BGD attorneys Jeremy Gerch and Mark Loyd successfully assisted three Trust clients, with the help of the Trusts’ other outside tax advisors, in obtaining favorable private letter rulings (PLRs) from the IRS. The rulings allowed the Trusts to retroactively revoke Electing Small Business Trust (ESBT) elections, and to make retroactive Qualified Subchapter S Trust (QSST) elections.

The Trusts own shares of stock in a very successful closely held corporation and had originally made QSST elections. However, for various reasons beginning in 2014, the Trusts converted to ESBTs. While the Trustee of the Trusts was aware of certain income tax consequences of converting to ESBTs, the conversion also resulted in unanticipated additional negative income tax implications which were not discovered until well after the conversion to ESBT status was effective. The Trustee then desired to “reconvert” to QSST status for each of the Trusts. A Trust often is allowed to convert from an ESBT to a QSST with little difficulty. However, because the Trusts converted from a QSST to an ESBT within the previous three years, the Trusts could not convert back to a QSST without the consent of the IRS through the formal PLR process. The relief requested in the PLRs also required additional justification, given that the Trustee wanted the revocation to be retroactively effective to the date the ESBT elections were made.

In a remarkable result for the client, the IRS consented to the revocations and granted the full relief requested in each of the three PLRs, which will provide a substantial amount of tax savings to the Trusts and their beneficiaries going forward. The PLRs will be released to the public on Feb. 16, 2018.

Bingham Greenebaum Doll is now part of Dentons. This release was published prior to the combination, which was effective in January of 2020. For more information, visit dentons.com or view our announcement.

About Dentons Bingham Greenebaum

Dentons Bingham Greenebaum is a premier regional business and tax law firm, based in the Midwest. The firm has helped its clients close deals, manage risks, and open doors to new opportunities for more than 100 years.  Dentons Bingham Greenebaum provides transactional, litigation, estate planning, tax and employee benefits, and economic development advice to clients across a variety of industries and business sectors. The firm’s client base is diverse and contains regional, national, and international engagements. The lawyers at Dentons Bingham Greenebaum serve clients in the communities where they live and work, with locations in Indiana, Kentucky, and Ohio. For more information, visit www.dentons.com