t c memo united_states tax_court harry j sullivan petitioner v commissioner of internal revenue respondent docket no filed date harry j sullivan pro_se anita a gill for respondent memorandum findings_of_fact and opinion dean special_trial_judge respondent determined a deficiency of dollar_figure in petitioner's federal_income_tax and an addition_to_tax of dollar_figure under sec_6651 unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure - - respondent determined that petitioner failed to substantiate that certain deductions were ordinary and necessary expenses_incurred while carrying_on_a_trade_or_business we must decide whether petitioner is entitled to deduct on schedule c profit or loss from business car and truck expenses and amounts deducted as wages paid for casual labor in excess of those allowed by respondent is liable for self-employment_tax and failed to file timely his federal_income_tax return without reasonable_cause the stipulated facts and exhibits are incorporated herein by reference at the time the petition in this case was filed petitioner resided in marietta ohio findings_of_fact petitioner filed his form_1040 u s individual_income_tax_return on date petitioner was self-employed in as a subcontractor he performed work on windows patios patio doors siding and other cosmetic work on houses petitioner drove a pickup truck with an 8-foot bed that he used to carry various pieces of equipment used in his business his work required him to carry pump-jacks for scaffolding he used on homes a porta-brake for metal bending ladder jacks roof brackets a 10-inch portable saw and a table saw during petitioner drove from his home to job sites located in west virginia pennsylvania maryland and ohio - - petitioner obtained his jobs through contractors he had met over the years and with whom he maintained contact periodically they called him when jobs became available it was not practical for petitioner to have a checking account in each of the states in which he worked even if he had such accounts the casual labor hired by petitioner usually insisted on payment in cash petitioner kept no record of the persons he employed during the year but he deducted on schedule c wage expenses of dollar_figure of which respondent disallowed dollar_figure although petitioner did not keep contemporaneous business records he did attempt to reconstruct his truck mileage entitled approx work mileage the reconstructed record consists of handwritten sheets with dates locations and trip distances petitioner deducted dollar_figure as car and truck expenses on his schedule c his reconstructed mileage total for the year is big_number miles petitioner reported a net profit from business of dollar_figure on his schedule c for the tax_return reports total taxable_income for the year of so opinion substantiation of schedule c expenses petitioner must show that the amounts claimed are deductible business_expenses rule a 292_us_435 hradesky v commissioner q4e- t c affd per curiam 540_f2d_821 5th cir taxpayers are required to maintain records that are sufficient to enable the commissioner to determine the correct_tax liability see sec_6001 sec_1_6001-1 income_tax regs failure to prove the exact amount of an otherwise deductible item may not always be fatal because generally unless precluded by sec_274 we may estimate the amount of such an expense and allow the deduction to that extent 255_f2d_128 10th cir affg 27_tc_413 39_f2d_540 2d cir in order for the court to estimate the amount of an expense however there must be some basis upon which an estimate may be made 85_tc_731 without such a basis an allowance would amount to unguided largesse 245_f2d_559 5th cir sec_274 provides however that no deduction shall be allowed with respect to any listed_property as defined in sec_280f unless the taxpayer substantiates by adequate_records or sufficient evidence to corroborate the taxpayer's own testimony the amount of the expenditure or use based on the ‘petitioner has made no argument that the burden_of_proof shifting provisions of sec_7491 apply to this case nor has he offered any evidence that he has complied with the reguirements of sec_7491 a - - appropriate measure mileage may be used in the case of automobiles the time and place of the expenditure or use the business_purpose of the expenditure or use and the business relationship to the taxpayer of each expenditure or use listed_property includes any passenger_automobile and any other_property used as a means of transportation sec_280f d a and generally a passenger_automobile is any 4-wheeled vehicle made for use on public roads weighing less than big_number pounds sec_280f a property used as a means of transportation includes trucks and any other vehicle for transporting persons or goods sec_1_280f-6t b temporary income_tax regs fed reg date because petitioner's pickup truck falls within the definition of listed_property expenses for its use must meet the substantiation requirements of sec_274 to meet the adequate_records requirements of sec_274 a taxpayer must maintain some form of records and documentary_evidence that in combination are sufficient to establish each element of an expenditure or use sec_1_274-5t temporary income_tax regs fed reg date a contemporaneous log is not reguired but corroborative evidence sec_1_274-5t temporary income_tax regs fed reg date specifically includes pickup trucks and vans within the substantiation requirements of sec_274 d unless it has been modified to exclude more than de_minimis personal_use petitioner made no such showing - - to support a taxpayer’s reconstruction of the elements of expenditure or use must have a high degree of probative value to elevate such statement to the level of credibility of a contemporaneous record sec_1_274-5t temporary income_tax regs fed reg date the court finds that petitioner has not met the adequate_records requirements of sec_274 and is unable to establish each element of his expenditure or use of the truck see sec_1_274-5t temporary income_tax regs fed reg date petitioner gave no oral or written evidence of the names or number of his employees for the year or how much he paid each of them the court therefore finds that there is no basis upon which an estimate may be made of his wage expenses for casual labor without such a basis an allowance would amount to unguided largesse see williams v united_states supra self-employment_tax from the evidence in the record the court concludes that petitioner is liable for the self-employment_tax under sec_1401 on his schedule c earnings failure_to_file timely when asked why his tax_return was filed late for petitioner forthrightly replied the fact of the matter is i was negligent because petitioner has conceded that his tax - return was not timely filed and that the failure_to_file was without reasonable_cause we hold that he is liable for the addition_to_tax under sec_6651 to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number tax_exempt_and_government_entities_division release number release date date date vil legend college trust dear we have considered your ruling_request dated date concerning the federal_income_tax consequences under sec_512 of the internal_revenue_code_of_1986 as amended hereafter code relating to a proposed contractual arrangement in the manner and for the purposes described below facts college is an educational_institution recognized as a tax-exempt_organization under sec_501 and sec_170 of the code college maintains an endowment fund comprised of privately raised endowments which fund was established to provide economic resources to college to provide for its educational activities the endowment fund is heavily diversified in both domestic and international markets and utilizes alternative investment strategies to reduce the overall risk of the portfolio and to enhance investment returns much of the income earned by the endowment fund consists of passive dividends interest rents and long- and short-term_capital_gains but some income is debt financed or otherwise is treated as unrelated_business_taxable_income college is both the trustee and sole charitable_remainder beneficiary of trust trustis a charitable_remainder_unitrust described under sec_664 of the code under the terms of the trust agreement trust’s donor is the income_beneficiary entitled to an annual payout of a unitrust_amount equal to a percentage of the net fair_market_value of trust’s assets pursuant to sec_643 of the code the remainder_interest is distributable to college upon the death of donor presently trust assets are managed by various investment managers in accordance with a strategy developed by an outside for-profit advisor college represents that as trustee and remainder beneficiary it is concerned that it cannot deliver results matching its endowments and that trust cannot be diversified properly unless it can be commingled with all endowment fund assets therefore in an attempt to increase trust's diversification and investment return college proposes to take advantage of the concept of economies of scale by allowing trust to commingle its assets with that of college’s endowment fund a higher rate of return on trust’s assets would cause its donor to receive a higher unitrust payout and would cause college to ultimately receive a higher final payment as the remainder beneficiary college proposes to enable trust to participate in college’s endowment fund through the acquisition of shares college proposes to create a contractual obligation pursuant to which it will issue to trust a contract right called shares in its endowment fund in exchange for trust investing its assets in the endowment fund college represents that the number of shares trust will receive will be in proportion to the value of trust’s investment in college’s endowment fund the contract will provide that trust will receive an income payout based on the number of shares owned and the annual endowment fund spending rate which rate is determined by college the value of the shares both at the time of acquisition and redemption will be based on the value of all underlying investment_assets held in the endowment fund the contract provides that trust could choose to either reinvest part of the payout or redeem additional shares depending on trust's cash requirements the payout up to the endowment fund spending rate will be characterized as ordinary_income to trust regardless of whether the underlying income to the endowment fund is characterized as capital_gain ordinary_income or a return_of_capital redemptions of shares by trust over and above receipt of the payout rate will be treated as either long- or short-term_capital_gain or loss depending on the holding_period of the units furthermore college will pay any_tax owed on unrelated_business_taxable_income earned by its endowment fund college represents that under the contract trust would not have any ownership_interest in the underlying assets of the endowment fund or any contract rights with respect to other trusts trust would have no power or right of any kind to control direct supervise recommend or review college’s business activities operations or decisions with respect to the endowment fund except the right to review the payout computation trust would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of shares college is neither a partner nor an agent of trust trust would also never be or become liable for any cost expense or payment incurred or due by college or for which college is liable or responsible relating to the endowment or the underlying endowment assets and college would indemnify and hold trust harmless from and against any liability arising out of any_action or inaction by college with respect to the endowment fund or the underlying assets as to the issue of fees and cost college states that it will not charge any fee for management of the trust although it expects to recover its actual costs of management of the endowment fund including the management of the trust as a charge against total investment return of the endowment furthermore college states that it may recover actual costs of administration of the trust as a charge against the trust you have requested the following ruling the issuance of endowment fund shares by college to trust the making or receipt of payments with respect to the shares and the holding or redemption of shares will not generate unrelated_business_taxable_income to college or trust oe law sec_501 of the code in part provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable educational scientific and certain other purposes sec_511 of the code in part imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 of the code defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with the modifications provided in sec_512 sec_512 of the code excludes from the definition of unrelated_business_taxable_income all dividends interest payments_with_respect_to_securities_loans as defined in subsection a amounts received or accrued as consideration for entering into agreements to make loans and annuities and all deductions directly connected with such income it also excludes all royalties including overriding royalties whether measured by production or by gross or taxable_income_from_the_property and all deductions directly connected with such income it also excludes certain rents sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_513 of the code provides that trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services an activity does not lose its identity as a trade_or_business merely because it is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may or may not be related to the exempt purposes of the organization sec_664 of the code defines a charitable_remainder_unitrust as a_trust a from which a fixed percentage which is not less than percent nor more than percent of the net fair_market_value of its assets valued annually is to be paid not less often than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals b from which no amount other than the payments described in subparagraph a and other than qualified gratuitous transfers described in subparagraph c may be paid to or for_the_use_of any person other than an organization described in sec_170 c following the termination of the payments described in subparagraph a the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 or is to be retained by the trust for such a use or to the extent the remainder_interest is in qualified_employer_securities as defined in subsection g all or part of such securities are to be transferred to an employee_stock_ownership_plan as defined in sec_4975 in a qualified_gratuitous_transfer as defined by subsection g and d with respect to each contribution of property to the trust the value determined under sec_7520 of such remainder_interest in such property is at least percent of the net fair_market_value of such property as of the date such property is contributed to the trust sec_1_512_b_-1 of the income_tax regulations regulations defines certain investment_income to include dividends interest payments_with_respect_to_securities_loans as defined in sec_512 annuities income from notional_principal_contracts as defined in sec_26 cfr or regulations issued under sec_446 other substantially_similar income from ordinary and routine investments to the extent determined by the commissioner and all deductions directly connected with any of the foregoing items of income shall be excluded in computing unrelated_business_taxable_income sec_1_513-1 of the regulations provides that gross_income of an exempt_organization subject_to the tax imposed by sec_511 of the code is includible in the computation of unrelated_business_taxable_income if it is income from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization’s performance of its exempt functions sec_1_513-1 of the regulations provides that the primary objective of adoption of the unrelated_business_income_tax was to eliminate a source of unfair competition by placing the unrelated business activities of certain exempt_organizations upon the same tax basis as the nonexempt business endeavors with which they compete in general any activity of a sec_511 organization which is carried on for the production_of_income and which otherwise possesses the characteristics required to constitute trade_or_business within the meaning of sec_162 - and which in addition is not substantially related to the performance of exempt functions - presents sufficient likelihood of unfair competition to be within the policy of the tax accordingly for purposes of sec_513 the term trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services thus the term trade_or_business in sec_513 is not limited to integrated aggregates of assets activities and good will which comprise businesses for the purposes of certain other provisions of the internal_revenue_code activities of producing or distributing goods or performing services from which a particular amount of gross_income is derived do not lose their identity as a trade_or_business merely because they are carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may or may not be related to the exempt purposes of the organization thus for example the regular sale of pharmaceutical supplies to the general_public by a hospital pharmacy does not lose its identity as a trade_or_business merely because the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purposes or in compliance with the terms of sec_513 similarly activities of soliciting selling and publishing commercial advertising do not lose their identity as a trade_or_business even though the advertising is published in an exempt_organization periodical which contains editorial matter related to the exempt purposes of the organization sec_1_513-1 of the regulations provides that in determining whether a trade_or_business from which a particular amount of gross_income derives is regularly carried on within the meaning of sec_512 of the code regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued sec_1_513-1 of the regulations provides that in general gross_income derives from an unrelated_trade_or_business within the meaning of sec_513 of the code if the conduct of the trade_or_business which produces the income is not substantially related other than through the production of funds to the purposes for which exemption is granted the presence of this requirement necessitates an examination of the relationship between the business activities which generate the particular income in question - the activities that is of producing and distributing the goods or performing the services involved - and the accomplishment of the organization’s exempt purposes sec_1_513-1 of the regulations provides that a trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes other than through the production_of_income and is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct_of_a_trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distribution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale of the goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantly to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances revrul_69_528 1969_2_cb_127 describes an organization that was formed to provide investment services on a fee basis exclusively to organizations exempt under sec_501 of the code the organization received funds from participating exempt_organizations and invested the proceeds in stocks reinvested the income and realized appreciation and upon request liquidated participant's interests and distributed the proceeds to the participant the service held that providing investment services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit the service further held that the activity would constitute an unrelated_trade_or_business even if the services were regularly provided by one tax-exempt_organization for other tax-exempt organizations thus the service concluded that the organization was not tax exempt under sec_501 because it was regularly carrying on a business of providing investment services that would be an unrelated_trade_or_business if carried on by any of the tax-exempt organizations on whose behalf it operated analysis the issue is whether college and trust will each incur unrelated_business_taxable_income upon the issuance of college’s endowment fund shares to trust upon the making or receipt of payments with respect to the shares and upon the holding or redemption of the shares sec_511 of the code imposes a tax on the income earned by an organization described in sec_501 if the income results from the operation of the organization's unrelated_trade_or_business an organization described in sec_501 that provides services will have unrelated_trade_or_business taxable_income if three conditions are satisfied the trade_or_business generates income the trade_or_business is regularly carried on and the trade_or_business is unrelated to the organization’s exempt_purpose or function see sec_512 sec_1_513-1 of the regulations the term trade_or_business has the same meaning for purposes of sec_513 as it does for sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 the proposed contractual relationship between college and trust is not a trade_or_business that will generate income for college and therefore it does not meet the first condition for a finding of unrelated_business_income college represents that it will not earn any income from the proposed contractual relationship with trust rather college will only be recovering its actual costs of managing its endowment fund and its actual costs of administrating trust furthermore the relationship between college and trust is not of a commercial nature such as that of a trade_or_business college represents that it is both the trustee and remainder beneficiary of trust's assets as such college will be engaging in investment activity of trust assets partially on its own behalf college represents that trust neither has any ownership_interest in the underlying assets of the endowment fund nor does it have a right to control college’s decisions as to the endowment fund and that trust will not be responsible for any liability relating to the endowment although trust's donor who is the present income_beneficiary for life may also benefit from the diversification and increased rate of return of commingling trust’s assets with those of college’s endowment fund the unique relationship between college and trust distinguishes it from a trade_or_business this relationship is also distinguishable from revrul_69_258 in which the service held that providing investment services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit and that the activity would constitute an unrelated_trade_or_business even if the services were regularly provided by one tax-exempt_organization for the benefit of other tax-exempt organizations because college is not charging any fees for investing in its endowment fund and because college is investing funds on its own behalf as sole remainder beneficiary and as trustee revrul_69_258 is not applicable therefore because the services college provides to trust are not a trade_or_business that will generate income college does not meet the first condition listed above for a finding of unrelated_business_income as for the issue of whether trust will incur unrelated_business_taxable_income upon the proposed transaction with college the answer is dependent in part on whether the income earned by trust is passive_income and subject_to the unrelated_business_taxable_income exception under sec_512 of the code as stated above sec_511 of the code imposes a tax on an organization’s unrelated_trade_or_business income if three conditions are met the first of which is that the organization engages in a trade_or_business that generates income see sec_1_513-1 of the regulations the term trade_or_business has the same meaning for purposes of sec_513 as it does for sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 however under sec_512 of the code and b -1 of the regulations investment_income is excluded in computing unrelated_business_taxable_income if the income results from d ividends interest payments_with_respect_to_securities_loans as defined in sec_512 annuities income from notional_principal_contracts as defined in sec_26 cfr or regulations issued under sec_446 other substantially_similar income from ordinary and routine investments to the extent determined by the commissioner here the income that trust is expected to receive from commingling its assets with those of the college’s endowment fund falls within the exception for certain investment_income under sec_512 of the code and b -1 of the regulations college represents that much of the income earned by the endowment fund consists of passive dividends interest rents and long- and short-term_capital_gains although college represents that some income is debt financed or otherwise is treated as unrelated_business_taxable_income the tax owed on such unrelated_business_taxable_income will be paid_by the college’s endowment fund because trust is only a passive investor and only has a contractual right against college and not any interest in the underlying investment_assets of the endowment fund the unrelated_business_taxable_income generated from any debt-financed_property is not attributable to trust specifically the contractual arrangement between college and trust provides that trust will only receive an income payout based on the number of shares owned in the endowment fund and the annual endowment fund spending rate which payout is characterized as ordinary_income to trust regardless of whether the underlying income to the endowment fund is characterized as capital_gain or a return_of_capital the redemption of shares will be treated as either long- or short-term_capital_gain or loss depending on the holding_period of the units under the terms of the contract trust would neither have any ownership_interest in the underlying assets of the endowment fund nor any contract rights with respect to other trusts trust would have no power or right of any kind to control direct supervise recommend or review college’s business activities operations or decisions with respect to the endowment fund except the right to review the payout computation based upon the above trust is purely a passive investor in college’s endowment fund with the income that trust earns from the endowment fund being substantially_similar to income from ordinary and routine investments therefore trust will not incur unrelated_business_taxable_income upon investing in college’s endowment fund conclusion accordingly based on the information submitted we rule that the issuance of endowment fund shares by college to trust the making or receipt of payments with respect to the shares and the holding or redemption of shares will not generate unrelated_business_taxable_income to college or trust except as we have ruled above we express no opinion as to the tax consequences of the transaction under the cited provisions of the code or under any other provisions of the code this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely robert c harper jr manager exempt_organizations technical group enclosure notice


third party communication none date of communication not applicable office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b01 jkristall preno-126201-12 uilc date date to lawrence davidow senior counsel large business international from nancy lee assistant to the branch chief branch income_tax accounting subject allocation of success-based fees this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent summary this memorandum responds to your request for assistance in determining whether nonrefundable milestone_payments made to a service provider for activities performed with respect to a covered transaction qualify for the safe_harbor provided in revproc_2011_29 2011_18_irb_746 for the reasons discussed below we conclude that nonrefundable milestone_payments that are creditable to a success-based_fee are not themselves success-based fees therefore these milestone_payments do not qualify for the safe_harbor provided in revproc_2011_29 please contact jason kristall at if you would like further assistance or have any questions about this memorandum or our conclusion facts a corporation taxpayer retains an investment banker to provide services as part of a transaction described in sec_1_263_a_-5 covered transaction the relationship between taxpayer and the investment banker is memorialized in an engagement letter pursuant to that engagement letter the investment banker will receive dollar_figure upon the successful closing of the transaction the engagement preno-126201-12 letter further requires taxpayer to pay dollar_figure upon the signing of a merger agreement and another dollar_figure upon shareholder approval of the transaction these amounts once paid are creditable toward the dollar_figure that will be owed upon the closing of the transaction accordingly when the transaction closes taxpayer will pay dollar_figure to the investment banker if the transaction does not close successfully the two dollar_figure milestone_payments are nonrefundable law sec_1_263_a_-1t c provides that no deduction is allowed for an amount_paid to acquire or create an intangible which under sec_1_263_a_-4 and d i a includes an ownership_interest in a corporation or other entity see also sec_1_263_a_-4 under sec_1_263_a_-5 a taxpayer must capitalize an amount_paid to facilitate the business acquisition or reorganization transactions described in sec_1_263_a_-5 an amount is paid to facilitate a transaction described in sec_1_263_a_-5 if the amount is paid in the process of investigating or otherwise pursuing the transaction whether an amount is paid in the process of investigating or otherwise pursuing the transaction is determined based on all of the facts and circumstances sec_1_263_a_-5 sec_1_263_a_-5 provides that an amount other than an inherently facilitative amount_paid in the process of investigating or otherwise pursuing a covered transaction facilitates the transaction only if the amount relates to activities performed on or after the earlier of the date on which a letter of intent exclusivity agreement or similar written communication other than a confidentiality agreement is executed by representatives of the acquirer and the target or the date on which the material terms of the transaction as tentatively agreed to by representatives of the acquirer and the target are authorized or approved by the taxpayer’s board_of directors or committee of the board_of directors bright-line date any amounts paid for activities described in sec_1_263_a_-5 through vi are inherently facilitative and facilitate the transaction regardless of whether the amount is paid for activities performed on or after the bright-line date sec_1_263_a_-5 provides that an amount that is contingent on the successful closing of a transaction described in sec_1_263_a_-5 ie a success-based_fee is presumed to facilitate the transaction a taxpayer may rebut the presumption by maintaining sufficient documentation to establish that a portion of the fee is allocable to activities that do not facilitate the transaction revproc_2011_29 provides a safe_harbor election for taxpayers that pay or incur success-based fees for services performed in the process of investigating or otherwise pursuing a covered transaction under revproc_2011_29 a taxpayer may allocate a success-based_fee between activities that facilitate the transaction and activities that preno-126201-12 do not facilitate the transaction by treating percent of the amount of the success-based_fee as an amount that does not facilitate the transaction and by capitalizing the remaining percent as an amount that does facilitate the transaction analysis a success-based_fee is an amount_paid or incurred that is contingent on the successful closing of a transaction described in sec_1_263_a_-5 see sec_1_263_a_-5 nonrefundable milestone_payments are not contingent on the successful closing of the transaction rather they are guaranteed payments incurred upon the occurrence of a specified milestone or upon some other date or event such payments are not success-based fees under revproc_2011_29 taxpayers may allocate success-based fees by treating percent of the amount of the success-based_fee as an amount that does not facilitate the transaction and by capitalizing the remaining percent as an amount that does facilitate the transaction this same allocation cannot be used for nonrefundable milestone_payments under the facts described herein taxpayer may make a safe- harbor election under revproc_2011_29 to allocate the dollar_figure payable as a success-based_fee however with respect to the two dollar_figure milestone_payments taxpayer must establish based on all the facts and circumstances whether the investment banker’s activities were facilitative or not see sec_1_263_a_-5 and conclusion nonrefundable milestone_payments that are creditable to a success-based_fee are not themselves success-based fees therefore they do not qualify for the safe_harbor provided by revproc_2011_29 case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views


number release date id office uilc cca_2010083116025337 ---------- from ------------------- sent tuesday date pm to -------------------- cc ----------- subject re tefra extension - who can sign in a tefra proceeding we only assess the partners not the we do not assess flow through entities partnership thus a form_872 will always reflect the taxpayer the partner we are actually assessing this is different from a form 872-p which reflects the partnership name but even in the case of a form 872-p we do not assess the partnership - that form extends the period for assessing all partners


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-129939-01 date date legend company a shareholders plr-129939-01 new shareholders plr-129939-01 state corporation llc plr-129939-01 partnership date date date date date date date date m n o p dear this letter responds to a letter dated date and subsequent correspondence requesting inadvertent termination relief under sec_1362 of internal_revenue_code company incorporated on date under the laws of state company elected to be an s_corporation effective date facts on date company issued m shares of its stock to corporation on date company issued an additional o shares of its stock to corporation subsequently on date corporation contributed all of its company stock p shares to llc corporation is a member of llc on date company issued n shares of its stock to partnership plr-129939-01 on or about date company learned that it had ineligible shareholders llc and partnership and thus its s_corporation_election had terminated on date subsequently remedial steps were taken to redeem all of company’s stock owned by the ineligible shareholders at a price equal to the ineligible shareholders’ original purchase_price for the stock after the redemption company issued shares of its stock that had previously been owned by the ineligible shareholders to a an individual shareholder of corporation and to the individual partners of partnership collectively new shareholders the above steps were completed on date company and its shareholders represent that the issuance of company stock to corporation and partnership and the subsequent transfer of company stock from corporation to llc were not intended to terminate company’s s_corporation_election additionally company and its shareholders represent that there was no intent to engage in tax_avoidance or retroactive tax planning company and its shareholders agree to make any adjustments consistent with the treatment of company as an s_corporation that the secretary may require with respect to the period of termination applicable law sec_1362 provides in part that a small_business_corporation may elect to be an s_corporation sec_1361 generally provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that an election under sec_1362 is terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that such termination is effective on and after the date the s_corporation ceases to be a small_business_corporation sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in the termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder in the corporation at any time during the period specified pursuant to this subsection agrees to make such plr-129939-01 adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the termination such corporation is treated as an s_corporation during the period specified by the secretary sec_1_1362-4 of the income_tax regulations provides that for purposes of sec_1_1362-4 the determination of whether a termination was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination was inadvertent the fact that the terminating event was not reasonably within the control of the corporation and was not part of a plan to terminate the election or the fact that the event took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event tends to establish that the termination was inadvertent conclusion based on the facts submitted and the representations made we conclude that company's s_corporation_election terminated on date when company issued stock to corporation an ineligible shareholder we also conclude that the termination was inadvertent within the meaning of sec_1362 therefore company will be treated as continuing to be an s_corporation from date to date provided company’s s_corporation_election was not otherwise terminated under sec_1362 this ruling is contingent on company and all of its shareholders treating company as an s_corporation from date to date and thereafter and on company treating shareholders as the shareholders of company during the inadvertent termination period accordingly shareholders in determining their federal tax_liability must include their pro_rata share of the separately and nonseparately computed items of company under sec_1366 make any adjustments to stock basis under sec_1367 and take into account any distributions made by company under sec_1368 if company or shareholders fail to treat company as described above this ruling shall be null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code specifically no opinion is expressed on whether the original election made by company to be treated as an s_corporation was a valid election under sec_1362 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is plr-129939-01 being forwarded to your authorized representative sincerely yours mary beth collins senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures cc copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp b05-plr-117658-00 date date re acquiring target a b state a we respond to a letter dated date in which you request rulings as to the federal_income_tax consequences of a proposed transaction the facts submitted for consideration are substantially as set forth below acquiring is a closed-end nondiversified management investment_company organized under the laws of state a acquiring elected to be taxed as a regulated_investment_company ric under sec_851 through of the internal_revenue_code acquiring has outstanding voting common_stock and a series of voting preferred_stock target is a closed-end nondiversified management investment_company organized under the laws of state a target has elected to be taxed as a ric under sec_851 through target has outstanding voting common_stock and b series of voting preferred_stock acquiring and target are registered under the investment_company act of the act for what are represented to be valid business reasons acquiring and target propose the following transaction i target will transfer all of its assets and liabilities to acquiring in exchange for an equal value of newly issued acquiring voting common_stock and voting preferred_stock plr-117658-00 ii iii iv v target will distribute to its shareholders all of the acquiring common_stock and voting preferred_stock received in the exchange target will then promptly liquidate and dissolve in accordance with the laws of state a and will terminate its registration under the act in liquidation of target target common shareholders will receive a proportionate number of acquiring common shares equal to the aggregate net asset value of target common_stock owned by such shareholders on the exchange date similarly target preferred shareholders will receive a number of acquiring preferred shares having a liquidation preference and value equal to the liquidation preference and value of the target shares owned by such shareholders on the exchange date the acquiring preferred shares to be issued shall have the same terms as the target preferred shares to be exchanged therefor acquiring may sell up to percent of the assets received in the transfer to unrelated purchasers and will reinvest the proceeds consistent with its investment objectives and policies no fractional shares will be issued by acquiring in the transaction all fractional shares of acquiring common_stock will be aggregated and sold and fractional shareholders will receive cash in lieu thereof acquiring and target have made the following representations in connection with the proposed transaction a b c d the fair_market_value of acquiring stock received by the target shareholders will be approximately equal to the fair_market_value of the target stock surrendered in the exchange therefor acquiring will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by target immediately prior to the transaction for purposes of this representation amounts paid_by target to dissenters amounts used by target to pay its transaction expenses amounts paid_by target to shareholders who receive cash or other_property and all redemptions and distributions except for regular normal dividends made by target immediately preceding the transfer will be included as assets of target held immediately prior to the transaction acquiring has no plan or intention to reacquire any of its stock issued in the transaction after the transaction acquiring will use the assets acquired from target in its business except that a portion of these assets may be sold or otherwise_disposed_of in the ordinary course of acquiring’s business any proceeds will be invested in accordance with acquiring’s investment plr-117658-00 e f g h i j k l m n objectives acquiring has no plan or intention to sell or otherwise dispose_of any of the assets of target acquired in the transaction except for dispositions made in the ordinary course of business target will distribute to its shareholders the stock of acquiring it receives pursuant to the plan_of_reorganization the acquiring voting preferred_stock to be received by shareholders of target in exchange for their target voting preferred_stock will be identical to the target voting preferred_stock exchanged the liabilities of target assumed by acquiring and any liabilities to which the transferred assets of target are subject were incurred by target in the ordinary course of its business following the transaction acquiring will continue the historic_business of target or use a significant portion of target’s historic_business_assets in the continuing business target acquiring and the shareholders of target will pay their respective expenses if any incurred in connection with the transaction there is no intercorporate indebtedness existing between target and acquiring that was issued acquired or will be settled at a discount acquiring and target meet the requirements of a regulated_investment_company as defined in sec_368 the fair_market_value of the assets of target transferred to acquiring will equal or exceed the sum of the liabilities assumed by acquiring plus the amount of liabilities if any to which the transferred assets are subject acquiring does not own directly or indirectly nor has it owned during the past five years directly or indirectly any stock of target cash is being distributed to the shareholders of target in lieu of fractional shares of acquiring solely to save acquiring the expense and inconvenience of issuing and transferring fractional shares such cash does not represent separately bargained for consideration in the transaction the total cash consideration that will be paid to target shareholders instead of issuing fractional shares of acquiring stock will not exceed one percent of the total consideration that will be issued in the transaction to target shareholders in exchange for their shares of target stock the fractional share interests of each shareholder of target will be aggregated and no target shareholder will receive cash in an amount equal to or greater than the value of one full share of acquiring stock plr-117658-00 o p q r target is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 target and acquiring have elected to be taxed as rics under sec_851 and for all of their taxable periods including the last short taxable_period for target ending on the date of the transaction have qualified for the special tax treatment afforded rics under the code after the transaction acquiring intends to continue to so qualify there is no plan or intention for acquiring the issuing_corporation as defined in sec_1_368-1 of the income_tax regulations or any person related as defined in sec_1_368-1 to acquiring to acquire during the five year period beginning on the date of the proposed transaction with consideration other than acquiring stock acquiring stock furnished in exchange for a proprietary interest in target in the proposed transaction either directly or through any transaction agreement or arrangement with any other person except for cash distributed to target’s common shareholders in lieu of fractional shares of acquiring common_stock during the five year period ending on the date of the proposed transaction i neither acquiring nor any person related as defined in e to acquiring will have acquired target’s stock with consideration other than acquiring stock ii neither target nor any person related as defined in sec_1_368-1 without regard to sec_1 e i a to target will have acquired target’s stock with consideration other than acquiring stock or target’s stock and iii no distributions will have been made with respect to target’s stock other than ordinary normal regular dividend distributions made pursuant to target’s historic dividend paying practice either directly or through any transaction agreement or arrangement with any other person except for a cash paid to dissenters and b distributions described in sec_852 and sec_4982 of the code as required for target’s tax treatment as a ric s the aggregate value of the acquisitions redemptions and distributions discussed in paragraphs q and r above will not exceed percent of the value without giving effect to the acquisitions redemptions and distributions of the proprietary interest in target on the effective date of the proposed transaction based solely upon the information and representations set forth above we hold as follows the acquisition by acquiring of substantially_all of the assets of target in exchange for voting shares of acquiring stock and acquiring’s assumption of target’s liabilities followed by target’s distribution to its shareholders of acquiring shares and any remaining assets in complete_liquidation will plr-117658-00 qualify as a reorganization within the meaning of sec_368 acquiring and target each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by target upon the transfer of substantially_all of its assets to acquiring solely in exchange for acquiring voting_stock and acquiring’s assumption of target’s liabilities or upon the distribution of such acquiring stock to target’s shareholders sec_361 sec_361 and sec_357 acquiring will not recognize any gain_or_loss on the receipt of the assets of target in exchange for voting shares of acquiring sec_1032 the basis of target’s assets in the hands of acquiring will be the same as the basis of those assets in the hands of target immediately prior to the reorganization sec_362 acquiring’s holding_period for target’s assets acquired will include the period during which such assets were held by target sec_1223 the shareholders of target will not recognize any gain_or_loss on the receipt of voting shares of acquiring including fractional shares to which they may be entitled solely in exchange for their shares in target sec_354 the basis of the acquiring shares received by target shareholders including fractional shares to which they may be entitled will be the same in the aggregate as the basis of target’s shares surrendered in exchange therefor sec_358 the holding_period of the acquiring shares received by target shareholders in exchange for their target shares including fractional shares to which they may be entitled will include the period during which the exchanged target shares were held provided that the target shares are held as a capital_asset in the hands of the target shareholders on the date of the exchange sec_1223 any gain_or_loss realized by a shareholder of target upon the sale of fractional share interests of acquiring voting_stock to which the shareholder is entitled will be recognized to the shareholder measured by the difference between the amount of cash received and the basis of the fractional share interest where the stock surrendered qualifies as a capital_asset in the hands of the shareholder such gain_or_loss will be a capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code plr-117658-00 pursuant to sec_381 and sec_1_381_a_-1 acquiring will succeed to and take into account the items of target described in sec_381 subject_to the conditions and limitations specified in sec_381 c and and the regulations thereunder no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings specifically no opinion was requested and none is expressed about whether acquiring and or target qualify as rics that are taxable under subchapter_m part of the code the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this letter is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax return of the taxpayers involved for the taxable_year in which the transaction covered by this letter is consummated pursuant to a power_of_attorney on file in this office a copy of this letter has been sent to the taxpayers’ representative sincerely yours associate chief_counsel corporate filiz a serbes assistant to the chief branch by


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number tax_exempt_and_government_entities_division release number release date date uniform issue list legend enterprises estate xt dear this is in response to your ruling_request dated date and as amended on date requesting a ruling on the proper treatment under sec_4943 of the internal_revenue_code code of your continued retention of the shares of enterprises stock facts you are a non-profit corporation recognized as an organization exempt from federal_income_tax under sec_501 of the code and are classified as a private_foundation within the meaning of sec_509 the purposes for which you are organized and operated are to provide charitable and educational_services to underprivileged children who come from troubled or broken homes who are in need of special services or treatment or who are otherwise at risk underprivileged or institutionalized you were created to receive the assets of the estate the assets you received included cash and shares represent a percent interest in enterprises shares of the issued and outstanding common_stock of enterprises the you state that you hold the stock for the following purposes e e enterprises will continue to lease a portion of its real_property to a local rancher and you desire to maintain enterprises as a separate_entity in order to obtain the benefit of the liability shield enterprises will conduct sporadic logging and thinning activities by contracting with independent third parties e during the course of the probate proceedings for the estate a dispute arose concerning the ownership of enterprises stock by other family members who are not disqualified persons in order to settle the dispute enterprises was required to borrow money from the estate in order to redeem the enterprises stock held by those other family members enterprises gave the estate a promissory note this transaction was approved by the probate_court during the settlement and distribution proceeding of the estate you are now the holder of the note through your ownership of percent of the stock of enterprises and e enterprises will facilitate the payment of the debt obligation to you resulting from the settlement of the estate and provide a liability shield with respect to the hazardous logging and milling activities you represent that all of enterprises income will be from passive sources including the rental income from the leasing of the grazing land to a rancher in addition enterprises will pay the excess income to you in the form of dividends on occasion an independent third party company will enter upon the property for timber harvesting activities the timber harvesting is a sporadically conducted thinning activity you state that enterprises will enter into contracts with third parties who will cut and remove the timber under the contracts you will retain an economic_interest in the timber pursuant to sec_631 of the code in addition you represent that all of enterprises’ revenue will be passive source income and that no election under sec_631 will be made in conjunction with the timber harvesting activity this ruling_request is limited to those timber cutting transactions that you represent qualify under sec_631 and b rulings requested you requested a ruling that your ownership of percent of the enterprises stock will not be classified as excess_business_holdings under sec_4943 of the code because at least percent of enterprises gross_income will be derived from passive sources law sec_512 of the code excludes from unrelated_business_taxable_income i all rents_from_real_property and ii all rents from personal_property including for purposes of this paragraph as personal_property any property described in sec_1245 leased with such real_property if the rents attributable to such personal_property are an incidental amount of the total rents received or accrued under the lease determined at the time the personal_property is placed_in_service sec_512 of the code excludes from the computation of unrelated_business_taxable_income all gains or losses from the sale exchange or other_disposition of property however this section does not apply with respect to the cutting of timber which is considered on the application of sec_631 as a sale_or_exchange of such timber sec_513 of the code provides that the term unrelated_trade_or_business means any trade_or_business the conduct of which is not substantially related aside from the need of such organization for the income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its charitable educational or other purpose constituting the basis of its exemption under sec_501 sec_631 of the code provides that a taxpayer may make an election to treat the cutting of timber as a sale_or_exchange of such timber cut during the year provided that the timber was owned or held under a contract right to cut for a period of more than one year sec_631 of the code provides that in the disposal of timber held by the owner for more than one year under a contract by which the owner retains an economic_interest in such timber the difference between the amount_realized from the disposal and the adjusted depletion basis shall be considered as though it were a gain_or_loss on the sale of such timber sec_4943 of the code imposes excise_taxes on the excess_business_holdings of any private_foundation in a business_enterprise sec_4943 of the code provides that the term excess_business_holdings means with respect to the holdings of any private_foundation in any business_enterprise the amount of stock or other interest in the enterprise which the foundation would have to dispose_of to a person other than a disqualified_person in order for the remaining holdings of the foundation in such enterprise to be permitted holdings sec_4943 of the code provides in part that the permitted holdings of any private_foundation in an incorporated business_enterprise are percent of the voting_stock reduced by the percentage of the voting_stock owned by all disqualified persons sec_4943 of the code provides that the term business_enterprise does not include a trade_or_business at least percent of the gross_income of which is derived from passive sources gross_income from passive sources includes the items excluded by sec_512 and sec_1_512_b_-1 of the income_tax regulations regulations states in part that the exclusion from unrelated_business_taxable_income contained in sec_512 of the code does not apply with respect to the cutting of timber which is considered upon the application of sec_631 as a sale of such timber sec_1_631-2 of the regulations provides that in the case of a disposal of timber under sec_631 of the code the provisions of sec_1231 apply and such timber shall be considered to be property_used_in_the_trade_or_business for the taxable_year in which it is considered to have been sold along with other_property of the taxpayer used_in_the_trade_or_business as defined in sec_1231 regardless of whether such timber is property held by the taxpayer primarily for the sale to customers in the ordinary_course_of_his_trade_or_business sec_53_4943-10 of the foundation and similar excise_taxes regulations foundation regulations’ provides that the term business_enterprise except as provided in paragraph b or c of this section includes the active_conduct_of_a_trade_or_business including any activity which is regularly carried on for the production_of_income from the sale_of_goods or the performance of services and which constitutes an unrelated_trade_or_business under sec_513 sec_53_4943-10 of the foundation regulations provides that the term business_enterprise does not include a trade_or_business at least percent of the gross_income of which is derived from passive sources sec_53_4943-10 of the foundation regulations provides states that gross_income from passive sources for purposes of this paragraph includes the items excluded by sec_512 relating to dividends interest and annuities b relating to royalties b relating to rent and b relating to gains or losses from the disposition of certain property analysis generally sec_4943 of the code imposes a tax on the excess_business_holdings in a business_enterprise of a private_foundation sec_4943 provides in part that the permitted holdings of any private_foundation in an incorporated business_enterprise are percent of the voting_stock reduced by the percentage of the voting_stock owned by all disqualified persons in your case you currently own percent of the issued and outstanding voting_stock of enterprises which would constitute an excess business holding absent an exception the term business_enterprise as defined in sec_53_4943-10 of the foundation regulations includes the active_conduct_of_a_trade_or_business including any activity which is regularly carried on for the production_of_income from the sale_of_goods or the performance of services and which constitutes an unrelated_trade_or_business under sec_513 of the code sec_513 provides that the term unrelated_trade_or_business means any trade_or_business the conduct of which is not substantially related aside from the need of such organization for the income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its charitable educational or other purpose constituting the basis of its exemption under sec_501 however the tax_on_excess_business_holdings does not apply to among other things a trade_or_business that derives at least percent of its gross_income from passive sources which includes dividends interest annuities rents described in sec_512 and capital_gains described in sec_512 for purposes of sec_4943 of the code a business_enterprise does not include a trade_or_business at least percent of the gross_income of which is derived from passive sources such as rents from real or personal_property you state that enterprises will receive rental income from the leasing of the grazing land to a rancher and income from contracts that enterprises will enter into with independent third parties who will cut and remove timber in which you will retain an economic_interest in that timber pursuant to those contracts in accordance with sec_631 of the code therefore income received from the timber harvesting activities and related timber sales in which there is no election made under sec_631 would be characterized as gains or losses from the sale exchange or other_disposition of property that is excluded from unrelated_business_taxable_income under sec_512 as such the income received by enterprises from the timber harvesting activities will be from passive sources within the meaning of sec_4943 therefore your ownership_interest of percent of the stock of enterprises will not be considered a business_enterprise and excess_business_holdings under sec_4943 since enterprises derives at least percent of the gross_income from passive sources as defined in sec_4943 and sec_53_4943-10 of the foundation regulations ruling your ownership_interest of percent of the enterprises stock will not be considered a business_enterprise and excess_business_holdings under sec_4943 of the code because at least percent of enterprises gross_income will be derived from passive sources you have represented that you will not make an election under sec_631 of the code and pursuant to sec_631 you will retain an economic_interest in the timber therefore we are making no determination involving sec_631 or b and assume that the above timber cutting transactions will meet the requirements of sec_631 this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely ronald shoemaker manager exempt_organizations technical group enclosure notice


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division nov uniform issue list dollar_figure tier ra’ tp legend taxpayer a institution a plana ira x amount a amount b financial_institution a financial_institution b country a dear this is in response to your request dated date as supplemented by correspondence dated date and date in which your authorized representative on your behalf requested a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution from plan a totaling amount a of which he elected to roll over amount b taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_402 of the code was due to his obligation to care for his ailing father whose medical_condition worsened around the time of the distribution and during the day period taxpayer a further represents that amount b has not been used for any other purpose taxpayer a resigned from institution a in date at the time he was living in country a where he had requested assignment in so that he might be close to his elderly and ailing parents in connection with his resignation he requested a distribution from plan a on date taxpayer a received a wire transfer of amount a into his account at financial_institution a in the united_states a 1099-r issued to taxpayer a for shows a gross distribution of amount a and a taxable_distribution of amount b the 1089-r shows the taxpayer a’s address as in country a taxpayer a represents that it was his intention to roll over the distribution to an individual_retirement_account ira but it was not possible for him to open an ira in the united_states without traveling there in person as taxpayer a did not have an existing ira account it was not possible to complete a direct_rollover by issuance of a check to the custodian of the ira in compliance with sec_1 a taxpayer a represents that he intended to travel to the united_states within days of the distribution to open an ira account and roll over the distribution but was prevented from doing so because of the need to care for his elderly parents whose condition worsened around the time of the distribution taxpayer a has submitted documentation showing that his father suffered a stroke in date for which he was hospitalized the stroke aggravated other medical conditions such that taxpayer a was unable to leave him alone for an extended period in date taxpayer a was able to travel to the united_states and on date transferred amount b to a rollover ira ira x with financial_institution b based on the facts and representations you request a ruling that the internal_revenue_service the service waive the day rollover requirement contained in sec_402 of the code with respect to the distribution of amount b e sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides that the secretary may waive the 60-day requirement under sec_402 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted is consistent with taxpayer a’s assertion that his failure to accomplish a timely rollover was a result of his inability to travel to the united_states within days to accomplish the rollover because of a need to care for his parents who were ill and particularly because of the stroke suffered by his father just prior the start of the day roll over period taxpayer did not have an existing ira in the united_states and it was not possible to open an ira in country a therefore pursuant to sec_402 of the code the service waives the 60-day rollover requirement with respect to the distribution to you of amount b from plan a provided all other requirements of sec_402 of the code except the 60-day rollover requirement were met with respect to the transfer of amount b to ira x on date such transfer will be considered a rollover_contribution within the meaning of sec_402 this ruling does not authorize the rollover of amounts that are required to be distributed under sec_401 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations that may be applicable hereto this letter is directed solely to the taxpayer awho requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact id at sse please address all correspondence to se t ep ra t3 sincerely yours laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc sm