internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi b01-plr-109320-00 date date legend portfolio trust fund company manager state state declaration date dollar_figurea dollar_figureb this letter responds to your submission of date together with subsequent correspondence in which you requested certain rulings under sec_704 sec_721 and sec_7704 of the internal_revenue_code facts portfolio is a sub-trust of trust which was organized as a business_trust under the laws of state pursuant to declaration trust is registered as an investment_company under the investment_company act of act portfolio is a separate business_trust under the laws of state which recognize that separate trusts established under a single instrument with common trustees are independent legal entities portfolio is registered as an investment_company under the act portfolio and fund represent that portfolio is classified as a partnership under sec_301_7701-3 of the procedure and administration regulations portfolio serves as an investment vehicle for fund fund is a separate series of company a state corporation that is an open-end management investment_company under the act fund invests substantially_all of its assets available for investment in portfolio and has the same investment objective as portfolio fund is treated as a corporation for federal_income_tax purposes and has elected or will elect to be taxed as a regulated_investment_company ric under part i of subchapter_m of chapter of plr-109320-00 subtitle a of the code fund intends to be operated in a manner which would permit it to continue to qualify as a ric portfolio was formed on date when manager became a partner in portfolio in exchange for cash of dollar_figurea and fund became a partner in portfolio in exchange for securities and other assets with a fair_market_value of dollar_figureb manager is the investment_advisor for fund beneficial interests in portfolio are issued solely in private_placement transactions that do not involve any public offering within the meaning of sec_4 of the securities act of as amended act portfolio will not register its shares under the act because shares in portfolio may be issued solely in private_placement transactions that do not involve any public offering within the meaning of sec_4 of the act investments in portfolio only may be made by investment companies or certain other entities that are accredited investors within the meaning of regulation d under the act the interest of each partner in portfolio is limited to the net assets of portfolio and does not extend to the assets of any other investment vehicles of trust portfolio has not invested in any of trust’s other investment vehicles nor are any of trust’s other investment vehicles invested in portfolio except as required by sec_704 and sec_1_704-1 each partner will be allocated a pro_rata share of partnership income gain loss deduction and credit in accordance with the regulations under sec_704 each partner’s initial capital_account balance will be the amount of money and the fair_market_value of the property contributed to portfolio by the partner under sec_1_704-1 portfolio will revalue its investment portfolio to fair_market_value as of the close of each day portfolio will adjust each partner’s capital_account to reflect the partner’s share of the net change in the value of its portfolio of securities from the close of the prior day to the close of the current day portfolio intends to qualify as a securities_partnership under sec_1_704-3 the number of partners in portfolio will be limited to or fewer calculated pursuant to sec_1_7704-1 portfolio has made the following additional representations fund has contributed either cash and or a portfolio of assets that meets the diversification requirements of sec_1_351-1 as further defined in sec_368 for purposes of this test government securities are not included within the meaning of securities under sec_368 but are included within the meaning of total assets in sec_368 the assets contributed by fund other than cash will consist of readily marketable_stock and securities as defined in sec_1_351-1 prior to the taxpayer_relief_act_of_1997 plr-109320-00 all cash received by portfolio will be invested in readily marketable_stock and securities as defined in sec_1_351-1 prior to the taxpayer_relief_act_of_1997 the burden of making sec_704 allocations separate from reverse sec_704 allocations is substantial law and analysis ruling portfolio and fund have requested a ruling that portfolio will not be a publicly_traded_partnership within the meaning of sec_7704 sec_7704 provides that a publicly_traded_partnership is treated as a corporation sec_7704 and sec_1_7704-1 provide that for purposes of sec_7704 the term publicly_traded_partnership means any partnership if interests in the partnership are traded on an established_securities_market or readily_tradable on a secondary market or the substantial equivalent thereof sec_1_7704-1 provides that interests in a partnership are readily_tradable on a secondary market or the substantial equivalent thereof if taking into account all of the facts and circumstances the partners are readily able to buy sell or exchange their partnership interests in a manner that is comparable economically to trading on an established_securities_market sec_1_7704-1 provides that interests in a partnership are not readily_tradable on a secondary market or the substantial equivalent thereof for purposes of sec_7704 if i all interests in the partnership were issued in a transaction or transactions that was not required to be registered under the act and ii the partnership does not have more than partners at any time during the taxable_year sec_1_7704-1 provides that for purposes of sec_1_7704-1 a person owning an interest in a partnership grantor_trust or s_corporation flow-through_entity that owns directly or through other flow-through entities an interest in the partnership is treated as a partner in the partnership only if i substantially_all of the value of the beneficial owner’s interest in the flow-through_entity is attributable to the flow-through entity’s interest direct or indirect in the partnership and ii a principal purpose of the use of the tiered arrangement is to permit the partnership to satisfy the 100-partner limitation of sec_1_7704-1 portfolio has represented that the number of partners in portfolio will be limited to or fewer calculated pursuant to sec_1_7704-1 no interest in portfolio has been or will be issued in a transaction or transactions required to be registered under the act accordingly portfolio will not be a publicly_traded_partnership within the plr-109320-00 meaning of sec_7704 ruling portfolio and fund have requested a ruling that portfolio and fund will not recognize gain_or_loss under sec_721 and sec_351 as a result of the contribution of assets by fund to portfolio sec_721 states generally that no gain_or_loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership sec_721 states that sec_721 shall not apply to gain realized on a transfer of property to a partnership that would be treated as an investment_company within the meaning of sec_351 if the partnership were incorporated treas reg c provides that a transfer of property will be considered to be a transfer to an investment_company if i the transfer results directly or indirectly in diversification of the transferor’s interests and ii the transferee is among other possibilities a corporation more than percent of the value of whose assets are held for investment a transfer will not result in diversification and therefore not constitute a transfer to an investment_company if a transferor transfers a diversified portfolio of stocks and securities as determined under sec_368 applying the relevant provisions of sec_368 but treating government securities as part of total assets but not as securities of an issuer sec_1_351-1 after applying the law to the facts submitted and the representations made we conclude that portfolio and fund will not recognize gain_or_loss under sec_721 and sec_351 as a result of the contributions of assets by fund to portfolio we express no opinion about whether subsequent transfers of stock and securities to portfolio by any transferor will affect the tax consequences of the original transfers ruling portfolio and fund have requested permission to aggregate built-in gains and losses from qualified_financial_assets contributed to portfolio with built-in gains and losses from revaluations of qualified_financial_assets held by portfolio for the purpose of making sec_704 and reverse sec_704 allocations sec_704 provides that income gain loss and deduction with respect to property contributed to the partnership by a partner is shared among the partners so as to take account of the variation between the basis of the property to the partnership and its fair_market_value at the time of contribution sec_1_704-3 states that the purpose of sec_704 is to prevent the shifting of tax consequences among partners with respect to precontribution gain_or_loss plr-109320-00 under sec_704 a partnership must allocate income gain loss and deductions with respect to property contributed by a partner to the partnership so as to take into account any variation between the adjusted tax basis of the property and its fair_market_value at the time of the contribution this allocation must be made using a reasonable method that is consistent with the purpose of sec_704 sec_1_704-3 provides that the principles of sec_1_704-3 apply to allocations with respect to property for which differences between book_value and adjusted tax basis are created when a partnership revalues partnership property under sec_1_704-1 reverse sec_704 allocations a partnership that makes allocations with respect to revalued property must use a reasonable method that is consistent with the purposes of sec_704 and c sec_1_704-3 indicates that sec_704 generally applies on a property-by- property basis therefore in determining whether there is a disparity between adjusted tax basis and fair_market_value the built-in gains and built-in losses on items of contributed or revalued property generally cannot be aggregated sec_1_704-3 sets forth a special rule allowing certain securities partnerships to make reverse sec_704 allocations on an aggregate basis specifically sec_1_704-3 provides that for purposes of making reverse sec_704 allocations a securities_partnership may aggregate gains and losses from qualified_financial_assets using any reasonable approach that is consistent with the purposes of sec_704 once a partnership adopts an aggregate approach the partnership must apply the same aggregate approach to all of its qualified_financial_assets for all taxable years in which the partnership qualifies as a securities_partnership sec_1_704-3 defines a securities_partnership as a partnership that is either a management company or an investment_partnership and that makes all of its book allocations in proportion to the partners’ relative book capital accounts except for reasonable special allocations to a partner that provides management services or investment advisory services to the partnership under sec_1_704-3 a partnership is a management company if it is registered as a management company under the act sec_1_704-3 defines qualified_financial_assets as any personal_property including stock that is actively_traded as defined in sec_1_1092_d_-1 defining actively_traded property for purposes of the straddle rules for a management company qualified_financial_assets also include the following even if not actively_traded shares of stock in a corporation notes bonds debentures or other evidences of indebtedness interest rate currency or equity notional_principal_contracts evidences of an interest in or derivative financial instruments in any security currency or commodity including any option forward or futures_contract or short position or any similar financial_instrument plr-109320-00 sec_1_704-3 and e v describe two approaches to making aggregate reverse sec_704 allocations that are generally reasonable -- the partial netting approach and the full netting approach however sec_1_704-3 provides that other approaches may be reasonable in appropriate circumstances sec_1_704-3 provides that an allocation method or combination of methods is not reasonable if the contribution of property or event that results in reverse sec_704 allocations and the corresponding allocation of tax items with respect to the property are made with a view to shifting the tax consequence of built-in_gain or loss among the partners in a manner that substantially reduces the present_value of the partners' aggregate tax_liability furthermore sec_1_704-3 provides that the character and other tax_attributes of gain_or_loss allocated to the partners under an aggregate approach must a preserve the tax_attributes of each item of gain_or_loss realized by the partnership b be determined under an approach that is consistently applied and c not be determined with a view to reducing substantially the present_value of the partners' aggregate tax_liability portfolio has represented that its allocations have complied and will comply with sec_1_704-3 the aggregation rule_of sec_1_704-3 applies only to reverse sec_704 allocations therefore a securities_partnership using an aggregate approach must generally account for any built-in_gain or loss from contributed_property separately the preamble to sec_1_704-3 explains that the final regulations do not authorize aggregation of built-in gains and losses from contributed_property with built-in gains and losses from revaluations because this type of aggregation can lead to substantial distortions in the character and timing of income and loss recognized by contributing partners t d 1995_1_cb_120 however the preamble also recognizes that there may be instances in which the likelihood of character and timing distortions is minimal and the burden of making sec_704 allocations separate from reverse sec_704 allocations is great consequently sec_1 e iii authorizes the commissioner to permit by published guidance or letter_ruling aggregation of qualified_financial_assets for purposes of making sec_704 allocations in the same manner as that described in sec_1_704-3 in this case portfolio will use the partial netting approach described in sec_1_704-3 portfolio’s burden of making sec_704 allocations separate from reverse sec_704 allocations is represented to be substantial in addition the likelihood that this type of aggregation could be abused by portfolio and its partners is minimal it is represented that fund is a publicly_offered_regulated_investment_company as defined in sec_67 and sec_1_67-2t after applying the relevant law to the facts presented and the representations made we conclude that portfolio may aggregate built-in gains and losses from qualified_financial_assets contributed to portfolio by fund with built-in gains and losses from plr-109320-00 revaluations of qualified_financial_assets held by portfolio for purposes of making sec_704 and reverse sec_704 allocations provided that a contribution or revaluation of property and the corresponding allocation of tax items with respect to the property are not made with a view to shifting the tax consequences of built-in_gain or loss among the partners in a manner that substantially reduces the present_value of the partners' aggregate tax_liability except as specifically ruled upon above we express no opinion on the federal tax consequences of the transactions described above under any other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction s that are not specifically covered by the above rulings ruling three is limited to allocations of gain_or_loss from the sale_or_other_disposition of qualified_financial_assets made under sec_704 sec_704 and sec_1_704-3 specifically no opinion is expressed concerning i whether fund qualifies as a ric that is taxable under subchapter_m part i of the code ii allocations of items other than items of gain_or_loss from the sale_or_other_disposition of qualified_financial_assets or iii the aggregation of built-in gains and losses from qualified_financial_assets contributed to portfolio other than those described above in addition portfolio must maintain sufficient records to enable it and its partners to comply with sec_704 and sec_737 this ruling is directed only to the taxpayer s requesting it sec_6110 of the code 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 portfolio and portfolio’s second authorized representative sincerely david r haglund senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


a ea - i ha ‘ a department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division number release date uil legend org organization name org address date date address address xx date person to contact badge number contact telephone number ein contact address last date for filing petition february 20xx certified mail and return reciept dear this is a final revocation letter as to your exempt status under sec_501 of the internal_revenue_code recognition of your exemption under internal_revenue_code sec_501 is revoked beginning january 20xx for the following reason s you have not demonstrated that you primarily engage in activities which accomplish one or more of such exempt purposes specified in sec_501 as required by sec_1_501_c_3_-1 contributions to your organization are no longer deductible effective january 20xx if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment by referring to the enclosed publication you may write to the united_states tax_court at the following address united_states tax_court second street nw washington dc you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to 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 as a result of this revocation of tax-exempt status your organization is required to file form_1120 annually with the appropriate campus identified in the instructions this letter is a final revocation letter and should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely marsha ramirez director eo examinations enclosures publication internal_revenue_service date date org address department of the treasury te_ge exempt_organizations examinations second avenue m s w540 seattle washington taxpayer_identification_number form_990 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 you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter rev catalog number 34809f 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 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 if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely marsha a ramirez director exempt_organizations enclosures publication publication report of examination letter rev catalog number 34809f or 886a department of the treasury - internal_revenue_service name of taxpayer org explanation of items schedule no or exhibit year period ended december 20xx legend org organization name director director xx date city city xyz state accountant accountant issue whether org qualifies for exemption under sec_501 of the internal_revenue_code facts on april 20xx org was issued letter with an information_document_request from the exempt organization’s correspondence unit located in city xyz the letter stated that the organization’s 20xx form_990 was selected for examination the organization did not file the 20xx form_990 the letter requested the organization to respond in writing by providing a detailed description of its activities by may 20xx on august 20xx an unsuccessful attempt was made to contact the organization’s director by phone on august 20xx a second unsuccessful attempt was made to contact director by phone on august 20xx director was contacted by phone and he stated that he did not receive letter issued to org on april 20xx director requested that the letter be resent to his home address director stated that the organization previously engaged in down payment assistance during tax years 20xx or 20xx but has subsequently stopped director stated that he would contact his accountant to assist him in obtaining the requested information on august 20xx director was issued a duplicate copy of letter with an information_document_request that was issued to the organization on april 20xx the letter was sent by certified mail to director’s home address the organization was requested to respond in writing by september 20xx on september 20xx director provided a faxed response in which he stated that there were no down payment assistance activities during tax_year 20xx director stated that the organization is no longer providing down payment assistance on october 20xx an unsuccessful attempt was made to contact director directly by phone on october 20xx a second unsuccessful attempt was made to contact director directly by phone on october 20xx director was successfully contacted by phone director stated that he planned to voluntarily terminate the organization the process to voluntarily terminate the organization was explained to director on november 20xx letter with an information_document_request was issued to org by certified mail the organization was requested to provide a copy of the articles of dissolution filed with the state of xyz a resolution signed by two officers indicating the date of dissolution and any documents from the state of xyz acknowledging the dissolution the organization was also requested to provide a signed statement from an officer advising of the disposition of the organization’s assets and to provide the name of the internal_revenue_code sec_501 organization that the assets were distributed to the organization was also form 886-arev department of the treasury - internal_revenue_service page -1- eee 886a department of the treasury - internal_revenue_service name of taxpayer explanation of items schedule no or exhibit year period ended december 20xx org legend org organization name director director xx date city city xyz state accountant accountant requested to provide a signed 20xx form_990 indicating that the return is the final return for the organization the organization was requested to provide the information by december 20xx on november 20xx director provided a faxed response in which he stated that he wanted to further some of the activities of org director stated that he contacted his accountant to assist him in providing the requested information on december 20xx a faxed copy of form_2848 power_of_attorney and declaration of representative was received from accountant accountant requested a copy of letter with the information_document_request that was previously sent to director on august 20xx accountant stated he would provide a written explanation of the activities that org has been engaged in over the past five years on december 20xx letter with an information_document_request was sent to accountant no response has been received from accountant exhibit a provides copies of the internal_revenue_service correspondence requesting that org provide the requested information org failed to respond to the internal revenue service’s correspondence law sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 of the code provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 of the regulations in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 of the code and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 of the regulations states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or form 886-a crev department of the treasury - internal_revenue_service page -2- eee 886a department of the treasury - internal_revenue_service schedule no or name of taxpayer december 20xx org exhibit year period ended explanation of items legend org organization name director director xx date city city xyz state accountant accountant employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 of the regulations provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provision of the code and regulations under sec_6001 and organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax exempt status and to determine its liability for any unrelated_business_income_tax conclusion it is the position of the internal_revenue_service that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under c of the internal_revenue_code accordingly the organization’s exempt status is revoked effective january 20xx form 886-arev department of the treasury - internal_revenue_service page -3-


internal_revenue_service number info release date date cc psi 1-cor-132467-01 uilc we are responding to correspondence submitted on your behalf by which has been forwarded to us by the atlanta service_center staff based on the information submitted you are requesting relief in order to establish date as the effective date for your s_corporation_election the information also asserts that you filed form_2553 in date failed to receive confirmation of acceptance of s_corporation status and apparently took action six months after filing the election based on the facts provided by the internal_revenue_service it appears that four notification letters regarding your form_2553 deficiency have been sent the earliest of these letters was issued in date one month after the irs received your late tax_return based on the instructions to form_2553 taxpayers are generally notified of acceptance or nonacceptance of their election within three months of date of filing_date mailed more importantly if the irs questions whether the election was filed acceptable proof of filing is a certified or registered mail receipt b form_2553 with an accepted stamp c form_2553 with stamped irs received date or e an irs letter stating the election has been accepted announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office in revproc_97_48 the irs provides special procedures that permit taxpayers in certain situations to obtain automatic late s_corporation relief instead of applying for a private_letter_ruling however because your first tax_return was filed late you are precluded from automatic relief the procedures for requesting a ruling are set out in revproc_2001_1 copy enclosed in addition a proper user_fee must be submitted along with your request the fee for a ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million for the last 12-month taxable_period qualify for a reduced user_fee in the amount of dollar_figure if your business qualifies for the reduced fee your request must include a statement certifying gross_income otherwise you will be billed the higher fee please format your ruling_request as shown in appendix b of revproc_2001_1 if you decide to submit a ruling_request please provide documents supporting your intention to be an s_corporation and include the proper user_fee please refer your package to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi b1 room if you have computer web access you may wish to visit www irs gov smallbiz for specialized tax information products and forms relating to small businesses please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2001_1 copy of submission


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 ------------------------- telephone number -------------------- refer reply to cc tege eb ec plr-119656-05 date date ------------------------------------------------------ --------------- ------------- --- this letter is in response to your ruling_request on behalf of taxpayer dated april legend taxpayer ------------------------------------------ plan date ------------------------ date ------------------ a b c plan --------------------------------------------------------------------------- dear ---------------- taxpayer has requested rulings relating to its employee_stock_purchase_plan the plan under sec_423 of the internal_revenue_code the code taxpayer adopted the plan on date taxpayer intended to submit the plan to its shareholders for approval on date the plan is designed to encourage employees of taxpayer and its subsidiaries to have a proprietary interest in taxpayer by giving them the option to purchase shares of common_stock of taxpayer through payroll deductions the plan also provides that all employees of taxpayer and such subsidiaries as taxpayer’s compensation committee designate will be eligible to participate in the offerings of options under the plan taxpayer proposes to amend the plan to exclude from participation any individual who is treated as an independent_contractor or employee of another company as evidenced by the fact that taxpayer or its subsidiaries neither withholds federal income taxes from the compensation paid to the individual nor pays employer fica_taxes on behalf of the individual even if the individual is subsequently determined the plan provides that no employee will be granted an option if the employee plr-119656-05 to be a common_law_employee of taxpayer or a subsidiary of taxpayer provided that the individual a has worked for taxpayer or a subsidiary of taxpayer for less than years b customarily works hours a week or less c customarily works for not more than months in a calendar_year or d is a highly_compensated_employee within the meaning of sec_414 of the code immediately after the option is granted owns stock equal to five percent or more of the total combined voting power or value of all classes of stock of taxpayer computed in accordance with sec_423 of the code no employee will be granted an option that permits the employee’s rights to purchase common_stock under all employee stock_purchase_plans of taxpayer to accrue at a rate which exceeds dollar_figure of fair_market_value of such common_stock determined at the date of grant for each calendar_year in which such option is outstanding at any time in accordance with the provisions of sec_423 of the code no more than a shares of taxpayer common_stock plus a maximum of b net shares will be available for options under the plan subject_to the plan’s adjustment provision for purposes of the plan the term net shares means any shares of taxpayer common_stock authorized for sale under plan that remain for sale on the effective date of the plan not including shares that are sold under any plan offering that is pending on such date each year during the term of the plan unless the compensation committee determines otherwise taxpayer will make one or more offerings in which options to purchase company common_stock will be granted under the plan the compensation committee will determine the option_price per share for each offering under the plan on or prior to the date of grant of the options which shall not be less than of the fair_market_value of taxpayer common_stock on the date of grant of the options or of the fair_market_value of taxpayer common_stock on the date of exercise of the options whichever is lower the fair_market_value of taxpayer common_stock on the date of grant or exercise of options will be determined using such methods or procedures as are established by the compensation committee prior to or on the date of grant of the option the expiration date of the options granted in each offering under the plan will be determined by the compensation committee prior to or on the date of grant of the options but shall not be more than c months after the date of grant of the options number of shares of taxpayer common_stock that could be purchased at the option_price as the compensation committee shall determine for each offering but not to exceed the amount specified in sec_423 of the code alternatively or in combination with setting a maximum number of shares the compensation committee may choose to determine a maximum dollar amount that can be used to purchase shares for each offering but not to exceed the amount specified in sec_423 of the an option granted under the plan will entitle the employee to purchase up to that plr-119656-05 code an employee will be permitted to participate for less than the maximum number of shares or dollar amount specified by the compensation committee the compensation committee will determine prior to or on the date of grant of an option the consequences of an employee’s election to participate for less than the maximum and whether the employee will be entitled to purchase fractional shares sec_421 of the code provides in part that if a share of stock is transferred to an individual in a transfer in which the requirements of sec_423 are met no income shall result to the individual at the time of the transfer no deduction shall be allowable to the employer_corporation at any time with respect to the share transferred and no amount other than the price paid under the option shall be considered as received by the issuing_corporation for the share transferred sec_423 of the code dealing with employee stock_purchase_plans provides that sec_421 will apply to the transfer of a share of stock to an individual pursuant to the exercise of an option if no disposition of the stock is made by the employee within years after the date the option is granted nor within year after the exercise of such option and at all times during the period beginning with the date of the granting of the option and ending months before the date of exercising the option the individual to whom the option was granted remains an employee of the granting corporation a parent or subsidiary_corporation of such corporation or a corporation or a parent or subsidiary_corporation of such corporation issuing or assuming a stock_option to which sec_424 applies sec_423 of the code sets forth nine requirements that a plan must meet in order to qualify as an employee_stock_purchase_plan sec_423 provides that only employees of the employer_corporation or a participating subsidiary are eligible to participate in the plan sec_423 requires the stockholders of the plan_sponsor to approve the plan within_12_months before or after the date the plan is adopted sec_423 and sec_423 restrict the employees who may be granted options under an employee_stock_purchase_plan sec_423 requires that all employees granted options under the plan shall have the same rights and privileges sec_423 restricts the price of each option sec_423 limits the period within which an option may be exercised sec_423 limits an employee's rate_of_accrual under all employee_stock_purchase_plan maintained by his employer and its related corporations to dollar_figure of fair_market_value of the stock for each calendar_year in which such option is outstanding at any time sec_423 precludes an employee from transferring an option except by the laws of descent and distribution sec_421 of the code provides that if the transfer of a share of stock to an individual pursuant to the exercise of an option would otherwise meet the requirements of sec_423 except there is a failure to meet the holding_period requirements of sec_423 then any increase in the income of such individual or deduction from the income of the employer_corporation for the taxable_year in which such exercise occurred attributable to such disposition is treated as an increase in income or a plr-119656-05 deduction from income in the taxable_year of such individual or of such employer_corporation in which such disposition occurred sec_423 of the code requires shareholder approval of an employee_stock_purchase_plan within_12_months before or after the date such plan is adopted by the board_of directors sec_1_423-2 of the income_tax regulations provides in pertinent part that increases in the aggregate number of shares that may be issued under the plan other than an increase merely reflecting a change in capitalization such as a stock_dividend or stock split-up will be treated as the adoption of a new plan requiring shareholder approval similarly a change in the designation of corporations whose employees may be offered options under the plan will be treated as the adoption of a new plan requiring stockholder approval any other changes in the terms of an employee_stock_purchase_plan may be made without such changes being considered the adoption of a new plan see revrul_78_326 1978_2_cb_162 sec_423 of the code requires that the terms of an employee_stock_purchase_plan provide that options are to be granted to all employees of any corporation whose employees are granted an such options by reason of their employment by such corporation except that there may be excluded employees who have been employed less than two years employees whose customary employment is hours or less per week employees whose customary employment is for not more than months in any calendar_year and highly compensated employees within the meaning of q sec_423 of the code applies a special rule if the option_price of stock acquired through a sec_423 transfer was less than of its fair_market_value when the option was granted if an individual disposes of such stock after the holding periods specified in sec_423 have elapsed or dies while owning such stock compensation is included in his or her gross_income for the taxable_year in which the disposition occurs or for the taxable_year closing with his or her death whichever applies the amount of compensation income included is equal to the lesser_of the excess of the fair_market_value of the stock on the date of its disposition or on the date of death over the amount_paid under the option for the stock or the excess of the fair_market_value of the stock at the time the option was granted over the option_price if the option_price in not fixed or determinable at the time the option is granted then for purposes of this rule the option_price is determined as if the option were exercised at such time if such a share is disposed of by the individual the basis of the share in his or her hands at the time of such disposition is increased by an amount equal to the amount so includible in his or her gross_income sec_1 c of the regulations provides in part that for purposes of sec_421 and sec_423 of the code the words the date of the granting of the option and the time such option is granted and similar phrases refer to the date or time when the corporation completes the corporate action constituting an offer of stock for sale to an individual under the terms and conditions of a statutory option plr-119656-05 for purposes of determining when an option is granted a corporation completes corporate action within the meaning of sec_1 c of the regulations when pursuant to the terms of the offer the number of shares of stock that may be purchased is fixed and determinable if an offer to sell stock does not designate a fixed a determinable number of shares that may be purchased then corporate action has not been completed see revrul_68_317 1968_1_cb_186 and revrul_70_358 1970_2_cb_96 both of which are clarified by revrul_73_223 1973_1_cb_206 sec_1 f of the regulations provides in part that for purposes of sec_421 and sec_423 of the code the term exercise when used in reference to an option means the act of acceptance by the optionee of the offer to sell contained in the option generally the time of exercise is the time when there is a sale or contract to sell between the corporation and the employee a mere promise to pay the option_price does not constitute an exercise unless the optionee is subject_to personal liability on the promise an agreement or undertaking by the employee to make payments under an employee_stock_purchase_plan does not constitute the exercise of an option so long as the payments remain subject_to withdrawal by the employee the disposition of a share of stock acquired by the exercise of a statutory option before the expiration of the holding_period described in sec_423 makes sec_421 inapplicable to the transfer of such share sec_1 b of the regulations income attributable to such transfer shall be treated by the individual as income received in the taxable_year in which the disposition occurs sec_83 of the code governs the tax consequences resulting from dispositions of plan stock held by employees if sec_421 does not apply to such disposition sec_83 of the code provides the general_rule that the excess of the fair_market_value of property transferred to an employee in_connection_with_the_performance_of_services over the amount_paid for such property shall be included in the gross_income of the employee in the first taxable_year in which the rights of such person are transferable or are not subject_to a substantial_risk_of_forfeiture based on the information submitted we rule as follows the plan including the proposed amendments qualifies as an employee_stock_purchase_plan within the meaning of sec_423 of the code the proposed amendment to the plan excluding certain individuals from participation as described above will not violate the requirements of sec_423 of the code and therefore will not affect the plan’s qualification under sec_423 sec_421 will apply to the transfer of a share of company common_stock to an individual pursuant to his or her exercise of an option under the plan if the requirements of sec_423 of the code are met plr-119656-05 no opinion is expressed concerning whether any individual is an employee of taxpayer or the federal tax consequences of the transaction described above under any other provisions of the code moreover if the plan is subsequently amended this ruling may not remain in effect a copy of this letter should be attached to company's federal_income_tax return for the year in which the amended plan is implemented 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 sincerely ___________________________________ robert misner senior technician reviewer executive compensation branch office of division counsel associate chief_counsel tax exempt and government entities


internal_revenue_service number info release date index numbers mr gerard biasi telluride ln department of the treasury washington dc person to contact peter a cohn id no telephone number refer reply to cc ita - genin-123033-04 date date dear mr biasi this responds to your email dated date in your email you ask about the deductibility of expenses_incurred by a pilot to be trained as a federal flight deck officer by way of background you say that the armed pilots against terrorism act includes a provision that airline pilots may voluntarily be trained as federal flight deck officers pilots who attend this training are not paid_by their employers for this training and are not reimbursed for their expenses sec_162 of the internal_revenue_code allows as a deduction all the ordinary and necessary expenses paid_or_incurred during a taxable_year in carrying on any trade_or_business sec_1_162-5 of the income_tax regulations states the requirements for education expenses of an employee to be deductible a first test is that the education must either maintain or improve skills needed in the employee’s present work or be required by the taxpayer’s employer or by the law to keep the employee’s present salary status or job even if the education meets either of the two requirements of the first test work-related education does not qualify if it is needed to meet the minimum educational requirements of the taxpayer’s trade_or_business or if it is part of a program of study that will qualify the taxpayer for a new trade_or_business if education meets the requirements to be deductible expenses that may be deductible include among others tuition books supplies and transportation and travel costs expenses for travel meals with a limit and lodging are deductible if the taxpayer travels overnight to obtain the education and the main purpose of the trip is to attend a work-related course if the travel away from home is mainly personal the taxpayer cannot deduct all of the expenses for travel meals_and_lodging in such a situation the taxpayer can only deduct expenses for meals_and_lodging during the time that the employee attends the qualified education whether the purpose of a trip is mainly personal or mainly educational depends upon the facts and circumstances you also asked about the loss of income due to attending training although there is not a deduction for not earning expected income if a taxpayer’s employer does not pay the taxpayer for all or part of time spent attending the training an appropriate reduction will be made in the amount of compensation income that the taxpayer reports on his or her income_tax return thus the taxpayer will not be taxed on the amount that the taxpayer did not earn this has been the position of many court decisions over the years such as the case of 313_us_28 in which the united_states supreme court said referring to a transaction which resulted in the taxpayer receiving less income than previously expected that u ndoubtedly it diminished the amount of gross_income petitioner expected to realize but to that extent he was relieved of the duty to pay income_tax for your reference we are enclosing publication tax benefits for education the relevant information begins on page of the publication we are also enclosing revproc_2004_1 which discusses how to obtain a ruling from the internal_revenue_service we hope that this general information is helpful to you if you have any additional questions please contact peter cohn at sincerely thomas d moffitt chief branch office of associate chief_counsel income_tax accounting enclosures pub revproc_2004_1


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-143926-07 date date ----------------------- ------------------------------ ---------------------------------------- legend distributing ---------------------------------------------------------------- ----------------------------------------------------------- controlled ---------------------------------------------------------------- ----------------------------------------------------------- sub ---------------------------------------------------------------- ----------------------------------------------------------- sub --------------------------------------------------------------------- business a -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ business b -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- a dear ------------- --------------------------- -------------- plr-143926-07 this letter responds to your date letter requesting rulings as to the federal_income_tax consequences of a proposed transaction the information submitted 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 materials 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 in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts distributing is a holding_company and the parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing has a single class of common_stock outstanding distributing wholly owns each of controlled and sub distributing is engaged in business a through its ownership of sub outstanding controlled is engaged in business b through its ownership of foreign subsidiaries including wholly-owned sub controlled is a holding_company that has a single class of common_stock financial information has been submitted which indicates that business a conducted by sub and business b conducted by sub each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years distributing intends to separate business a from business b for the following business purposes to allow management of distributing and controlled to focus more effectively on their respective businesses and the varied market dynamics to achieve substantial cost savings resulting from reduced corporate overhead to provide greater aggregate debt capacity to both distributing and controlled to enhance the ability of distributing and controlled to make acquisitions including by using more-efficient focused equity to use focused equity to more tightly align compensation and rewards with the performance of each entity and to allow i ii plr-143926-07 distributing and controlled to target their respective shareholder bases more effectively and optimize capital allocation within each company proposed transaction for what are represented to be valid business purposes distributing proposes the following steps the proposed transaction controlled will distribute approximately dollar_figurea to distributing the cash dividend distributing will distribute all of the controlled stock pro_rata to distributing shareholders the distribution in connection with the proposed transaction distributing and controlled will enter into several agreements relating to the separation of controlled and certain continuing transactions between the companies including a tax_matters_agreement the tax_matters_agreement and certain other ancillary agreements together with the tax_matters_agreement the ancillary agreements representations the following representations are made with respect to the distribution a any indebtedness owed by controlled to distributing after the distribution will not constitute stock_or_securities b except for distribution of restricted shares of controlled stock to holders of restricted shares of distributing stock no part of the consideration distributed by distributing in the distribution will be received by a distributing shareholder as a creditor employee or in any capacity other than that of a distributing shareholder in no event will the restricted_stock distribution represent more than percent of the controlled stock in the distribution c the five years of financial information submitted on behalf of business a as conducted by sub a member of the distributing separate_affiliated_group the sag as defined in sec_355 is representative of the present business operations of business a as conducted by sub and with regard to business a there have been no substantial operational changes since the date of the last financial statements submitted d the five years of financial information submitted on behalf of business b as conducted by sub a member of the controlled sag is representative of the present business operations of business b as conducted by sub and with regard to plr-143926-07 business b there have been no substantial operational changes since the date of the last financial statements submitted e following the proposed transaction the distributing sag and the controlled sag will each continue the active_conduct of each of its businesses independently except as contemplated by the ancillary agreements and with its separate employees f no intercorporate debt will exist between distributing and its subsidiaries on the one hand and controlled and its subsidiaries on the other hand for more than thirty days subsequent to the distribution except for short-term payables arising under the ancillary agreements or indebtedness otherwise arising in the ordinary course of business g payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length h neither business a nor control of an entity conducting this business was acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part i neither business b nor control of an entity conducting this business was acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part j the distribution is being carried out for the following corporate business purposes to allow management of distributing and controlled to focus more effectively on their respective businesses and the varied market dynamics to achieve substantial cost savings resulting from reduced corporate overhead to provide greater aggregate debt capacity to both distributing and controlled to enhance the ability of distributing and controlled to make acquisitions including by using more-efficient focused equity to use focused equity to more tightly align compensation and rewards with the performance of each entity and to allow distributing and controlled to target their respective shareholder bases more effectively and optimize capital allocation within each company the distribution is motivated in whole or substantial part by these corporate business purposes k the distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing controlled or both plr-143926-07 l for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold distributing stock possessing percent or more of the total combined voting power of all classes of stock entitled to vote or percent or more of the total value of shares of all classes of stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution m for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold controlled stock possessing percent or more of the total combined voting power of all classes of stock entitled to vote or percent or more of the total value of shares of all classes of stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution n the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation o immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations further distributing’s excess_loss_account if any with respect to controlled stock will be included in income immediately before the distribution rulings based solely on the information submitted and the representations made we rule as follows on the proposed transaction no gain_or_loss will be recognized by and no amount will be included in the income of the distributing shareholders upon the receipt of controlled stock in the distribution sec_355 controlled stock in the distribution sec_355 no gain_or_loss will be recognized by distributing on the distribution of the the aggregate basis of the distributing stock and the controlled stock received by the distributing shareholders after the distribution will be the same as the basis of the distributing stock in the hands of its shareholders immediately before the plr-143926-07 distribution allocated in the manner described in sec_1_358-2 sec_358 b and c sec_1_358-1 the holding_period of the controlled stock in the hands of the distributing shareholders will include the holding_period of the distributing stock held by each distributing shareholder prior to the distribution provided that the distributing stock is held as a capital_asset on the date of the distribution sec_1223 as provided in sec_312 earnings_and_profits if any will be allocated between distributing and controlled in accordance with sec_1_312-10 and sec_1_1502-33 the cash dividend will be treated as a distribution to which sec_301 applies sec_301 sec_1_1502-13 caveats no opinion is expressed about the tax treatment of the proposed transaction described above under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the proposed transaction satisfies the business_purpose requirement of sec_1_355-2 ii whether the proposed transaction is used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both see sec_355 and sec_1_355-2 and iii whether the proposed transaction is part of a plan or series of related transactions under sec_355 procedural statements this ruling 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 in this office a copy of this ruling plr-143926-07 letter will be sent to your authorized representatives sincerely _richard k passales_______ richard k passales senior counsel branch office of associate chief_counsel corporate-


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-101732-11 plr-101733-11 plr-101734-11 date may legend ------------------------- --------------------------------------- ---------------------------------------------------------------- x y z country x ---------------- country y --------------------- country z -------- date date ---------------------- ------------------ dear ---------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x y and z requesting extensions of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded entities under sec_301_7701-3 facts plr-101732-11 the information submitted states that x was formed under the laws of country x y was formed under the laws of country y and z was formed under the laws of country z x and y both intended to be treated as disregarded entities effective date z intended to be treated as a disregarded_entity effective date x y and z each represent that it is a foreign_entity eligible to elect to be treated as a disregarded_entity however all of x y and z inadvertently failed to timely file forms entity classification election 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 at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and 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_7701-3 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 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 for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin plr-101732-11 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x y and z are granted extensions of time of one hundred and twenty days from the date of this letter to elect to be treated as disregarded entities for federal tax purposes effective date for x and y and date for z the elections should be made by filing forms with the appropriate service_center a copy of this letter should be attached to the elections except as expressly provided herein we express or imply no opinion 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 taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative 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 plr-101732-11 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 sincerely associate chief_counsel passthroughs special industries by richard t probst senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b1-plr-106576-03 date date legend lossco outside tax professional date date date i h x state c company officer dear this responds to a letter dated date submitted on behalf of lossco requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election lossco is requesting an extension to file a closing-of-the-books election pursuant to sec_1_382-6 of the income_tax regulations the election with respect to a transaction that occurred on date additional information was received in letters dated date and date the material information is summarized below lossco a state c_corporation is engaged in business i lossco computed its federal_income_tax liability using an accrual_method of accounting and filed its federal_income_tax returns on a calendar_year basis on date lossco issued x shares of preferred_stock the preferred_stock issuance resulted in an ownership_change as defined in sec_382 of the internal_revenue_code for the entire tax_year ending on date the net_operating_loss for lossco was dollar_figureh the election was due on date the extended due_date for lossco’s federal_income_tax return but for various reasons it was not filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for the taxable_year for which lossco's election should have been filed or subsequent years the following representations have been made in connection with this request lossco was a loss_corporation as defined in sec_382 and sec_1_382-2 for the tax_year ending date lossco did not accelerate income into the pre-change period or defer loss to the post-change period for the purpose of avoiding the application of sec_382 lossco was not under the jurisdiction of a court in a title_11_or_similar_case lossco will determine its alternative_minimum_taxable_income and adjusted_current_earnings for the pre-change and post-change periods based on a closing-of-the-books election as of the ownership_change date and will elect out of ratable allocation since date lossco has continued the operation of its historic trade_or_business lossco has not carried back and will not carry back under sec_172 any portion of the net_operating_loss it incurred in the tax_year ended on date to a prior tax_year an election under sec_338 was not made in connection with the date transaction sec_1_382-6 provides that except as provided in paragraphs b and d of the section a loss_corporation must allocate its net_operating_loss or taxable_income and its net_capital_loss or modified capital_gain_net_income for the change year between the pre-change period and the post-change period by ratably allocating an equal portion to each day in the year sec_1_382-6 provides that a loss_corporation may elect to allocate its net_operating_loss or taxable_income and its net_capital_loss or modified capital_gain_net_income for the change year between the pre-change period and the post-change period as if the loss corporation's books were closed on the change_date sec_1_382-6 provides that a loss_corporation makes the closing-of-the-books election by including the following statement on the information statement required by sec_1_382-2t for the change year the closing-of-the-books election under sec_1_382-6 is hereby made with respect to the ownership_change occurring on insert date the election must be made on or before the due_date including extensions of the loss corporation's income_tax return for the change year under sec_301_9100-1 the commissioner has discretion to 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections 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 sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_382-6 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for lossco to file the election provided lossco shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by lossco company officer and outside tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 the information also establishes that lossco reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that lossco has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for lossco to file the election within days of the date on this letter lossco must file or amend as applicable its income_tax returns for all open taxable years affected by the election and to attach to the returns a copy of the election a copy of the information statement if one has not already been attached and a copy of this letter the above extension of time is conditioned on lossco’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the lossco’s tax_liability for the years involved a determination thereof will be made by the applicable director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that lossco’s tax_liability is lower sec_301_9100-3 we express no opinion as to whether lossco is a loss_corporation as defined in sec_382 and sec_1_382-2 or whether an ownership_change as defined in sec_382 and sec_1_382-2t occurred on date or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayer however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply this ruling is directed only to the taxpayer s requesting it sec_6110 of the code 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 ken cohen senior technician reviewer branch office of associate chief_counsel corporate


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-111409-05 date august legend legend taxpayer spouse trust ------------------------------------------------ ----------------------------------------------- --------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------- dear -------------------------- -------------------------- ------- ------- ------------- --------------------------------------------------------------------------------- date year year x y this letter is in response to a letter dated date from your authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations and sec_2642 of the internal_revenue_code to make an allocation of taxpayer’s and spouse’s generation-skipping_transfer gst tax exemption the facts and representations submitted are summarized as follows on date taxpayer as grantor established an irrevocable_trust trust for the benefit of his children and descendants of his children the initial and only transfers to trust were made by taxpayer in year in the amount of dollar_figurex and dollar_figurey taxpayer and spouse timely filed united_states gift and generation-skipping_transfer_tax returns form sec_709 to report those transfers to trust and consented to split the gifts pursuant to sec_2513 for year however the certified_public_accountant who prepared the returns and on whose expertise taxpayer and spouse relied inadvertently failed to allocate taxpayer’s and spouse’s available gst tax exemptions to the transfers in year an attorney advised taxpayer and spouse that to they should have allocated their gst tax plr-111409-05 exemptions for the prior gifts to trust on their year gift_tax returns for trust to be exempt from gst tax sec_2601 imposes a tax on every generation-skipping_transfer a generation- sec_2631 provides that for purposes of determining the gst tax every sec_2642 provides generally that the secretary shall by regulation sec_2632 provides that any allocation by an individual of his or her gst skipping transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual's estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 notice_2001_50 2001_2_cb_189 provides that under sec_2642 the sec_2642 provides that in determining whether to grant relief under requests for relief under sec_301_9100-3 will be granted when the taxpayer under sec_301_9100-1 a regulatory election includes an election whose due sec_301_9100-3 provides that in general requests for extensions of time plr-111409-05 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 in subtitles e g h and i for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an election described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or to advise the taxpayer to make the election the requirements of sec_301_9100-3 have been satisfied therefore taxpayer and spouse are each granted an extension of time of days from the date of this letter to make allocations of their respective gst exemptions to trust for year an individual or supplemental form_709 should be filed for each taxpayer for year each form_709 should include a notice of allocation properly allocating the taxpayer's gst_exemption to the transfers to trust the allocations will be effective as of the respective dates of the transfers to trust and the inclusion_ratio of trust will be determined based on the value of the transfers to trust as determined for federal gift_tax purposes and the amount of exemption allocated to trust a copy of this letter should be attached to each individual or supplemental form_709 and filed with the internal_revenue_service center cincinnati ohio copies are included for this purpose concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter based on the facts submitted and the representations made we conclude that sec_301_9100-3 provides that a taxpayer is deemed to have acted except as expressly provided herein no opinion is expressed or implied plr-111409-05 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 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 pursuant to the power_of_attorney on file with this office this letter is being sent this ruling is directed only to the taxpayer requesting it sec_6110 to the taxpayer's representative provides that it may not be used or cited as precedent sincerely heather c maloy associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter