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 ---------------- ---------------- telephone number --------------------- refer reply to cc ita b07 plr-133743-18 date date legend parent ----------------------------------------------------- ----------------------- sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 date1 date2 date3 date4 --------------------------------------------- ------------------------------------------- -------------------------------------------------- ------------------------------- --------------------------------------- ------------------------------------------------------- ----------------------------------------- --------------------------------- ------------------------------- --------------------------------------------- ---------------------- --------------------------- ------------------- ------------------------ plr-133743-18 dear ----------------- this letter_ruling responds to a letter dated date and supplemental correspondence submitted by parent on behalf of its subsidiaries sec_1 through s10 collectively the subsidiaries parent is requesting an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file the originals and the signed duplicate copies of two forms application_for change in accounting_method on behalf of the subsidiaries parent should have filed the originals and copies of these originals pursuant to section a i of revproc_2015_13 2015_5_irb_419 for the taxable_year beginning date1 and ended date2 facts parent represents the facts are as follows parent is the common parent of a consolidated_group that includes the subsidiaries parent files a consolidated federal_income_tax return on a calendar_year basis parent’s overall_method_of_accounting is the accrual_method beginning for the taxable_year beginning date1 and ended date2 the subsidiaries wanted to change their methods_of_accounting for depreciation for leasehold improvements data center facilities equipment computer equipment communication equipment leased equipment capitalized leased property and furniture and fixtures for purposes of determining the earnings_and_profits of a foreign_corporation from using u s generally_accepted_accounting_principles gaap to determining the depreciation under sec_168 of the internal_revenue_code additionally beginning for the taxable_year beginning date1 and ended date2 sec_1 through s8 wanted to change their method of determining amortization for developed and acquired computer_software for purposes of determining the earnings_and_profits of a foreign_corporation from amortizing the deduction over months pursuant to gaap to depreciating the software using the straight-line method over months beginning with the month the software was placed_in_service pursuant to revproc_2000_50 2000_2_cb_601 and sec_167 parent believes that these changes in methods_of_accounting could be implemented under the automatic change procedures of revproc_2015_13 thus in accord with the automatic change procedures of revproc_2015_13 parent should have completed the required originals of the forms reflecting the desired accounting_method changes and attached these originals to parent’s timely filed consolidated federal_income_tax return for the taxable_year beginning date1 and ended date2 further in accord with the automatic change procedures of revproc_2015_13 a copy of the originals of the forms each with an original signature or a plr-133743-18 photocopy of the original signature should have been timely filed with the appropriate office of the internal_revenue_service irs lastly parent’s consolidated federal_income_tax return for the taxable_year beginning date1 and ended date2 should have reflected these accounting_method changes made by the subsidiaries parent’s consolidated federal_income_tax return for the taxable_year beginning date1 and ended date2 was due on date3 without extensions parent was unable to file its consolidated federal_income_tax return by date3 so it intended to request an extension of time to file its consolidated federal_income_tax return to date4 parent prepared all of the relevant information necessary to correctly and timely file parent’s federal application_for extension for the taxable_year beginning date1 and ended date2 on date3 parent timely paid the tax it owed on extension for its federal_income_tax returns for the taxable_year beginning date1 and ended date2 however due to an extraordinary series of events parent inadvertently failed to timely e-file form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns for the taxable_year beginning date1 and ended date2 to extend the due_date for its federal tax_return several months after date3 parent discovered that parent’s form_7004 had not been filed as a result of parent’s failure to timely file form_7004 for the taxable_year beginning date1 and ended date2 the original forms were not attached to a timely filed federal_income_tax return for that taxable_year and the signed duplicate copies of parents’ forms were not timely filed with the appropriate irs office as required by section a i of revproc_2015_13 parent filed the signed duplicate copies of the two forms at issue with the ogden utah office of the irs on date4 parent filed its consolidated federal_income_tax return for the taxable_year beginning date1 and ended date2 on date4 parent attached to this filed return the originals of the two forms at issue the filed return also fully reflects the accounting_method changes made by the subsidiaries including the necessary adjustments under sec_481 ruling requested parent requests an extension of time pursuant to sec_301_9100-1 and sec_301 to file the original forms and the signed duplicate copies of the originals of the forms described above for the subsidiaries for the taxable_year beginning date1 and ended date2 law and analysis plr-133743-18 revproc_2015_13 as clarified and modified by revproc_2015_33 and as modified by revproc_2017_59 and by section dollar_figure of revproc_2016_1 provides the automatic change procedures and the non-automatic change procedures by which a taxpayer may obtain consent to change its methods_of_accounting pursuant to section of revproc_2015_13 a taxpayer that complies with all the applicable provisions of revproc_2015_13 and implements the change in method_of_accounting on its federal_income_tax return for the requested year_of_change to which the original form_3115 is attached pursuant to section dollar_figure of revproc_2015_13 has obtained the consent of the commissioner of internal revenue to change its method_of_accounting under sec_446 and the regulations thereunder section a i of revproc_2015_13 provides that a taxpayer changing a method_of_accounting under the automatic change procedures of revproc_2015_13 must complete and file a form_3115 in duplicate the original must be attached to the taxpayer’s timely filed including any extensions original federal_income_tax return for the year_of_change and a signed copy of the original form_3115 must be filed with the appropriate office of the irs no earlier than the first day of the requested year_of_change and no later than when the original form_3115 is filed with the federal_income_tax return for the requested year_of_change 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 certain regulatory elections 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 automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making 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 evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government sec_301_9100-3 imposes special rules for accounting_method regulatory elections this section provides in relevant part that the interests of the government are deemed to be prejudiced except in unusual and compelling circumstances when the accounting_method regulatory election for which relief is requested is subject_to the procedure described in sec_1_446-1 or the relief requires an adjustment under sec_481 or would require an adjustment under sec_481 if the taxpayer changed to the accounting_method for which relief is requested in a taxable_year subsequent to the taxable_year the election should have been made plr-133743-18 conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly parent is granted an extension of time to file the two originals of the forms changing the subsidiaries’ methods_of_accounting beginning for the taxable_year beginning date1 and ended date2 and file the signed duplicate copies of these original forms with the appropriate office of the irs in this regard we will consider the filing of the two original forms with parent’s consolidated federal_income_tax return for the taxable_year beginning date1 and ended date2 that was filed on date4 to be timely made we also will consider the filing of the signed duplicate copies of the original forms with the irs office in ogden utah on date4 to be timely made except as expressly set forth above we express no opinion concerning the tax consequences of the facts described above under any other provision of the code or regulations specifically no opinion is expressed or implied concerning whether the accounting_method changes the subsidiaries have made are eligible to be made under the automatic change procedures of revproc_2015_13 or the subsidiaries otherwise meet the requirements of revproc_2015_13 to make the accounting_method changes using the automatic change procedures of revproc_2015_13 lastly we emphasize that this letter_ruling does not grant any extension of time for the filing of parent’s form_7004 or its consolidated federal_income_tax return for the taxable_year beginning date1 and ended date2 the ruling contained in this letter_ruling is based upon facts and representations submitted by parent with an accompanying penalty of perjury statement executed by the appropriate party while this office has not verified any of the material submitted in support of this request for an extension of time to file the required forms all material is subject_to verification on examination this letter_ruling is directed only to parent who requested it sec_6110 provides that it may not be used or cited as precedent plr-133743-18 in accordance with the power_of_attorney we are sending copies of this letter_ruling to parent’s authorized representatives sincerely charles j magee charles j magee senior counsel branch office of the associate chief_counsel income_tax accounting enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court thomas e truskowsky and susan l truskowsky petitioners v commissioner of internal revenue respondent docket no 14066-01s filed date harry d shapiro and christopher j pippett for petitioners innessa glazman and warren p simonsen for respondent dean special_trial_judge this case was heard under the provisions of sec_7463 of the internal_revenue_code as in effect at the time the petition was filed unless otherwise indicated all other section references are to the internal_revenue_code in effect for the years at issue the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined deficiencies in petitioners' federal_income_tax of dollar_figure for and dollar_figure for the issue for decision is whether petitioners' business_losses constitute passive_activity_losses the amount of petitioners' allowable itemized_deductions and personal exemptions will be determined by our disposition of the contested issue the stipulated facts and exhibits received into evidence are incorporated herein by reference at the time the petition in this case was filed petitioners resided in moatsville west virginia petitioners' vocations background during the years and petitioners resided in trappe pennsylvania and both were full-time employees at a large computer_software corporation the oracle corporation oracle petitioner susan truskowsky was a program manager in the program management group at oracle consulting her job required her to travel to projects around the country mostly in the mid-atlantic region and to dallas texas in petitioner thomas truskowsky was employed as senior principal consultant for oracle in he became a technical manager mr truskowsky commuted to central new jersey from trappe pennsylvania every day petitioners' cattle breeding activity petitioners' cattle breeding activity began in when they bought their first cows they were limousin cattle a beef breed from france petitioners decided to go into the limousin cattle business after considering other breeds of cattle the farm petitioners needed a place to board their cattle as they did not own a farm during the years in issue petitioners learned about k-c delight farm k-c from a local newspaper that advertises to farmers they visited k-c and other farms before choosing k-c chester deitch who operated k-c did not own the farm but rented it he operated k-c primarily as a multiple acreage general and dairy farm near his home and included in mr deitch's farmland rental was a parcel of land where he boarded petitioners' cattle mr deitch maintained approximately two dozen cattle of his own on the same parcel where he boarded petitioners' cattle mr deitch maintained his and petitioners' animals in different paddocks petitioners' animals had their own shelter and automatic watering systems mr deitch did not live on the parcel of property where he kept petitioners' cattle pincite simmons road there were however boarders in the house at that location and mr deitch's brother who helped him on the farm lived on simmons road in the summer house as the simmons road location was somewhat isolated and mr deitch and his brother had animals tools and equipment that they needed to keep secure there was an understanding that the tenants would keep an eye on the farm for mr deitch and let him know if they saw someone come onto the property mr deitch lived nearby in a house on deitch mill road his farm on deitch mill road was used to keep dairy cows according to mrs truskowsky she didn't actually go there very often the agreement mr deitch had an oral agreement with petitioners to board their animals in the sheltered barn and pasture paddocks and to feed and care for their animals for dollar_figure per day per head of cattle the agreement continued for about years from spring of until february of the number of animals boarded varied from week to week and month to month from about to head mr dietch fed the cattle twice a day they were fed silage hay and supplemental grain some of which was grown by mr deitch on his farm through the daily contact for feeding the animals were observed for general health and veterinary needs if mr deitch detected problems that were not too complicated he gave them any needed shots or other treatment if a veterinarian was required he generally contacted the veterinarian he would also contact petitioners when the veterinarian was needed as they were responsible for the resulting expenses mr deitch estimates there were from to calves born to petitioners' animals during a year he his wife or other family_member was present for the births he spent on average about hours a day with petitioners' animals feeding and observing them and performing other miscellaneous tasks mr deitch did not invoice or bill petitioners under the oral agreement but petitioners kept track of the number of cattle present at k-c during each month in and and generally paid accordingly veterinary breeding services from time to time during the period at issue petitioners' cattle received veterinary services at some distance from k-c the services included in vitro fertilizations and embryo transfers techniques which particularly interested petitioners in some of the cattle were transported to a facility called em tran in elizabethtown pennsylvania in cattle were sent to both em tran and genetic visions in coatesville pennsylvania one or both of petitioners visited em tran about times over years and they went to genetic visions about times in when petitioners went to em tran they checked the health of their cattle and visited dr henderson at the facility to receive instruction on the embryo process the in vitro process they also discussed these matters with dr evans at genetic visions at first petitioners came to genetic visions together then sometimes mr or mrs truskowsky would come alone as their schedules permitted when they came with their animals petitioners would typically spend from to hours working at the facility to get the cattle from k-c to facilities at em tran or genetic visions petitioners had to contract a livestock hauler to transport the cattle the hauler would arrive at the farm and the cattle were loaded onto the truck taken to the facility and unloaded the process would be reversed to return them to the farm shows and auctions petitioners participated in buying their limousin cattle at shows and auctions most of their purchases were initiated through a broker using e-mail or fax but petitioners did attend some shows and auctions in and petitioners' visits to k-c during the years at issue petitioners would periodically visit k-c to pay mr deitch and to inspect the health and condition of their animals petitioners used grain to attract the cattle close enough to observe their general condition petitioners would sometimes stop on the way to the farm to purchase the grain which took from a hour to hour the farm located between gettysburg and mechanicsburg pennsylvania was halfway between petitioners' home in trappe and mrs truskowsky's mother's home near washington d c the distance between trappe and the farm is approximately miles like mrs truskowsky's mother's home the oracle office where mrs truskowsky worked is located in the washington d c area it was convenient for mrs truskowsky when she visited k-c on the weekend then to go to stay at her mother's house to prepare for the coming work week instead of returning home to trappe petitioners' farm search petitioners had a desire to acquire a farm of their own during and they used the services of a real_estate agent to aid them in locating one petitioners made trips with an agent to look at farm property offered for sale petitioners eventually purchased a farm in west virginia in november of reconstructed logs and tax returns although petitioners maintained certain records of their limousin cattle activity they did not keep any log of the actual number of hours they devoted to the activity at the request of their attorneys petitioners prepared for use at trial documents that attempt to demonstrate the actual hours they devoted to their limousin cattle activity during and petitioners filed with each of their and federal_income_tax returns a schedule c profit or loss from business for their cattle activity for petitioners reported a schedule c loss of dollar_figure petitioners for reported a schedule c loss of dollar_figure discussion because the court decides this case without regard to the burden_of_proof sec_7491 is inapplicable passive_activity_losses sec_469 states that a passive_activity_loss is not allowed to an individual as a deduction for the year in which it is sustained sec_469 defines a passive_activity_loss as the amount by which a the aggregate losses from all passive activities for the taxable_year exceed b the aggregate income from all passive activities for such year passive activities are those activities which involve the conduct_of_a_trade_or_business in which the taxpayer does not materially participate sec_469 the term trade_or_business for this purpose means any activity in connection with any trade_or_business or any activity with respect to which expenses are allowable as a deduction under sec_212 sec_469 material_participation sec_469 provides that generally an individual shall be treated as materially participating in an activity only if he or she is involved in the operations of the activity on a basis that is regular continuous and substantial congress directed the secretary_of_the_treasury secretary to prescribe such regulations as may be necessary or appropriate to carry out the provisions of sec_469 including regulations that specify what constitutes material_participation sec_469 both temporary and final regulations relating to the meaning of the terms participation and material_participation have been promulgated under sec_469 the term participation means generally any work done by an individual without regard to the capacity in which the individual does the work in connection with an activity in which the individual owns an interest at the time the work is done sec_1_469-5 income_tax regs temporary regulations issued under sec_469 provide certain exceptions to the definition of participation one particular provision sec_1_469-5t temporary income_tax regs fed reg date provides that work done by an individual in the capacity of an investor in an activity shall not be treated as participation by the individual in the activity unless the individual is involved in the day-to-day management or operations of the activity work done by an individual as an investor in an activity includes but is not limited to studying and reviewing financial statements or reports on operations of the activity preparing or compiling summaries or analyses of the finances or operations of the activity for the individual's own use and monitoring the finances or operations of the activity in a non-managerial capacity id temporary regulations relating to the meaning of the term material_participation in sec_469 provide that in general an individual shall be treated for purposes of sec_469 and the regulations thereunder as materially participating in an activity for the taxable_year if and only if-- the individual participates in the activity for more than hours during such year the individual's participation in the activity for the taxable_year constitutes substantially_all of the participation in such activity of all individuals including individuals who are not owners of interests in the activity for such year the individual participates in the activity for more than hours during the taxable_year and such individual's participation in the activity for the taxable_year is not less than the participation in the activity of any other individual including individuals who are not owners of interests in the activity for such year the activity is a significant_participation_activity for the taxable_year and the individual's aggregate participation in all significant participation activities during such year exceeds hours the individual materially participated in the activity for any taxable years whether or not consecutive during the taxable years that immediately precede the taxable_year the activity is a personal_service_activity and the individual materially participated in the activity for any taxable years preceding the taxable_year or based on all of the facts and circumstances the individual participated in the activity on a regular continuous and substantial basis during such year sec_1_469-5t temporary income_tax regs fed reg date in determining whether a taxpayer materially participated in an activity the participation of a spouse shall be taken into account sec_469 respondent determined that petitioners did not materially participate in the cattle activity and that petitioners' business_losses therefore constitute passive_activity_losses petitioners contend that they participated in the activity for more than hours test or for more than hours during the taxable_year and that their participation was not less than the participation in the activity of any other individual test test in the time logs they prepared for trial petitioners show participation for a total of hours for and hours for in their limousin cattle activity of the hours claimed for are related to trips to k-c of the claimed for are related to trips to k-c citing goshorn v commissioner tcmemo_1993_578 and toups v commissioner tcmemo_1993_359 petitioners argue that their travel between their home and k-c constitutes work done in connection with their cattle activity see sec_1 f income_tax regs the court recognizes that travel in some circumstances can be work done in connection with a trade_or_business in this case for example petitioners' travel between k-c and the facilities at em tran and genetic visions is work done in connection with their cattle activity the court however disagrees with petitioners' conclusion that all their travel here was work neither of the cases they cited supports the inclusion of commuting hours as hours of work for purposes of sec_1 f income_tax regs commuting is an inherently_personal activity and as such does not constitute work in connection with a trade_or_business see 413_us_838 we cannot read sec_262 of the internal_revenue_code as excluding such expenses from 'personal' expenses 326_us_465 sec_1_262-1 income_tax regs taxpayer's choice to live at a distance from his place of business is personal and a taxpayer's costs of commuting to his place of business or employment are personal petitioners' total claimed hours of work must be reduced by the number of hours each spent in the personal activity of commuting between their home in trappe k-c and mrs truskowsky's mother's home near washington d c the court estimates an approximate travel time of hours from petitioners' home to k-c and hours back or to go on to mrs truskowsky's mother's house a total trip of about hours for mr truskowsky estimated that he made trips to k-c which when multiplied by hours i sec_144 hours mrs truskowsky estimated that she made trips and therefore spent about hours commuting to and from the farm petitioners spent a total of hours commuting to and from the farm in that must be deducted from their total claimed hours of work for mr and mrs truskowsky claimed and trips respectively to k-c for a total of commuting hours that must be deducted from their total claimed hours sec_1_469-5t temporary income_tax regs fed reg date provides that work done by an individual in the individual's capacity as an investor in an activity shall not be treated as participation by the individual in the activity unless the individual is involved in the day-to- day management or operations of the activity the court is unable to find from a preponderance_of_the_evidence that petitioners were involved in the day-to-day management or operations of their limousin cattle activity the court finds therefore that hours claimed for the activities of books for thomas for and for and susan truskowsky and wire xfers foreign drafts for and for for susan truskowsky shows and sales for thomas and and susan truskowsky and other travel for thomas and and susan truskowsky and and farm purchase for thomas and and susan truskowsky and may not be counted as participation in the cattle activity reduced by the amounts stated petitioners' participation in their limousin cattle activity was in both years less than the hours required to qualify under test as material_participation test the court finds that although petitioners did not participate for or more hours they did participate in the activity for more than hours during the taxable_year in order to qualify under test however they must also show that their participation in the activity for the taxable_year is not less than the participation in the activity of any other individual including individuals who are not owners of interests in the activity for such year mr deitch testified that he participated in petitioners' cattle activity on average about hours day when his daily participation is multiplied by it is well over hours a year more than that of petitioners at trial there was some testimony and cross-examination suggesting that mr deitch did not contribute as many hours to the activity as that to which he testified on the other side of the scale there was testimony and evidence suggesting that petitioners' logs exaggerate the number of hours they contributed to the activity the result is that the court finds from a preponderance_of_the_evidence that petitioners' level of participation in their cattle activity did not exceed mr deitch's day-to-day participation in the activity in either year petitioners do not meet the requirements of test test although petitioners have not met the requirements of either of the tests on which they relied in their trial memorandum and at trial there is an additional test under which they might yet qualify based on all the facts and circumstances if petitioners nevertheless participated in the limousin cattle activity on a regular continuous and substantial basis during such year they have materially participated even if they do not pass any of the other six tests sec_1_469-5t temporary income_tax regs fed reg date test the standard for test is not explained in the temporary regulations however the very structure of the regulations suggests that it will apply only in exceptional circumstances where the more specific and detailed requirements of the other six tests are not met it is possible that the other six tests may not be met yet the taxpayer either works full time in the business or does all the activities necessary to conduct the business even though that is a small amount of work compared to other businesses in general see h conf rept 1986_3_cb_148 it is also true that a taxpayer is more likely materially participating in an agricultural activity if he is conducting the activity at or near his primary residence see s rept 1986_3_cb_733 petitioners lived almost miles from their limousin cattle activity did not perform all of the activities necessary to the conduct of the activity and did not perform the activity on a full-time basis in addition there was another individual who was involved on a daily basis with the activity all of the facts and circumstances of this case do not show by a preponderance_of_the_evidence that despite not meeting the requirements of the other six tests petitioners participated in the limousin cattle activity on a regular continuous and substantial basis during and they do not meet the requirements of test conclusion respondent's determination that petitioners' business_losses for and constitute passive_activity_losses is sustained reviewed and adopted as the report of the small_tax_case division for respondent decision will be entered


internal_revenue_service p o box cincinnati oh date july number release date legend y dear department of the treasury employer_identification_number contact person - id number contact telephone number uil we have considered your request for advance approval of your grant-making program under sec_4945 g of the internal_revenue_code dated date our records indicate that you were recognized as exempt from federal_income_tax under sec_501 of the code and classified as a private_foundation as defined in sec_509 your letter indicates that you will operate a grant-making program called y the purpose of y is to fully cover the tuition cost of a recipient’s undergraduate degree graduate school degree or advanced study in the united_states and to subsidize the recipient’s living expense and cost of textbooks you will consider any student pursuing an undergraduate degree graduate school degree or advance study in the united_states who possess a cumulative grade point average of at least dollar_figure in his or her current curriculum and whose annual family household_income is dollar_figure or less a prospective individual interested in applying for y can obtain an application form by sending a self-addressed stamped envelope to your address the scholarship selection committee members review the quality of the applicants and make informed decisions on the eventual scholarship recipients the members of the scholarship selection committee are uncompensated volunteer members you have ensured that the committee members are independent and not subject_to the control or influence of others when evaluating and selecting scholarship recipients by applying due diligence you expect to accomplish such reasonable due diligence by researching and documenting that the applicants are not related to any selection committee member or a relative of a selection committee member you will also establish a policy and procedure that will not permit any selection committee member from having inappropriate contact with scholarship applicants during the process of evaluation and selection no member of the selection committee or officer director and substantial_contributor or their relatives is eligible for awards made under your program you agree to maintain records that include the following information used to evaluate the qualifications of potential grantees identification of the grantees the amount and purpose of each grant and all grantee reports and other follow-up data obtained in administering y you will verify that the funds are used for legitimate educational expenses the tuition will be sent directly to the educational_institution for application to the student’s financial_account and thereby ensuring those funds are used legitimately you will require the recipient to have the most recent quarter or semester’s transcript sent directly from the institution to you within days of the end of the quarter or semester if you believe the scholarship funds were not used for their intended purpose you will take the appropriate steps to recover diverted funds and ensure other scholarship funds held for the recipient are used for the intended purpose further you will withhold further payments to the scholarship recipient until you obtain the recipient’s assurance that future diversions will not occur if a recipient withdraws from enrollment but intends to return to the institution then scholarship awards will cease until such recipient is re-enrolled at an institution you will only pay the tuition to the institution on behalf of the recipient once the institution verifies that the recipient is an enrolled student in good standing the recipient will be required to submit receipts for all expenditures totaling the amount of the portion of y that is given directly to the recipient in cash the receipts will be reviewed by a selection committee member sec_4945 and b of the code impose certain excise_taxes on taxable - expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 gi the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process ii such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois lerner lois lerner director exempt_organizations


office_of_chief_counsel internal_revenue_service memorandum number release date cc fip b04 jeglover pref-112116-15 uilc date july to j paul knap attorney cc lb_i rfth ch2m from alexis a macivor branch chief branch financial institutions products third party communication none date of communication not applicable subject treatment of reimbursements on high deductible policies under sec_832 this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend taxpayer tax period ------- ------------------------------------------------- issue sec_1 is taxpayer entitled to a loss incurred under sec_832 for uncollectible deductibles is taxpayer entitled to a deduction under sec_832 for a bad_debt within the scope of sec_166 for uncollectible deductibles conclusion sec_1 under sec_832 as constrained by sec_1_832-4 taxpayer is not entitled to a loss incurred for uncollectible deductibles using its current methodology under sec_832 taxpayer is entitled to a deduction for a bad_debt within the scope of sec_166 for an uncollectible deductible to the extent consistent with sec_832 pref-112116-15 facts taxpayer writes high deductible policies covering workers’ compensation automobile and general liability these policies are implemented through a base policy with a high deductible endorsement and an accompanying negotiated security_agreement state law requires an insurer providing workers’ compensation or automobile liability coverage to pay claimants on a first-dollar basis without regard to any applicable deductibles that might apply this requirement is imposed even if the insurer does not expect the insured to reimburse the deductible or the insured is insolvent or bankrupt accordingly the base policy provides that taxpayer will pay the full amount of all claims on behalf of the insured just as it would if the policy did not have any deductible the endorsement sets forth the amount and terms of the deductible and provides that the insured will reimburse taxpayer for claims that taxpayer pays that are within the deductible limit the portion of claims for which the insured agrees to reimburse taxpayer is referred to as the deductible layer the separately negotiated security_agreement addresses the amount and type of collateral taxpayer requires for purposes of annual_statement reporting unpaid loss_reserves for high deductible plans shall be determined in accordance with the national association of insurance commissioners’ naic statement of statutory accounting principles ssap reserves for claims arising under high deductible plans shall be established net of the deductible however no reserve credit shall be permitted for any claim where any amount due from the insured has been determined to be uncollectible ssap taxpayer complies with this statutory accounting guidance taxpayer monitors bankruptcy filings delinquent premium payments and other legal notices as well as information provided by underwriters brokers agents and others to determine if the insured is unlikely to be able to fulfill its obligations to reimburse taxpayer for the deductible layer amount if taxpayer is of the opinion that any portion of a deductible layer reimbursement recoverable has become uncollectible taxpayer establishes a supplemental reserve for the amount of the uncollectible reimbursement to reverse the reserve credit as required by ssap the supplemental reserve only includes deductible layer amounts that relate to claims for which unpaid loss_reserves have been established and are deemed uncollectible it does not include amounts that are an actuarial estimate of deductible amounts that may be uncollectible in the future when the unpaid loss reserve and supplemental reserve are combined taxpayer reports an appropriate level of reserves in compliance with ssap on its annual_statement when a claim is paid taxpayer releases the unpaid loss reserve and supplemental reserve attributable to the paid loss the deductible layer amount is then reported as a receivable and if uncollectible in whole or part a bad_debt in which case the uncollectible deductible layer amount is reported as an uncollectible receivable taxpayer provided the following example illustrating the methodology pref-112116-15 assume a policy with a dollar_figure million limit and a dollar_figure reimbursable deductible layer loss events occur that taxpayer values at dollar_figure taxpayer initially adds dollar_figure to unpaid_losses and nets the reimbursable deductible layer amount of dollar_figure producing a final unpaid loss of dollar_figure assume the insured posted dollar_figure of collateral and taxpayer learns the insured is in bankruptcy and the estimated bankruptcy recoverable is dollar_figure accordingly the actual deductible layer amount reimbursement will be dollar_figure rather than the contractually mandated dollar_figure accordingly taxpayer increases the supplemental reserve by dollar_figure which is then added to unpaid_losses producing aggregate unpaid_losses of dollar_figure when taxpayer pays the claim it reduces unpaid_losses by dollar_figure taxpayer posts a receivable of dollar_figure the nominal reimbursement and applies the collateral of dollar_figure for a net receivable of dollar_figure taxpayer also reports a contra asset of dollar_figure to reflect the portion of the receivable that it does not expect to recover although the specific terms of each contract may vary common to each specimen submitted to our office is that taxpayer is not entitled to reimbursement until taxpayer has actually paid the claim the issues presented as with most issues arising under the application of subchapter_l is not whether an item is includible in or deductible from gross_income but the time of recognizing the item and the analytical reason for that recognition and timing law and analysis issue sec_831 imposes tax computed as provided in sec_11 for each taxable_year on the taxable_income of every insurance_company other than a life_insurance_company sec_832 defines taxable_income for a company subject_to sec_831 to be the gross_income defined in sec_832 less the deductions allowed by sec_832 sec_832 defines gross_income to include the combined gross amount earned during the taxable_year from investment_income and from underwriting_income for purposes of illustration discounting required by sec_846 is ignored for example one endorsement specimen provides taxpayer will pay part of all of any deductible amounts or ‘allocated loss adjustment expense’ to effect settlement of any claim and upon notification of the action taken the insured will reimburse us for such part of any deductible amounts or ‘allocated loss adjustment expenses’ as shown on the billing from us another provides the insured will be billed periodically following the effective date of the contract for the following paid losses within the deductible amounts plus applicable paid alae paid during the period pref-112116-15 computed on the basis of the underwriting and investment exhibit of the annual_statement approved by the naic sec_832 defines underwriting_income to be premiums earned on insurance contracts during the taxable_year less losses_incurred and expenses_incurred see also sec_832 allowing a deduction for losses_incurred as defined in sec_832 sec_1_832-4 of the income_tax regulations provides that the underwriting and investment exhibit of the annual_statement is presumed to reflect the true net_income of the company and insofar as it is not inconsistent with the provisions of the code will be recognized and used as a basis for that purpose all items of the exhibit however do not reflect an insurance company’s income as defined in the code sec_832 defines premiums earned as gross premiums written on insurance contracts during the taxable_year reduced by return_premiums and premiums_paid for reinsurance plu sec_80 percent of unearned premiums on outstanding business at the end of the preceding_taxable_year and reduced by percent of the unearned premiums on outstanding business at the end of the taxable_year sec_1_832-4 defines gross premiums written as amounts payable for insurance coverage the label placed on a payment in a contract does not determine whether an amount is a gross premium written gross premiums written do not include other items of income for example charges for providing loss adjustment or claims processing services under administrative or cost-plus arrangements gross premiums written on an insurance_contract include all amounts payable for the effective period of the insurance_contract sec_832 defines losses_incurred to be losses_incurred during the taxable_year on insurance contracts computed by taking losses paid during the taxable_year reduced by salvage and reinsurance recovered during the taxable_year adding all unpaid_losses on life_insurance contracts plus all discounted_unpaid_losses outstanding at the end of the taxable_year deducting unpaid_losses on life_insurance contracts plus all discounted_unpaid_losses outstanding at the end of the preceding_taxable_year and adding estimated salvage and reinsurance recoverable at the end of the preceding year and deducing estimated salvage and reinsurance recoverable as of the end of the taxable_year sec_1_832-4 provides that to the extent that amounts paid or payable with respect to an arrangement are not gross premiums written the insurance_company may not treat amounts payable to customers under the applicable_portion of such arrangements as losses_incurred described in sec_832 in general a taxpayer is not allowed to deduct an otherwise deductible amount if the taxpayer is entitled to reimbursement unless the reimbursement is included in gross_income is worthless or is unlikely to be collected 61_f2d_950 2d cir aff’g 24_bta_518 addressograph-multigraph corp v commissioner 4_tcm_147 findley v u s pref-112116-15 f w services inc v commissioner tcmemo_2010_128 af459_fedappx_389 5th cir unpublished opinion involved funding of the deductible layer of a workers’ compensation policy and an employer’s liability policy with a reserve fund contract entered into with an affiliate of the insurers the court upheld disallowance of a deduction for amounts paid into the reserve fund in excess of the actual claims and expenses paid during the year holding that the payments to the reserve fund provided only assurance that the deductible amounts would be paid and did not alter the risk inherent in the true insurance a reserve arrangement does not morph into insurance just because there is an insurance_policy next to it taxpayer did not include the deductible layer amount in gross premiums written therefore sec_1_832-4 prohibits taxpayer from including the reimbursable deductible layer amount as a component of sec_832 losses_incurred if taxpayer had included the reimbursable deductible in gross premiums taxpayer could have included the reimbursable deductible component of losses as losses_incurred issue under sec_832 the taxable_income of an insurance_company taxable under sec_831 is the gross_income as defined in sec_832 less the deductions allowed by sec_832 sec_832 allows deductions other than those specified in sec_832 as provided in sec_161 - and in sec_401 - sec_1_832-4 provides that the underwriting and investment exhibit of the annual_statement is presumed to reflect the true net_income of the company and insofar as it is not inconsistent with the provisions of the code will be recognized and used as a basis for that purpose accordingly taxpayer is generally subject_to the accrual_method of accounting sec_448 see also eg 65_tc_897 we note that petitioner in accordance with the instructions on filling out the income statements of the underwriting and investment exhibit on the annual_statement form is required to use the accrual_method of accounting aff’d in part 571_f2d_514 10th cir city investing co v commissioner tcmemo_1987_36 aff’d sub nom 875_f2d_377 2nd cir cert den sub nom 493_us_1069 sec_166 allows as a deduction any debt which becomes worthless within the taxable_year while sec_166 provides that when satisfied that a debt is recoverable only in part the secretary may allow such debt in an amount not in excess of the part charged off within the taxable_year as a deduction sec_166 provides that for purposes of sec_166 the basis for determining the amount of the deduction for any bad 28_fsupp_715 w d la 11_tc_843 supplementing 7_tc_1310 pittsburgh indus eng’g co v commissioner 9_tcm_1132 see weihrauch v commissioner 37_tcm_28 revrul_75_46 1975_1_cb_55 pref-112116-15 debt shall be the adjusted_basis provided in sec_1011 for determining the loss from the sale_or_other_disposition of property sec_1_166-1 provides that only a bona_fide debt qualifies for purposes of sec_166 a bona_fide debt is a debt which arises from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money a debt arising out of the receivables of an accrual_method taxpayer is deemed to be an enforceable obligation for these purposes to the extent that the income such debt represents has been included in the return of income for the year for which the deduction as a bad_debt is claimed or for a prior taxable_year that the bad_debt is not due at the time of deduction shall not itself prevent its allowance under this section under sec_1_166-2 in determining whether a debt is worthless in whole or part the service will consider all pertinent evidence including the value of the collateral if any securing the debt and the financial condition of the debtor sec_1_166-3 provides that a deduction under sec_166 on account of partially worthless debts shall be allowed with respect to specific debts only sec_832 provides that nothing in sec_832 shall permit the same item to be deducted more than once for the uncollectible deductible layer reimbursement amount to be a debt within the scope of sec_166 it must be a bona_fide debt a debt is bona_fide if taxpayer’s contractual rights to reimbursement are a valid and enforceable obligation to pay a fixed or determinable sum of money sec_1_166-1 here prior to taxpayer’s payment of a claim taxpayer does not have an enforceable claim to reimbursement hence there is no debt from the insured to the taxpayer until taxpayer’s payment of the claim the debt would be deemed an enforceable obligation for purposes of sec_1_166-1 if the income such debt represents has been included in the return of income for the year for which the deduction is claimed or for a prior taxable_year here consistent with the finding under issue that the deductible layer amount was not included in gross premiums written it does not appear that taxpayer included the reimbursement in income for the year for which the deduction is claimed or for a prior taxable_year once taxpayer has paid the claim taxpayer has a contractual right to reimbursement that is a bona_fide debt for purposes of sec_166 if all or part of the debt is later determined to be worthless taxpayer may claim a full or partial deduction sec_1_166-2 if taxpayer had included both the reimbursable deductible in gross premiums and the reimbursable deductible component of losses as losses_incurred taxpayer may not also claim a deduction for the bad_debt sec_832 pref-112116-15 accounting for uncollectible deductible layer the proper accounting for the uncollectible deductible layer reimbursement given that it was not included in gross premiums written would be for taxpayer to take a deduction under sec_832 as an allowable sec_166 deduction at the time taxpayer’s right to reimbursement is determined to be worthless ie uncollectible under sec_1_166-2 this conclusion can be illustrated through the above example involving a policy with a dollar_figure million limit and a dollar_figure reimbursable deductible layer amount under which loss events occur that taxpayer values at dollar_figure taxpayer will be required to disburse dollar_figure and nominally should be reimbursed for dollar_figure with the balance of dollar_figure borne by taxpayer however in addition to the posted collateral of dollar_figure consistent with sec_1_166-2 taxpayer has determined that it is able to recover only an additional dollar_figure leaving a dollar_figure deficit in the amount reimbursed taxpayer has a loss incurred under sec_832 of dollar_figure and an obligation to disburse dollar_figure as taxpayer pays the claims it should recognize losses paid under sec_832 of dollar_figure and has a non-deductible disbursement of dollar_figure for which it has a nominal right of recovery thus creating the bona_fide debt of dollar_figure because taxpayer has determined consistent with sec_1_166-2 that it is able to collect only dollar_figure of that debt taxpayer may claim a deduction under sec_832 as an allowable sec_166 deduction for dollar_figure this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information determined to be necessary please contact this office for our views if disclosure is 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 please call if you have any further questions for illustration purposes the discounting required by sec_846 is ignored


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 1-plr-117321-99 date nov legend x date this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the sole shareholder of x desired that x elect s_corporation treatment for x effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-117321-99 sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes 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 x signed david r haglund sincerely david r haglund senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


tax_exempt_and_government_entities_division uic hrekkkkkekerkekkkkk kher hrekkekkereerekereeikrire rekkkkkkekkkkkkkaek rra legend taxpayer a taxpayer b _- ira u department of the treasury internal_revenue_service washington d c er ira uk ’ ‘ ‘ kaka rk kek ker ere kek err er eek iikererkek ree rrrrakirk raakakrkkkek kkk kher erik eker eek kee reiki erik ire ear eek i ik waka akakkkakkke rr ree kee kr rii rei erik ikk ierie eee wraakek kk rekkkeek keke keke ker erie eker kr rrr ki wha ak ark keke ke kek er ek erk kkk ie ik kek kerikeri keke kremer kr ik raanakak erk kek kek eere kerrier eek eker ike ieee reeakriererernkke rik roth_ira w haekrakarkk wer rek ree kerr eker eker ire kerikeri ee krekkkkkikkkekkarrae ikk maree kkrekrererekkekkekerkrk karr kk raei roth_ira x rrakwaak kk brkkk kk ike kkk erik iki kreuk wramkkkkk kkk keke kerr eker ikke rrereeakrerekakr ak kr ige account r ke k ik a harker rkekrererkeierkrerereereraakker kr kkk kkk kkekkekkkkk kaw kek ekeek keke krekrereikiekrererek ikikkrrekhkeek kkk ki k hk account s company m sum l -_ _- sum n sum o sum p wanaka k wk keke kkk kek kk eker ikk eker kr erik eker iek is riririks canaan kar kkk wrk kee k ker eek ker ek rea erekekke eker keke ak ki i ik akan nk kkk kh rkk keke eker kier ire rekrrreakerkrerrrankkaa kk r ki k rank kaekkaekekkkkek ke rkekrerekerekeereekkekkeeakr kaka kk kkk rk i nana ann kkk kkk eek kr erikek kk e ek ikik rikki ekrererera aaai ck kr arn aa klee rk kakkkk keke rerkkekeeriekrere eere rak kr rr iia mraakkkekkekker ker kkk kkk ree ekr er eker kerr ere rrr e raarakkakhkekeerk kee kerr eere kkk hk iii ik iie trike iis sii se riki iaai ia sum q _ rararman err keke kk keke keir ke rerk kerikeri eai kekiererekirkiki ke ki k individual a nara nner kkk kekkkkk he kr kh kei keekkrick erk kerkrkrerek rear kr iie k boric ri toit ii ri iir ik in ik individual b company e individual c individual d khir hri keke er err riekierer eerie hhh kiki krike kerri eker errerekrikkeek hii iih hire r ir ike eker iik ikke reiki arerr hrikikk erik keira keke eeekree reid keea eere dear riker ikekrre eerie kk airk this letter is in response to the letter dated date submitted by your authorized representative as supplemented by correspondence dated date date date and date in which you request relief under sec_301_9100-3 of the procedure and administration regulations the regulations the following facts and representations have been made in support of your ruling_request taxpayers a and b maintained iras u and v individual_retirement_arrangements described in sec_408 of the internal_revenue_code code with company m on date per the advice of individual a taxpayer a and taxpayer b's former broker at company m taxpayer a converted ira u in the amount of sum l to roth_ira w with company m likewise taxpayer b converted ira v in the amount of sum m to roth_ira x also with company m taxpayer a is married to taxpayer b subsequently taxpayers a and b employed the services of individual b a certified_public_accountant to prepare their joint federal_income_tax return for the taxable_year individual b was provided information concerning the roth conversions and included the distributions as income on their federal_income_tax return for taxpayer a and taxpayer b's adjusted_gross_income for before the roth conversions exceeded the limit prescribed in sec_408a of the code individual b did not inform taxpayer a and taxpayer b of the income limitations on roth conversions taxpayer a and taxpayer b believed that they had each made qualified roth conversions in taxpayer a and taxpayer b used the services of company e to prepare their tax returns while discussing prior year tax information individual c of company e noticed that taxpayer a and taxpayer b's combined adjusted_gross_income for exceeded the limit found at code sec_408a the failed conversion was not discovered until date which did not allow sufficient time to obtain a ruling on the issue on date on the advice of individual d of company m and individual c taxpayer a transferred sum n from roth_ira w to account r a non-ira account with company m and taxpayer b transferred sum o from roth_ira x to account s a non-ira account with company m to avoid exposure to additional penalties on date taxpayer a transferred sum p from account r back to roth_ira w and taxpayer b transferred sum q from account s back to roth_ira x the rr kkkerekeikkkekikerereerer difference between the amounts of the original distributions and the rollover of funds was due to the decline in the value of the investments this request for relief under sec_301_9100-3 of the regulations was submitted prior to the service’s discovering taxpayers a and b’s ineligibility to convert their traditional iras u and v into roth iras w and x taxpayers a and b timely filed their joint federal_income_tax return based on the foregoing information you request the following letter_ruling that pursuant to sec_301_9100-3 of the regulations taxpayer a and taxpayer b are granted a period not to exceed sixty days from the date of this ruling letter to recharacterize roth iras w and x respectfully to traditional iras with respect to your request for relief under sec_301_9100-3 of the regulations sec_408a of the code and sec_1_408a-5 of the income_tax regulations i t regulations provide that except as otherwise provided by the secretary a taxpayer may elect to recharacterize an ira contribution made to one type of ira as having been made to another type of ira by making a trustee-to- trustee transfer of the ira contribution plus earnings to the other type of ira ina recharacterization the ira contribution is treated as having been made to the transferee ira and not the transferor ira under sec_408a and sec_1_408a-5 this recharacterization election generally must occur on or before the date prescribed by law including extensions for filing the taxpayer's federal_income_tax returns for the year of contributions sec_1_408a-5 question and answer -6 of the i t regulations describes how a taxpayer makes the election to recharacterize the ira contribution to recharacterize an amount that has been converted from a traditional_ira to a roth_ira the taxpayer must notify the roth_ira trustee of the taxpayer's intent to recharacterize the amount the taxpayer must provide the trustee and the transferee trustee if different from the transferor trustee with specified information that is sufficient to effect the recharacterization and the trustee must make the transfer code sec_408a provides in relevant part that an individual with adjusted_gross_income as modified within the meaning of subparagraph c c in excess of dollar_figure for a taxable_year is not permitted to make a qualified_rollover_contribution to a roth_ira from an individual_retirement_plan other than a roth_ira during that taxable_year sec_1_408a-4 q a-2 of the i t regulations provides in summary that an individual with modified_adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to convert an amount to a roth_ira during that taxable_year sec_1_408a-4 q a-2 further provides in summary that an individual and his spouse must file a joint federal tax_return to convert a traditional_ira to a roth_ira and that the modified_adjusted_gross_income subject_to the dollar_figure limit for a taxable_year is the modified_adjusted_gross_income derived from the joint_return using the couple's combined income kiki kkrekkekek akira iir sec_301_9100-1 sec_301_9100-2 and of the regulations in general provide guidance concerning requests for relief submitted to the service on or after date section c of the regulations provides that the commissioner of the internal_revenue_service in his discretion may grant a reasonable extension of the time fixed by a regulation a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin for the making of an election or application_for relief in respect of tax under among others subtitle a of the code sec_301_9100-2 of the regulations lists certain elections for which automatic extensions of time to file are granted sec_301_9100-3 of the regulations generally provides guidance with respect to the granting of relief with respect to the elections not referenced in sec_301_9100-2 the relief requested in this case is not referenced in section sec_301_9100-3 of the regulations provides that applications for relief that fall within sec_301_9100-3 will be granted when the taxpayer provides sufficient evidence including affidavits described in sec_301 e to establish that the taxpayer acted reasonably and in good_faith and granting relief would not prejudice the interests of the government sec_301_9100-3 of the regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith i if its request for sec_301_9100-1 relief is filed before the failure to make a timely election is discovered by the service ii if the taxpayer inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii if the taxpayer failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv the taxpayer reasonably relied upon the written advice of the service or v 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 advise the taxpayer to make the election sec_301_9100-3 of the regulations provides that ordinarily the interests of the government will be treated as prejudiced and that ordinarily the service will not grant relief when tax years that would have been affected by the election had it been timely made are closed by the statute_of_limitations before the taxpayer's receipt of a ruling granting relief under this section in this case taxpayer a and taxpayer b were not eligible to convert traditional iras u and v to roth iras w and x since taxpayer a and taxpayer b's combined modified_adjusted_gross_income for exceeded dollar_figure taxpayer a and taxpayer b timely filed their joint federal_income_tax return taxpayer a and taxpayer b were unaware that they were ineligible for the roth_ira conversions until date therefore it is necessary to determine if they are eligible for relief under the provisions of sec_301_9100-3 of the regulations in this case taxpayers a and b were ineligible to convert iras u and v to roth iras w and x respectively since their modified_adjusted_gross_income exceeded dollar_figure however until they discovered otherwise taxpayers a and b believed they were eligible to convert their traditional iras u and v to roth iras upon hrkrkee rr rekekekrekrekekererree ke discovering that they were ineligible to convert iras u and v to roth iras w and x taxpayers a and b directed individual c and individual d to take all necessary steps to recharacterize their roth iras w and x to traditional iras taxpayers a and b filed this request for relief under sec_301_9100-3 of the regulations shortly after discovering that they were ineligible to convert iras u and v to roth iras w and x and before the service discovered that taxpayer a and taxpayer b were ineligible to convert iras u and v to roth iras w and x the taxable_year is not a closed_year under the statute_of_limitations with respect to your request for relief we believe that based on the information submitted and the representations contained herein the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been met and that you have acted reasonably and in good_faith with respect to making the election to recharacterize your roth iras w and x to traditional iras specifically the service has concluded that you have met the requirements of clauses i and v of sec_301_9100-3 of the regulations therefore taxpayers a and b are granted a period not to exceed sixty days from the date of this ruling to recharacterize roth iras w and x back to traditional iras 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 which may be applicable thereto this letter 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 a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office if you wish to inquire about this ruling please contact eh hse sincerely yours signed joyce e floyd joyce e floyd manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of ruling letter notice of intention to disclose