In Private Letter Ruling 200839017 (Released Sept. 26, 2008) the IRS recognizes as an "F" reorganization the conversion an S corporation incorporated as a corporation under state law to a limited liability company organized under state law, so long as the entity remains an S corporation for tax purposes.
The taxpayer (corporation) made 16 representations in connection with the ruling. You can read all 16 here, but in sum it was a plain vanilla transaction. The units received were equal in value to the shares converted, no other consideration was paid, there were no plans by the shareholders to dispose of the units or by the company to sell any assets, no plans to redeem.
Interestingly, the company represented there would be no dissenting shareholders. If that continues to be a key to a conversion it might prove problematic and limit conversions to transactions in which all of the shareholders agree to the conversion in advance. This does not appear to be a requirement in the more traditional F reorganization.
Finally, the taxpayer represented that under state law Newco would be considered the same entity after the conversion as before. Under current Iowa law, a corporation could not make that representation. Under the new Iowa LLC Act Section 489.1009(1) does provide that an organization converted to an LLC is the same entity as before.
Based on these representations, the Service ruled that the conversion would be an F reorganization, no gain or loss would be recognized by any of the participants, the tax basis would be unchanged and the holding periods would tack. Also, the S election would not terminate and the taxpayer would keep its EIN. The Service also noted that the operating agreement would not create different classes of stock because "it does not create different rights to current distributions or liquidation proceeds." There is no way to know if these means that distributions were mandated to be pro rata, like a corporate dividend, or the IRS was recognizing the discretion inherent in LLC distributions. Be cautious here.