").
Code section 1296(b)(2) allows a passive foreign investment
company ("PFIC") shareholder to make a QEF election and be taxed
currently on the PFIC’s earnings. Prior to TAMRA, the QEF
election was made by the PFIC, not by the PFIC shareholder. This
treatment was changed by TAMRA section 6127 to allow each PFIC
shareholder to make the election separately. Procedures for
making retroactive QEF elections, as provided for under TAMRA,
were provided by IRS Notice 88-125. (See Institute memorandum to
Tax Members No. 68-88, dated December 22, 1988.)
According to the letter ruling, the RIC’s auditors failed
to inform it of the ability to make the retroactive QEF election
until after the time for making that election had passed.
Therefore, pursuant to Treasury Regulation 1.9100-1(a), the
Internal Revenue Service granted the RIC’s request to make the
retroactive QEF election late.
We will keep you informed of further developments.
David J. Mangefrida, Jr.
Assistant General Counsel
Attachment
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