internal_revenue_service number release date index numbers ---------------------------------------------------------- -------------------------------------- ----------------------------- ---------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------------- id no -------------- ---------------------------------------------------- telephone number --------------------- refer reply to cc psi b01 plr-127935-09 date date legend x -------------------------------------------------------- --------------------------------------------------------------- y date date country ---------------------- -------------------------- ---------------------------- -------------------------- dear ---------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts the information submitted states that x is a limited_company formed on date under the laws of country on date y acquired an interest in x x is a foreign_entity eligible to make a classification election x's default status was as an association_taxable_as_a_corporation for federal tax purposes x intended to be classified as a disregarded_entity for federal tax purposes effective date due to inadvertence x failed to file a timely form_8832 entity classification election electing to treat x as a plr-127935-09 disregarded_entity effective date law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability or b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-127935-09 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective date x must make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form 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 sec_6110 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 curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- -------------------------------- --------------------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------- id no ------------- ----------------- telephone number ---------------------- refer reply to cc psi plr-135293-15 date date ------------------------------------------------------------------------------------------------------ legend x ------------------------ state -------------- dear ----------------- this responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_7704 of the internal_revenue_code facts according to the information submitted x is a limited_liability_company organized under the laws of state as part of an initial_public_offering ipo for a to-be-formed partnership partnership x intends to contribute assets related to its fluid handling and disposal activities after completion of the ipo partnership will be a publicly_traded_partnership within the meaning of sec_7704 x represents that partnership will earn income by providing fluid management and disposal services to customers engaged in the exploration for and development and production of oil and natural_gas partnership will supply fluids for drilling and fracturing operations and provide fluids and solid_waste disposal services to oil_and_gas producers x represents that partnership will supply drilling and fracturing fluids including fresh water brine drilling mud lubricants and other injectants for use in drilling and hydraulic fracturing the drilling mud will be recycled or will be produced from by-products of partnership’s disposal services the remaining products will be sourced from third parties the fluids will generally be transported to the well site by third party trucks or pipeline partnership’s personnel will be at the well site on a regular basis to work with production teams to plr-135293-15 coordinate deliveries and will remotely monitor fluid levels to ensure producers a continuous supply of fluids x represents that partnership also will store treat and dispose_of flowback produced water and other drilling production waste generally using salt water disposal swd wells flowback and produced water will typically be transported to partnership’s swd wells by third party truck or pipelines however partnership anticipates building its own pipelines for such transportation x represents that partnership may expand its operation to include fluid treatment so as to be able to either release the treated fluids into the groundwater or use the recycled fluids in future drilling and fracturing operations partnership will also provide disposal services for used drilling mud and drill cuttings that surface during the drilling and production of oil_and_gas and collect on tank bottoms in connection with its disposal services partnership will provide truck and tank washout services storage tanks trucks and other equipment that store and transport flowback produced water and other drilling and production waste must be properly cleaned and maintained to prevent rust and corrosion failing to properly clean these items could result in damage to tanks and potential leakage of hazardous fluids partnership will also earn income from selling hydrocarbons and other minerals and natural_resources that are collected as part of the disposal process x makes the following representations partnership will provide personnel for its fluid management and disposal services partnership’s personnel will have specialized knowledge training and experience to perform these services the equipment used in and the personnel training associated with the fluid management and disposal services have no utility outside of oil_and_gas exploration under legal and environmental restrictions the saltwater disposal wells are restricted to storing and disposing of waste associated with exploration and production activities and are thus not easily converted to other use processing and treatment of flowback fluids and produced water is required prior to injection into a disposal well in order to comply with governmental regulations and industry standards the production of oil_and_gas using the hydraulic fracturing process would not be commercially viable without fluid management and disposal services law analysis sec_7704 provides that except as provided in sec_7704 a publicly_traded_partnership will be treated as a corporation plr-135293-15 sec_7704 provides that the term publicly_traded_partnership means any partnership if interests in that partnership are traded on an established_securities_market or interests in that partnership are readily_tradable on a secondary market or the substantial equivalent thereof sec_7704 provides that sec_7704 does not apply to a publicly_traded_partnership for any taxable_year if such partnership meets the gross_income requirements of sec_7704 for the taxable_year and each preceding_taxable_year beginning after date during which the partnership or any predecessor was in existence sec_7704 provides in relevant part that a partnership meets the gross_income requirements of sec_7704 for any taxable_year if percent or more of the gross_income of the partnership for the taxable_year consists of qualifying_income sec_7704 provides that the term qualifying_income includes income and gains derived from the exploration development mining or production processing refining transportation including pipelines transporting gas oil or products thereof or the marketing of any mineral_or_natural_resource including fertilizer geothermal_energy and timber conclusion based solely on the facts submitted and the representations made we conclude that gross_income derived by x’s newly formed partnership from its fluid management and disposal services constitutes qualifying_income within the meaning of sec_7704 in addition income derived from partnership from selling the filtered hydrocarbons and other recoverable minerals that are collected as part of the disposal process constitutes qualifying_income within the meaning of sec_7704 so long as the sales are not to end users at the retail level this ruling is not applicable to any income derived by partnership from the delivery of water or other injectants including recycled produced water to affiliates or third parties where partnership does not also collect and clean recycle or otherwise dispose_of the resulting produced water and drilling production waste after use except as expressly provided herein no opinion is expressed or implied concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed as to whether x meets the percent gross_income requirement of sec_7704 in any taxable_year for which this ruling may apply the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed plr-135293-15 by an appropriate party while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it however in the event of a technical_termination of x’s partnership under sec_708 the resulting_partnership may continue to rely on this ruling in determining its qualifying_income under sec_7704 sec_6110 of the code provides that this letter 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 sincerely laura c fields laura c fields senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


cca_2017120115245148 id uilc number release date from sent friday december pm to cc bcc subject msj administrative record question ---------------------- the question should the entire administrative record be submitted to the court on an msj was raised at the training this week we had some thoughts that we wanted to share given the court’s desire for information in these cases we generally think that it would be advisable to include the entire administrative record with the msj that said we recognize that this may not always be the best practice and we think that the ultimate decision is best left to your discretion the assigned attorney should evaluate each case based on the facts of the case the assigned judge or any other number of factors when determining whether to submit the entire administrative record to the tax_court the current procedures in cdp cases are also instructive and provide useful guidance so we wanted to bring them to your attention so you could share with your attorneys of particular note we suggest looking to ccdm stipulation of facts and submission of administrative record in collection_due_process cdp cases and ccdm declaration among the other cdp ccdm sections thank you ------------------------------------ --------------------------------------- -------------- --------------- -----------------------------


department of the treasury internal_revenue_service commerce street dallas tx date person to contact badge number contact telephone number contact address employer_identification_number tax_exempt_and_government_entities_division release number release date uil code legend org - organization name xx - date address - address org address certified mail dear this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated january 20xx is hereby revoked and you are no longer exempt under sec_501 of the code effective july 20xx the revocation of your exempt status was made for the following reason s your primary activity and purpose during 20xx has considered of the operation of bingo_games these activities in and of themselves do not further an exempt_purpose and comprise more than an insubstantial amount of your activities during 20xx accordingly you have demonstrated that you are not operated exclusively for exempt purposes as described in internal_revenue_code sec_501 see sec_1_501_c_3_-1 contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code effective july 20xx you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending august 20xx and for all the tax years thereafter in accordance with instructions of the return if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition in one of these three courts must be filed before the 9ist day after the date that this determination was mailed to you if you wish to seek review of our determination please contact the clerk of the respective court for rules regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the untied states tax_court at the following address please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll free and ask for the taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examination sec_55 n robinson mc okc oklahoma city ok department of the treasury date date org address taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if we issue a determination_letter to you based on technical_advice no further you may also request that we refer this matter for technical_advice as explained in publication administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its letter rev catalog number 34809f administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at lf you have any questions please call the contact person at the telephone number shown in the if you write please provide a telephone number and the most convenient heading of this letter time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures publication publication report of examination letter rev catalog number 34809f schedule number or exhibit ‘form 886-a rev date name of taxpayer org explanations of items year period ended 20xx08 tax identification_number ein legend org - organization name state game - game issues xx - date address - address city - city state - co-1 co-2 co-3 - companie sec_1 whether org did operate exclusively for exempt purposes described within internal_revenue_code sec_501 for the year under exam a b whether org did operate for the primary purpose of carrying_on_a_trade_or_business for profit whether more than an insubstantial part of org activities are in furtherance of a non-exempt purpose facts org org was incorporated under the laws of the state of state as a nonprofit corporation on january 19xx in a determination_letter dated february 19xx org the service determined org to be exempt from federal_income_tax as an organization described in sec_501 of the internal_revenue_code in its articles of incorporation org stated the purposes for which the corporation is organized are to increase public understanding of substance abuse and chemical dependency its nature control and remedy to establish and maintain centers for the collection formulation and dissemination of information bearing on problems of substance abuse and chemical dependency to support clinics for the medical and psychiatric diagnosis and treatment of chemically dependent individuals for research in substance abuse and dependency and for the training of staff and such other interested persons as its resources may permit to promote the creation of hospital and related facilities for the treatment of victims of chemical dependency to conserve the resources of the community by improved application of such resources to the problems of chemical dependency to accept receive and acquire funds stocks securities and property by donations bequests devises or otherwise and to use hold invest re-invest convert sell transfer mortgage pledge and dispose_of any and all funds stocks securities and properties so accepted received or acquired for the furtherance or accomplishment of the purposes of this corporation to do all acts and exercise all powers and assume all obligations necessary or incident to the purposes of said corporation form 886-a catalog number 20810w page_1 publish no irs gov department of the treasury-internal revenue service schedule number or exhibit 886-a form rov date explanations of items name of taxpayer org year period ended 20xx08 tax identification_number ein reported financial information on form_990 20xx08 part lil gaming a game b pull tabs instant c other gaming d total gaming game progressive add col a game through col c oo cc oo oo gross - revenue cash prizes x no x no volunteer non exempt activity description prizes rent facility costs other direct expenses n noncash o www q the address shown on form_990 return is address city state this is the location of co-1 where game is played labor direct expense summary add line sec_2 through in column d net gaming income summary combine line column qd and line org did not perform any exempt_activities for the year of audit org did make a contribution in the amount of dollar_figure to co-2 for addictive and other diseases and a dollar_figure contribution to co-3 of city org ’s sole activity was game total gross revenue was dollar_figure of which dollar_figure is instant game instant game is reported of form 990-t as unrelated income subject_to the unrelated_business_income_tax org did file form 990-t for tax_year ending august 20xx reporting its unrelated business activity org did not receive any contributions or grants for the year of exam all game activity was conducted with paid workers form 886-a department of the treasury-internal revenue service state of state requires game licensed holders to make contributions to charities in order to note maintain their license catalog number 20810w _publish no irs gov page_2 schedule number or exhibit 886-a form rev date explanations of items name of taxpayer org law year period ended 20xx08 tax identification_number ein sec_501 of the internal_revenue_code provides that an organization described in sec_501 is exempt from income_tax sec_501 of the code exempts from federal_income_tax corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated it engages primarily in activities that accomplish one exclusively for one or more exempt purposes only if or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose the existence of a substantial nonexempt purpose regardless of the number or importance of exempt purposes will cause failure of the operational_test 326_us_279 sec_502 feeder organizations a general_rule -an organization operated for the primary purpose of carrying_on_a_trade_or_business for profit shall not be exempt from taxation under sec_501 on the ground that all of its profits are payable to one or more organizations_exempt_from_taxation under sec_501 b special rule -for purposes of this section the term trade_or_business shall not include- any trade_or_business in which substantially_all the work in carrying on such trade_or_business is performed for the organization without compensation or revrul_61_170 1961_2_cb_112 ruled that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section operational_test it is not exempt if an organization fails to meet either the organizational_test or the revrul_70_4 1970_1_cb_126 ruled that sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for educational_purposes sec_1_501_c_3_-1 of the income_tax regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose it engages primarily in activities which in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes the court found that the form 886-a catalog number 20810w page _ publish no irs gov department of the treasury-internal revenue service schedule number or exhibit explanations of items form 886-a rev date name of taxpayer org trade_association had an underlying commercial motive that distinguished its educational program from that carried out by a university year period ended 20xx08 tax identification_number ein taxpayer’s position taxpayer has not stated their final position at the time or this report government’s position it is the government's position that ‘org’ is not operated as an organization described in sec_501 of the internal_revenue_code the address shown on form_990 return address city state is in better co-1 where game is played org’ 's sole activity is game game is not an exempt activity business bureau of washington d c inc v united_states 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes fifty five percent of org 's gross revenue is from pull tabs instant game instant game is a trade_or_business for profit and is an unrelated exempt activity org did not receive any contribution or grants for the year of exam all game activity was conducted with paid workers sec_502 specifically provides that an organization operated for the primary purpose of carrying_on_a_trade_or_business for profit shall not be exempt under on the ground that all of its profits are payable to organizations which do qualify under sec_501 note examination revealed no exempt activity what so ever in year of exam conclusion org is not operating exclusively for purposes specified in sec_501 c and is not exempt from income_tax under sec_501 effective september 20xx in order to be treated as a c the exempt_organization must in operation perform an exempt activity related to it's exempt_purpose this organization during the year of exam performed no exempt activity and fails the operation test therefore we propose revocation if you agree to the proposed revocation please sign form_6018 and mail back to the person listed in the attached letter with in days of receipt of this letter if you do not agree to the proposed revocation please refer to the letter and attached publications for the appeals process or contact the person listed in the letter lf this proposed revocation is upheld form_1120 u s_corporation income_tax return should be filed for tax years ending beyond the date of revocation form 886-a catalog number 20810w page_4 publish no irs gov department of the treasury-internal revenue service


internal_revenue_service number release date index numbers ------------------------- ---------------------- ------------------------------------------------------ -------------------------------- -------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number -------------------- refer reply to cc corp b04 plr-152006-11 date date legend government --------------------- fund -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ ---------------------------------- ----------------------- newco policyholders ------------------------------------------------------ ------------------------------------------------------ ----------------------- ---------------------------------------------------------- ---------------------------------------------------------------------- - ----------------------------------------------------------------------- ----------------------------------------------------------------- law ------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------- ------------------ subs ------------------------------------------------------------------------ ---------------------------------------------------------------------- --------------------------------------------------------------------- -- --------------------------------------------------------------- -------- --------------------------------------------------------- -------------------------------------------------------------- --------- -------------------------------------------------------------- --------- plr-152006-11 ---------------------------------------------------------------- ------- ---------------------------------------------------------------- ------- --------------------------------------------------------- -------------------------------------------------------------- --------- -------------------------------------------------------------- --------- ------------------------------------------------------------------ ----- ------------------------------------------------------------------------ - ------------------------- governor board legislature ------------------------------------------- --------------------------------------- --------------------------------------------- privatization legislation ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------ -------------------------------------------------- insurance_business --------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ interests ------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------- - --------------------- agency state x year year year date date -------------------------------------------- ---------------------------------- ---------- ------- ------- ------- ------------------ ---------------------- plr-152006-11 dear ---------------- this letter responds to your date letter requesting rulings under sec_351 and sec_832 of the internal_revenue_code_of_1986 as amended the code regarding the proposed transaction defined below the information provided in that letter and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process summary of facts fund conducts the insurance_business throughout state x to allow fund policyholders to comply with the law the government established fund in year as part of the agency in year fund became an unincorporated agency of the government under fund’s enabling statute the governor appoints the board and the board appoints a manager to oversee the daily operations of fund fund is subject_to oversight by the legislature and all money in fund would be subject_to disposition by the legislature if the law was repealed fund directly and indirectly wholly owns the stock of the subs for federal_income_tax purposes fund is classified as a tax-exempt_organization under sec_501 and uses the accrual_method of accounting to compute its income on a calendar year-end basis for purposes of this letter_ruling fund is not recognized as an entity separate from the government in year the government moved to privatize the insurance_business conducted by fund the privatization legislation which became effective on date temporarily continued fund to provide for a transition_period to allow the board to establish a successor mutual insurer corporation to fund proposed transaction pursuant to the privatization legislation and to achieve what are represented to be valid business reasons the following transactions that constitute the proposed transaction will occur on date i all of the assets of fund will be transferred to newco and newco will assume the liabilities associated with the insurance_business by operation of law all policies owned by policyholders along with any advanced deposits placed with fund will novate to and be plr-152006-11 deposited in an account with newco respectively as a result all of the rights and obligations of fund including those rights and obligations under policies issued by fund will become the rights and obligations of newco newco will use the accrual_method of accounting and have a calendar year-end the novation satisfies state requirements if any with respect to the policyholder and or insurance department notification and consent for assumption_reinsurance contracts ii iii newco will issue the interests directly to the policyholders the interests will entitle the policyholders to receive dividends if and when declared and to share in the assets of newco in the event of a liquidation the policyholders will hold all of the voting power of newco immediately after the proposed transaction no rights or property will be issued or transferred by newco directly to fund fund will cease to exist for all purposes and the government will no longer have any rights or obligations in the insurance_business or in newco representations newco makes the following representations regarding the proposed transaction a fund is an organization that is an integral part of the government and therefore not eligible to be classified under sec_301_7701-2 as a corporation for federal_income_tax purposes b newco qualifies as an insurance_company for federal_income_tax purposes c no stock securities or other ownership interests will be issued for services rendered to or for the benefit of newco in connection with the proposed transaction d no stock securities or other ownership interests will be issued for indebtedness of newco that is not evidenced by a security or for interest on indebtedness of newco which accrued on or after the beginning of the holding_period of fund for the debt e all rights title and interests for each copyright in each medium of exploitation will be transferred to newco plr-152006-11 f fund will not retain any significant_power_right_or_continuing_interest within the meaning of sec_1253 in any trademarks or trade names being transferred g none of the stock or other ownership interests to be transferred will be sec_306 stock within the meaning of sec_306 h the proposed transaction will not be the result of the solicitation by a promoter broker or investment house i fund will not retain any rights in the property transferred to newco j the value of the stock received in exchange for accounts_receivable will be equal to the net value of the accounts transferred ie the face_amount of the accounts_receivable previously included in income less the amount of the reserve for bad_debts k any debt relating to the stock of the subs being transferred that is being assumed or to which such stock is subject was incurred to acquire such stock of the subs and was incurred when such stock was acquired and fund is transferring all of the stock for which the acquisition_indebtedness being assumed or to which such stock is subject was incurred l the adjusted_basis and the fair_market_value of the property transferred by fund to newco will be in each instance equal to or in excess of the sum of the liabilities assumed as determined under sec_357 by newco m the aggregate fair_market_value of the assets transferred by fund to newco will exceed the sum of i the amount of liabilities to be assumed as determined under sec_357 by newco in connection with the exchange ii the amount of liabilities owed to newco by fund that will be discharged or extinguished in connection with the exchange and iii the amount of any money and the fair_market_value of any other_property other than stock permitted to be received under sec_351 without the recognition of gain to be received by fund in connection with the exchange the fair_market_value of the assets of newco will exceed the amount of its liabilities immediately_after_the_exchange n the aggregate fair_market_value of the property transferred to newco will be equal to or exceed the aggregate adjusted bases of such property immediately_after_the_exchange o the liabilities of fund to be assumed as determined under sec_357 by newco will be incurred in the ordinary course of business and will be associated with the assets to be transferred plr-152006-11 p there will be no indebtedness between fund and newco and there will be no indebtedness created in favor of fund as a result of the proposed transaction q the transfers and exchanges will occur under a plan agreed upon before the proposed transaction in which the rights of the parties are defined r all exchanges will occur on approximately the same date s there is no plan or intention on the part of newco to redeem or otherwise reacquire any stock indebtedness or other ownership interests issued in the proposed transaction t taking into account any issuance of additional shares of newco stock or other ownership interests any issuance of stock or other ownership interests for services the exercise of any of newco stock_rights warrants or subscriptions a public offering of newco stock and the sale exchange transfer by gift or other_disposition of any of the stock or other ownership interests of newco to be received in the exchange by virtue of requiring the fund board to perform all acts necessary to establish a successor mutual insurance corporation newco and by directing the transfer of all of fund’s assets and obligations to newco government will be in control of newco within the meaning of sec_368 u the interests issued by newco in the proposed transaction will be approximately equal to the fair_market_value of the property transferred to newco v newco will remain in existence and retain and use the property transferred to it in a trade_or_business w there is no plan or intention by newco to dispose_of the transferred property other than in the normal course of business operations x each of fund and newco will pay its own expenses if any incurred in connection with the proposed transaction y the proposed transaction will not constitute transfers of property to an investment_company within the meaning of sec_351 and sec_1_351-1 z fund was not and will not be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the equity interests received in the exchange will not be used to satisfy the indebtedness of such debtor plr-152006-11 aa newco will not be a personal_service_corporation within the meaning of sec_269a bb fund would be permitted under the constitution of state x to own all of the stock or other equity ownership interests in newco cc the proposed transaction is motivated in substantial part by bona_fide business purposes unrelated to federal income taxes dd newco will report its operations on a calendar-year basis using the accrual_method of reporting prescribed by the national association of insurance commissioners ee the proposed transaction will have no effect on those policyholders that are directly insured by subs rulings based solely on the information and representations submitted we rule as follows on the proposed transaction for federal_income_tax purposes the proposed transaction will be treated as if a the government through fund transfers the insurance_business and subs to newco in exchange for all of the interests in newco and the assumption by newco of related liabilities collectively the exchange and b the government through fund transfers the interests to the policyholders see 70_tc_121 the interests deemed received by the government through fund in the exchange will be treated as stock for purposes of sec_351 except as provided in ruling the government through fund will recognize no gain_or_loss in connection with the exchange sec_351 and sec_357 and c the requirement of sec_351 that the government through fund control newco immediately_after_the_exchange will be satisfied because the government through fund has the right in choosing the method of privatizing the insurance_business conducted by the government through fund either to retain the interests or to designate other persons to receive the interests see d’angelo associates inc v commissioner sec_304 and not sec_351 and not so much of sec_357 and sec_358 as relates to sec_351 will apply to newco’s acquisition of the portion of the stock of the subs treated as received in exchange for newco’s assumption of the government’s through fund liabilities sec_304 the acquisition by plr-152006-11 newco of the portion of the stock of the subs treated as received in exchange for newco’s assumption of the government’s through fund liabilities will be treated as a distribution in redemption of a corresponding portion of newco stock subject_to the limitations and provisions of sec_302 no income gain_or_loss will be recognized by newco as a result of the exchange sec_1032 to the extent that sec_351 applies to the exchange the basis of each asset received by newco in the exchange will equal the basis of that asset in the hands of the government through fund immediately before the exchange sec_362 to the extent that sec_351 applies to the exchange the holding_period of each asset received by newco in the exchange will include the holding_period of that asset in the hands of the government through fund immediately before the exchange sec_1223 for the year in which fund enters the proposed transaction the income reflected by newco will be computed pursuant to the principles of sec_832 and newco will include in its unpaid_losses at the beginning of that year for purposes of sec_832 the ending balances of unpaid_losses determined pursuant to sec_846 on a discounted basis that fund held immediately before the transaction in connection with the policies that were the subject of the transaction and newco will not take into premium income for purposes of sec_832 any amount with respect to the assets transferred to it in consideration of the assumption_of_liabilities in connection with the transaction see revrul_94_45 1994_2_cb_39 for the year in which fund entered into the proposed transaction premiums earned by newco will be computed pursuant to the principles of sec_832 and newco will include in its beginning unearned premiums the ending balances of unearned premiums computed pincite percent pursuant to sec_832 that fund held immediately before the transaction in connection with the policies that were the subject of the transaction see revrul_94_45 1994_2_cb_39 the realization of the value of any insurance in force transferred in the exchange will not be subject_to the provisions of sec_832 nor will newco be entitled to deduct as a deferred expense under sec_832 or sec_832 an amount equal to that value caveats plr-152006-11 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 procedural statements this ruling letter is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent 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 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 _______________________________ lewis k brickates chief branch office of associate chief_counsel corporate cc


t c memo united_states tax_court leroy muncy petitioner v commissioner of internal revenue respondent docket no filed date leroy muncy pro_se ann louise darnold and h elizabeth h downs for respondent memorandum findings_of_fact and opinion nega judge respondent determined deficiencies and additions to tax and asserted increased deficiencies with respect to petitioner as follows unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue and all rule references are to the continued deficiency dollar_figure big_number big_number big_number big_number big_number sec_6651 additions to tax sec_6651 sec_6654 dollar_figure big_number big_number big_number big_number big_number dollar_figure big_number big_number big_number big_number big_number dollar_figure big_number big_number big_number big_number big_number year respondent originally determined deficiencies of dollar_figure dollar_figure and dollar_figure for and respectively by reducing petitioner’s total corrected tax_liabilities for these years the numbers above by the amounts of restitution ordered by the u s district_court for the eastern district of arkansas respondent now asserts in his amendment to answer that the total corrected tax_liabilities unreduced by the restitution amounts are the appropriate tax deficiencies for these years the issues for decision are whether petitioner had unreported income for the taxable years through years at issue whether petitioner is liable for the additions to tax for these years and whether petitioner is liable for a penalty under sec_6673 on the grounds that petitioner’s arguments are frivolous and that the proceeding was commenced and maintained primarily for delay continued tax_court rules_of_practice and procedure all monetary amounts are rounded to the nearest dollar findings_of_fact petitioner resided in arkansas at the time the petition was filed petitioner failed to file federal_income_tax returns and pay estimated_tax for tax years through respondent prepared substitutes for returns sfrs for these years pursuant to sec_6020 from through petitioner worked as a wholesale tire salesman at beacon tire inc beacon tire petitioner was treated as an employee of beacon tire until around this time petitioner was exposed to an antitaxation group that convinced him that his wages were not taxable and that it was illegal for beacon tire to withhold tax from his wages at his insistence beacon tire stopped withholding petitioner’s income_tax in petitioner began working with individuals who promoted tax- avoidance schemes the plan was to set up employment agencies to receive petitioner’s wages so the wages would not be reported in his name or paid directly to him accordingly petitioner became a contractor for a company called contract select inc contract select and a contract was entered into between beacon tire and contract select although petitioner was allegedly an independent_contractor for contract select which eventually became accurate consulting no other aspects of petitioner’s job or duties changed beacon tire continued to reimburse petitioner for all his business_expenses provided him with a company vehicle to drive and determined his earnings checks for earnings were sent to contract select from to and accurate consulting from to and were either deposited or transferred into a_trust or a nominee account that petitioner created cashed by petitioner or endorsed over to a third party petitioner made all decisions regarding the receipt deposit or disbursement of income that beacon tire paid to these entities upon petitioner’s insistence no forms w-2 wage and tax statement nor any version of form_1099 were issued to petitioner by contract select or accurate consulting to report income paid to him for tax years through petitioner was investigated by the criminal_investigation_division of the internal_revenue_service irs after audits revealed that petitioner was using an abusive tax scheme and was claiming to be a sovereign living soul who was not a citizen_of_the_united_states or the state of arkansas and not a party to the united_states constitution during the investigation no valid business_purpose was discovered to explain why petitioner’s income was sent to contract select or accurate consulting in an attempt to impede the investigation petitioner filed over freedom_of_information_act requests with the irs in date petitioner pleaded guilty to one count of willful attempt to evade and defeat his individual income_tax for the tax_year his criminal plea agreement stated except to the extent otherwise expressly specified herein this agreement does not bar or compromise any civil or administrative claim pending or that may be made against the defendant including but not limited to tax matters the plea agreement also stated this agreement is binding only upon the united_states attorney’s office for the eastern district of arkansas and the defendant it does not bind any other federal state or local prosecuting administrative or regulatory authority in its judgment filed date the district_court placed petitioner on probation for three years and required him to file tax returns as a condition of the probation united_states v muncy no 10-cr-00018-bsm e d ark filed date the judgment also deferred the full determination of restitution or specifically the count states that petitioner knowingly utilized various shell entities and abusive trusts to prevent withholding by his employer then intentionally refused to file his tax returns for the purpose of willfully avoiding the payment of such individual income taxes that would have been due or owing such taxes were substantial such conduct by petitioner was in violation of title_26 u s c sec_7201 the information sheet states on or about date petitioner willfully attempt ed to evade and defeat his individual income_tax imposed by law for the calendar_year we take this to mean that the charge relates to the tax_year what it called criminal monetary penalties until a later date soon after a restitution report was filed determining restitution amounts of dollar_figure dollar_figure and dollar_figure for tax years through respectively an order was entered on date reflecting this determination on date respondent mailed a notice_of_deficiency to petitioner and attached a form 4549-a income_tax discrepancy adjustments in the notice respondent calculated petitioner’s total corrected tax_liability for each year for each of the tax years through petitioner’s deficiency amount was his total corrected tax_liability for each of the tax years through respondent reduced petitioner’s total corrected tax_liability by the amounts of criminal restitution ordered for that year to come up with the deficiency amount on date respondent made assessments of the restitution in his internal records on date respondent filed a first amendment to answer stating that petitioner’s deficiency for each of the tax years through should be petitioner’s total corrected tax_liability for that year unreduced by the amount of criminal restitution for that year petitioner asserts that the restitution report and the order for restitution represent the full settlement of his tax_liabilities for through there is no evidence that petitioner has satisfied his criminal restitution order or received any discharge during the pendency of this case petitioner has served on respondent a first formal discovery request a second formal discovery request and interrogatories seeking information about the employment status and authority of irs personnel on date petitioner filed a motion to compel discovery in an attempt to obtain this information by order dated date the court denied this motion on the grounds that it advanced a frivolous argument and did not relate to the issues in the case thereafter petitioner filed a motion requesting a determination of the existence of the court’s subject matter jurisdiction essentially repeating his arguments regarding the inadequate delegated authority of irs personnel by order dated date the court denied petitioner’s motion and reminded him of the frivolous nature of his arguments i petitioner’s tax_liability opinion generally the commissioner’s determination_of_a_deficiency is presumed correct and the taxpayer has the burden of proving it incorrect rule a 290_us_111 however the commissioner generally bears the burden_of_proof with respect to any increases in deficiency rule a petitioner contends that respondent’s deficiency determinations for tax years through are null and void because the notice_of_deficiency was not issued and sent by a duly authorized delegate of the secretary petitioner also contends that respondent’s deficiency determinations for tax years through contravene petitioner’s criminal plea agreement and judgment petitioner argues in the alternative that the proper deficiency amounts are those set out in the notice_of_deficiency because they allow a credit for the amounts of restitution ordered for tax years through petitioner’s argument regarding the authority of irs employees is similar to those we have previously held to be without merit in numerous opinions we have determined that arguments questioning the authority of irs employees to sign and issue documents are frivolous see eg roye v commissioner tcmemo_2012_246 cooper v commissioner tcmemo_2006_241 slip op pincite we note that all of petitioner’s arguments are specious and without substance and many of them have been offered by others who are merely attempting to avoid the payment of federal tax kozack v commissioner tcmemo_2005_246 see also 136_tc_498 cf 737_f2d_1417 5th cir we perceive no need to refute petitioner’s arguments with somber reasoning and copious citation of precedent to do so might suggest that his arguments have some colorable merit petitioner also contends that respondent erred in determining deficiencies for the taxable years through because the deficiencies contravene his criminal plea agreement and judgment specifically petitioner contends that the district_court determined his tax_liabilities for through and that respondent is collaterally estopped from relitigating these amounts although the district_court ordered specific restitution amounts for each of the tax years through petitioner’s tax_liabilities for each of these years were not an essential element of the government’s case and were not actually litigated see sec_7201 419_f3d_829 8th cir aff’g tcmemo_2003_332 90_tc_162 holding that t he parties must actually have litigated the issues and the resolution of these similarly petitioner argues that the doctrine_of res_judicata applies for these years we note that collateral_estoppel rather than the related doctrine_of res_judicata may apply when a civil case follows a criminal case see 303_us_391 the difference in degree of the burden_of_proof in criminal and civil cases precludes application of the doctrine_of res_judicata 10_f3d_1553 11th cir issues must have been essential to the prior decision in order for collateral_estoppel to apply aff’d 904_f2d_525 9th cir senyszyn v commissioner tcmemo_2013_274 at although the existence of an underpayment in tax is a necessary element of tax_evasion under sec_7201 the determination of an exact liability evaded is not therefore respondent is not collaterally estopped from determining deficiencies relating to tax years through in the alternative petitioner contends that the increased deficiencies asserted in respondent’s amendment to answer for tax years through should be reduced by the amounts of restitution ordered for these years essentially petitioner contends that the amounts originally determined in the notice_of_deficiency are the correct amounts of deficiencies initially respondent determined deficiencies for tax years through by calculating petitioner’s total corrected tax_liability for each of these years furthermore petitioner’s plea agreement expressly states that it does not bar or compromise any civil or administrative claim pending or that may be made against the defendant including but not limited to tax matters the plea agreement states that it is binding only upon the united_states attorney’s office for the eastern district of arkansas and the defendant and does not bind any other federal state or local prosecuting administrative or regulatory authority the criminal judgment refers to the restitution payments as criminal monetary penalties and makes no mention of civil liabilities or penalties there is no overpayment for the court to consider under sec_6512 and subtracting the respective amounts of restitution ordered by the district_court subsequently in his amendment to answer respondent asserted that the amounts of restitution should not be subtracted from the calculated total corrected tax_liability for each of these years respondent met his burden_of_proof with respect to these increases in deficiencies asserted in his amended answer specifically respondent offered into evidence invoices from contract select and accurate consulting to beacon tire as well as canceled checks from beacon tire to these agencies documenting payments for petitioner’s wages these documents verify that petitioner received income in the amounts respondent determined petitioner conceded at trial that he received income from contract select and accurate consulting and it was his responsibility to show that the amounts he received from these agencies were nontaxable see 981_f2d_350 8th cir aff’g in part rev’g in part 96_tc_172 petitioner did not show that these amounts were in error or were not taxable this leaves us with the question of whether respondent should reduce his deficiency determinations by amounts of restitution previously ordered by the district_court the restitution statute expressly contemplates that a civil claim may be brought after the criminal prosecution by providing that the amount_paid under a restitution order shall be reduced by any amount later recovered as compensatory_damages for the same loss by the victim in any federal civil_proceeding u s c j a the reverse applies as well any amount_paid to the irs as restitution for taxes owed must be deducted from any civil judgment the irs obtains to collect the same tax_deficiency 217_f3d_960 8th cir this seems to imply that a civil judgment must be entered before the irs reduces a taxpayer’s tax_liability by amounts of restitution paid furthermore sec_6211 defines a deficiency as the correct_tax for a year minus amounts previously assessed as a deficiency before the enactment of sec_6201 and sec_6213 the court held that amounts paid to satisfy restitution ordered by a district_court are not amounts previously assessed as a deficiency for purposes of sec_6211 and do not reduce a deficiency determination weber v commissioner tcmemo_1995_ wl at emphasis added the enactment of sec_6201 and sec_6213 follows the logic of both the restitution statute and the court’s prior holding sec_6201 previously assessed means assessed before our decision see 135_tc_238 n applies to restitution orders entered after date and provides that the service shall assess and collect the amount of restitution under an order for failure to pay any_tax imposed under title_26 in the same manner as if such amount were such tax the plain language of sec_6201 states that the irs shall assess and collect restitution previously ordered by a district_court in the same manner as if such amount were such tax emphasis added this language is almost identical to the language in sec_6305 which provides that the irs shall assess and collect amounts certified by the secretary of health and human services as delinquent spousal and child_support payments in the same manner as if such amount were a tax imposed by subtitle c sec_6305 goes on to state that delinquent spousal and child_support payments assessed and collected by the irs as if they were a tax under that provision are not subject_to judicial review by the tax court--or any other federal court for that matter in other words delinquent spousal and child_support payments assessed under sec_6305 as if they were a tax are not assessed as a deficiency see 24_f3d_901 7th cir unlike a summary_assessment a deficiency assessment requires the irs to follow a number of statutory steps before it may undertake to collect the deficiency see also 796_f2d_582 1st cir sec_6305 therefore reflects the logical intent of congress to keep the irs from becoming embroiled in matters between states and individuals in which the federal_agency has no direct involvement another reference point for the analysis of the plain language in sec_6201 is sec_6665 which provides that additions to tax additional_amounts and civil penalties shall be assessed collected and paid in the same manner as taxes emphasis added we believe the distinction between as if and as is significant although this provision requires deficiency procedures for some additions to tax eg for failure_to_report_tips under sec_6652 sec_6665 goes on to say that certain additions to tax are not assessed collected and paid in the same manner as taxes and the regular deficiency procedures for assessment and collection do not apply to them see sec_6665 for purposes of subchapter_b of chapter subsection a of sec_6665 shall not apply to any addition_to_tax under sec_6651 sec_6654 or instead these other additions to tax are summarily assessed meyer v commissioner 97_tc_555 similarly sec_6213 which applies to notices of assessments of restitution states that regular deficiency procedures do not apply to amounts of restitution assessments see sec_6213 if the taxpayer is notified that an assessment has been or will be made pursuant to sec_6201 subsection a of sec_6213 pertaining to the procedures to challenge a deficiency in tax_court shall not apply with respect to the amount of such assessment although neither sec_6201 nor sec_6213 explicitly states that assessed restitution amounts may not be considered in the definition of a deficiency under sec_6211 we believe common sense dictates that they not be included as amounts previously assessed as a deficiency for purposes of that section furthermore the legislative_history of sec_6201 follows this reasoning specifically the legislative_history states that sec_6201 will allow the irs to assess and collect in the same manner as delinquent taxes mandatory orders of restitution cong rec emphasis added that being said we believe the as if such amount were such tax language of sec_6201 is significant and does not share the same meaning as in the same manner as taxes instead the as if language was intended to empower the irs to collect court-ordered restitution for criminal tax cases without following regular deficiency procedures the joint_committee on taxation’s general explanation also known as the blue_book provides some guidance on the question as well see staff of j comm on taxation general explanation of tax legislation enacted in the 111th congress pincite j comm print the joint_committee states that although an amount of restitution ordered is computed by reference to the taxes that would have been owed but for the criminal offenses charged restitution is not itself a determination of tax within the meaning of the code and does not provide a basis on which tax may be assessed id pincite thus a taxpayer’s tax_liability is assessed separately from restitution and in fact may exceed amounts of restitution ordered for the year or years in question see morse v commissioner f 3d pincite gillum v commissioner tcmemo_2010_280 aff’d 676_f3d_633 8th cir this comports with the purpose of the statute which is not intended to be a radical departure from the way restitution was previously collected for criminal tax cases for failure_to_pay_tax imposed under title_26 see h_r 111th cong preamble to provide for the assessment by the secretary_of_the_treasury of certain criminal restitution rather the statute is intended to enhance the irs’ and the treasury department’s collection we note that the blue books are not legislative_history though they can sometimes be relevant if persuasive united_states v woods u s __ __ 134_sct_557 capabilities when restitution is ordered cong rec the bill would also allow the irs to collect restitution debt that has been court ordered to be paid in criminal tax cases before the enactment of the statute collection responsibilities were shared among the district_court that ordered restitution the financial litigation unit of the local u s attorney’s office and the service see staff of j comm on taxation supra pincite now in addition to that collection mechanism the statute allows the service to immediately assess the restitution without issuing a statutory_notice_of_deficiency and collect as if it were a tax the court-ordered restitution see sec_6201 sec_6213 petitioner was ordered to pay restitution for failure_to_pay_tax imposed under title_26 for tax years through because the order was entered after date sec_6201 applies firearms excise_tax improvement act of pub_l_no sec_3 stat pincite although respondent assessed the restitution before our decision--that is the restitution was previously assessed respondent did not assess the restitution as a deficiency instead the restitution was summarily assessed therefore we conclude and hold that petitioner’s criminal plea agreement and judgment ordering restitution did not even if we were to assume arguendo that the restitution had been collected without assessment it would not have been collected as a deficiency discharge and do not reduce petitioner’s deficiencies for tax years through we sustain respondent’s deficiency determinations on the notice_of_deficiency for tax years through and sustain the increased deficiencies asserted in respondent’s amendment to answer for tax years through ii additions to tax and penalty petitioner asserts that the doctrines of res_judicata and collateral_estoppel preclude respondent from seeking civil_fraud additions to tax for the reasons described above we conclude that those doctrines do not apply see also morse v commissioner f 3d pincite t he government does not surrender its right to seek civil_fraud penalties by undertaking a criminal tax prosecution therefore we review respondent’s determination that petitioner is liable for additions to tax for tax years through petitioner also contends in his petition that the double_jeopardy clause of the fifth_amendment of the u s constitution bars the commissioner from imposing civil_fraud penalties and additions to tax in the notice_of_deficiency we note that the double_jeopardy clause protects only against the imposition of multiple criminal punishments for the same offense 522_us_93 emphasis added furthermore the civil_tax_penalty for fraud is not a punishment for purposes of the double_jeopardy clause of the fifth_amendment helvering v mitchell u s pincite morse v commissioner tcmemo_2003_332 aff’d 419_f3d_829 8th cir roberts v commissioner tcmemo_1997_216 a fraudulent_failure_to_file a tax_return the addition_to_tax in cases of fraud is a civil sanction provided primarily as a safeguard for the protection of revenue and to reimburse the government for the heavy expense of investigation and loss resulting from the taxpayer’s fraud 303_us_391 see also price v commissioner tcmemo_1996_204 to sustain the addition_to_tax provided by sec_6651 respondent has the burden of proving by clear_and_convincing evidence that petitioner underpaid his income_tax and that some part of the underpayment was due to fraud see sec_7454 rule b see also 102_tc_632 jones v commissioner tcmemo_2014_101 good v commissioner tcmemo_2012_323 in applying the addition_to_tax under sec_6651 we consider the same elements or long-recognized badges_of_fraud discussed in cases applying sec_6663 or former sec_6653 clayton v commissioner t c pincite see 99_tc_202 fraud may be proved by circumstantial evidence and the taxpayer’s entire course of conduct may establish the requisite fraudulent intent 80_tc_1111 circumstantial evidence of fraud present here includes the pattern of failure_to_file returns failure to report substantial amounts of income concealing assets engaging in illegal activities failure to cooperate with the taxing authorities in determining petitioner’s correct liability and failure to make estimated_tax payments see eg 796_f2d_303 9th cir aff’g tcmemo_1984_601 252_f2d_56 9th cir clayton v commissioner t c pincite 75_tc_1 67_tc_181 aff’d without published opinion 578_f2d_1383 8th cir respondent contends first that petitioner is estopped to deny fraud for tax_year by his guilty plea to a violation of sec_7201 a conviction for federal_income_tax evasion either upon a plea of guilty or upon a jury verdict of guilt conclusively establishes fraud in a subsequent civil tax_fraud proceeding through application of the doctrine_of collateral_estoppel weber v commissioner tcmemo_1995_125 petitioner was convicted of criminal_tax_evasion under sec_7201 pursuant to a plea agreement in the district_court in which he pleaded guilty to one count of tax_evasion for the taxable_year because the conviction required showing that petitioner willfully attempted to evade tax petitioner is collaterally estopped from contesting that he is liable for the addition_to_tax for fraud with respect to the taxable_year see 96_tc_858 aff’d 959_f2d_16 2d cir we therefore hold that petitioner is liable for the fraud addition_to_tax for the tax_year petitioner did not file returns for any of the years in issue and he did not dispute any of the facts establishing his receipt of substantial taxable_income during the years in issue petitioner engaged in a complex scheme to conceal his income and assets during the years in issue he was convicted of engaging in that conduct in order to defeat the payment of taxes due for and the obvious purpose of engaging in the scheme was to evade taxes for the previous years and subsequent year as well the objective facts are clear_and_convincing evidence of fraud sufficient to satisfy respondent’s burden_of_proof the additions to tax for fraud have frequently been imposed on taxpayers like petitioner who were knowledgeable about their taxpaying responsibilities and consciously decided to unilaterally opt_out of our system of taxation 94_tc_316 citing numerous relevant cases see niedringhaus v commissioner t c pincite accordingly we hold that petitioner is liable for the additions to tax under sec_6651 and sustain respondent’s determinations as set forth in the notice_of_deficiency b failure_to_pay_tax sec_6651 provides for an addition_to_tax when a taxpayer fails to timely pay the tax shown on a return unless the taxpayer proves that the failure was due to reasonable_cause and not due to willful neglect respondent has satisfied his burden of production with respect to the additions to tax under sec_6651 see sec_7491 respondent prepared sfrs in accordance with sec_6020 for all of the years at issue and petitioner did not pay the amounts shown as due see sec_6651 120_tc_163 as a result respondent’s burden of producing evidence that supports an addition_to_tax for failure to timely pay tax due under sec_6651 is satisfied petitioner has not offered any arguments alleging reasonable_cause for failure to pay the amounts shown as due on the substitute returns and so is liable for the addition_to_tax under sec_6651 for each of the years at issue c failure to pay estimated_tax respondent determined that petitioner is liable for additions to tax under sec_6654 sec_6654 and b provides for an addition_to_tax in the event of a taxpayer’s underpayment of a required_installment of estimated_tax as it relates to this case each required_installment of estimated_tax is equal to of the required_annual_payment which in turn is equal to the lesser_of of the tax shown on the taxpayer’s return for that year or if no return is filed of his or her tax for such year or of the tax shown on the taxpayer’s return for the immediately preceding_taxable_year sec_6654 and b the commissioner’s burden of production under sec_7491 requires him to produce for each year for which the addition is asserted evidence that the taxpayer had a required_annual_payment under sec_6654 to do so the commissioner must establish the tax shown on the taxpayer’s return for the preceding year or demonstrate that the taxpayer filed no such return see 127_tc_200 aff’d 521_f3d_1289 10th cir schlussel v commissioner tcmemo_2013_185 respondent introduced evidence to prove that petitioner was required to file federal_income_tax returns for through that petitioner did not file returns for through and that petitioner did not make estimated_tax payments for through however respondent did not introduce evidence sufficient to prove that petitioner had an obligation to make any estimated_tax payments for see wheeler v commissioner t c pincite respondent was required to produce sufficient evidence that petitioner had a required_annual_payment for under sec_6654 and respondent failed to do so instead respondent produced evidence establishing that petitioner did not file a return for and that petitioner had an income_tax_liability for that year this evidence was sufficient to permit the court to make the analysis required by sec_6654 however in order to permit the court to make the analysis required by sec_6654 and to conclude that respondent had met his burden of producing evidence that petitioner had a required_annual_payment for payable in installments under sec_6654 respondent also had to introduce evidence showing whether petitioner had filed a return_for_the_preceding_taxable_year and if he did the amount of tax shown on that return respondent did not do so without that evidence we cannot identify the number equal to of the tax shown on petitioner’s return we cannot complete the comparison required by sec_6654 and we cannot conclude that petitioner had a required_annual_payment for that was payable in installments under sec_6654 consequently respondent’s determination regarding the sec_6654 addition_to_tax for the tax_year is not sustained petitioner did not file returns for tax_year sec_2001 through he did not file returns for the years immediately preceding these years and he did not pay estimated_tax in these years there are exceptions to the obligation to make estimated_tax payments set forth in sec_6654 but petitioner has not shown that he meets the criteria for those exceptions see sec_6654 138_tc_228 the burden_of_proof is on petitioner to show that he is covered by one of the relief provisions of sec_6654 therefore petitioner is liable for the addition_to_tax under sec_6654 for tax_year sec_2001 through calculated with respect to the required annual payment-- of the tax due for those years d sec_6673 penalty for frivolous arguments the court may penalize a taxpayer if the taxpayer institutes or maintains proceedings primarily for delay or if the taxpayer’s position is frivolous or groundless sec_6673 in this case the court will not grant sanctions this is not because the facts and law do not support the sanctions rather the court chooses to give petitioner a warning before imposing sanctions while the record supports such sanctions the court is circumspect about imposing them without a proper warning to parties now that such a warning has been issued the court expects that petitioner will not continue to make frivolous arguments in this or other tax_court proceedings or relitigate a settled case in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing an appropriate decision will be entered


internal_revenue_service number release date index number -------------------------------- ------------------------------- ------------------------------------------- ---------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-105077-08 date date legend x --------------------------------- ----------------------- y -------------------------------------------------- -------------------------------------------- -------------------------------------------------- ------------- ------------------------- -------------------- ------------------------- -------------------------- ------------------ ------------------------------------------------ z state d1 d2 d3 d4 d5 d6 dear -------------- this letter responds to the letter dated date and related correspondence written on behalf of x requesting that the commissioner of the plr-105077-08 internal revenue permit x to elect to change its classification under sec_301_7701-3 of the procedure and administration regulations facts the information submitted states that x was formed under the laws of state on d1 x elected to be classified as an association for federal tax purposes effective d2 on d3 x was acquired by y a real_estate_investment_trust upon acquisition y and x elected to treat x as a taxable_reit_subsidiary trs under sec_856 of the internal_revenue_code code on d4 y sold a portion of x’s outstanding membership interests to z on d5 z sold all of its interests in x to y so that y became the sole shareholder of x x y and shareholders of y proposed a transaction intended to qualify as a reorganization under sec_368 according to the proposal y will contribute its interest in x to a newly formed trs of y contribution date it is intended that x elect to be treated as a disregarded_entity effective d6 since the proposed disregarded_entity classification election will come within the 60-month period from d2 x requests that it be permitted to elect to make such a classification change based on the fact that more than percent of the ownership interests in x on d6 will be held by persons that did not own any interest in x as of d2 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a domestic eligible_entity elects otherwise the entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the appropriate service_center under sec_301 c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_301_7701-3 provides that if an eligible_entity makes an election under sec_301_7701-3 to change its classification the entity cannot change its plr-105077-08 classification by election again during the months succeeding the effective date of the election however the commissioner may permit the entity to change its classification by election within the months if more than percent of the ownership interests in the entity as of the effective date of the subsequent election are owned by persons that did not own any interests in the entity on the filing_date or on the effective date of the entity’s prior election conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_7701-3 and therefore is permitted to file a form_8832 to elect to be treated as a disregarded_entity effective on d6 a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the code in particular we express no opinion concerning whether the proposed transaction will qualify as a reorganization under sec_368 this ruling is directed only to the taxpayer requesting it sec_6110 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 mailed to your authorized representative sincerely dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c summary opinion united_states tax_court charles h little iii petitioner v commissioner of internal revenue respondent docket no 14304-04s filed date charles h little iii pro_se ilesa mcauliffe for respondent couvillion special_trial_judge this case was heard pursuant to sec_7463 in effect when the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority 1unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for the year and the additions to tax under sec_6651 and sec_6654 in the amounts of dollar_figure and dollar_figure respectively prior to trial the parties agreed to a deficiency in the amount of dollar_figure the remaining issues for decision are whether petitioner is liable for the additions to tax under sec_6651 and sec_6654 some of the facts were stipulated those facts with the exhibits annexed thereto are so found and made part hereof petitioner’s legal residence at the time the petition was filed was mountlake terrace washington petitioner is a real_estate agent who specialized in what he described as manufactured_home parks and rv parks more specifically this is a phase or aspect of commercial real_estate in which the agent specializes in real_estate transactions representing either buyers or sellers of parks or tracts of land that are adapted as a location for manufactured homes and or recreational vehicles rvs the customary practice is that the entire park is owned by a landlord and lots or spaces in the park are designated and leased for manufactured homes or rvs each lot is provided with the necessary utilities the individual 2the settlement is based upon petitioner’s concession that he earned dollar_figure in nonemployee compensation during the year and dollar_figure in taxable interest_income lots are not sold the entire park constitutes an economic unit thus if an investor is interested in purchasing a park or if the owner of an existing park desires to sell real_estate agents such as petitioner typically would be used because of their experience in this segment of real_estate petitioner did not own develop or manage such parks he was simply an agent in what appears to be a niche in the field of real_estate a notice_of_deficiency was issued to petitioner for the year at the time the notice_of_deficiency was issued on date petitioner had not filed a federal_income_tax return for the year the year at issue petitioner acknowledged that for several years during the 1990s he had filed protester federal_income_tax returns during these years he was following the advice of a lady who apparently specialized in filing protester returns and in handling correspondence received by her clients including petitioner from the irs regarding such returns some of the returns filed by petitioner were zero returns on which each line on the return was filled in with a zero petitioner and his wife were also devastated as he explained over the loss of their daughter who died unexpectedly and for no known reason in the daughter was not married and had two young girls prior to her death she had placed one of the girls for adoption and at her death petitioner and his wife assumed custody of the other girl whom they later adopted that child was born in and for several years had serious medical problems all of which were costly to petitioner and his wife petitioner contends that these events had a severe impact on him and his wife the court understands that to mean that petitioner and his wife essentially lost focus on their lives at some point petitioner heeded the advice of a lady who encouraged people not to pay federal income taxes and he filed protester income_tax returns based on that advice as an example for the tax_year petitioner and his wife filed a joint federal_income_tax return on which they reported their income expenses and a tax_liability of dollar_figure based on the advice of the return preparer petitioner thereafter filed three amended returns claiming an overpayment on each amended_return the claimed overpayment on the third return constituted the balance of tax reported on the original return during all this time petitioner continued in his regular employment petitioner was also courted during this time by other professional tax protesters who charged for their advice on how to beat the tax system at some point some of petitioner’s peers in the real_estate business counseled him that professional protesters were crooks who would take his money and ultimately he petitioner would be held liable for his taxes petitioner accepted this advice and decided to thereafter file federal_income_tax returns utilizing the services of a responsible certified_public_accountant it appears that for or more years prior to the year at issue petitioner had to file returns or amended returns to correctly report his income for those years petitioner contends that for these prior years he was not required by the irs to pay any penalties at trial counsel for respondent agreed that for these prior years additions to tax against petitioner were abated on this history petitioner contends he should not be held liable for the sec_6651 and sec_6654 additions to tax that are before the court for the tax_year sec_7491 imposes upon the commissioner the burden of production with respect to the liability of any person for any penalty addition_to_tax or additional_amount imposed by this title in 116_tc_438 this court held that the phrase burden of production does not mean that the burden_of_proof is on the commissioner with respect to penalties and additions to tax the burden of production under higbee is satisfied where respondent shows in the case of the sec_6651 addition_to_tax that no income_tax return has been filed or if filed was not filed timely and with respect to sec_6654 that estimated_taxes have not been paid 3for the year at issue the income_tax return was filed in date and was accepted and processed by the irs a copy of that return was not offered into evidence at trial as noted earlier petitioner had not filed a federal_income_tax return at the time the notice_of_deficiency was issued therefore respondent’s burden of production was met as to the sec_6651 addition_to_tax sec_6651 provides for an addition_to_tax for failure_to_file a federal_income_tax return this addition_to_tax is not imposed if the failure_to_file is not due to willful neglect and is due to reasonable_cause the term willful neglect has been interpreted to mean a conscious intentional failure or reckless indifference 469_us_241 reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence and was nonetheless unable to file the return timely fambrough v commissioner tcmemo_1990_104 petitioner’s situation here at best can be considered reckless indifference even though petitioner and his wife were experiencing a stressful situation lingering from the untimely death of their daughter and the illness of their granddaughter petitioner nonetheless pursued gainful employment during the tax_year at issue these personal problems although serious did not prevent petitioner from engaging in his business activity and in earning substantial income since these personal problems did not impair petitioner’s ability to pursue gainful employment they likewise should not have impaired petitioner’s duty to file a timely return for the year at issue although additions to tax were abated for petitioner’s prior years the court sees no basis for an abatement for the year at issue the court moreover has no obligation to abate the additions to tax simply because they were abated for prior years respondent is sustained on this issue the final issue is respondent’s determination that petitioner is liable for the addition_to_tax under sec_6654 for failure to pay estimated_tax this addition_to_tax is applicable where there is an underpayment of estimated_tax subject_to exceptions or waivers that are not applicable here sec_6654 the provisions of this section are mandatory where there is an underpayment_of_tax as determined under sec_6654 this section contains no exonerating provisions such as reasonable_cause or lack of willful neglect 33_tc_1071 in general estimated income_tax payments are used to provide for payment of income taxes not collected through withholding sec_6654 provides for quarterly installments income taxes withheld from salaries or wages apply toward the amount of each required quarterly installment however to the extent withholdings do not satisfy the required quarterly installments the taxpayer is required to make supplemental quarterly payments of estimated_taxes sec_6654 since petitioner was self-employed he was required to make estimated payments he did not make estimated payments of his taxes for the year at issue under sec_6654 the amount of the four quarterly installments including taxes withheld generally must equal percent of the tax for the year or percent of the tax for the preceding_taxable_year whichever is less the court therefore sustains respondent on this issue reviewed and adopted as the report of the small_tax_case division due to the agreed reduced deficiency the additions to tax must be recalculated accordingly decision will be entered under rule