internal_revenue_service department of the treasury number release date index number 468a 468a washington dc person to contact telephone number refer reply to cc psi plr-115718-02 date date re request for a revised schedule of ruling amounts legend taxpayer old co co plant location commission a commission b commission c commission d commission e director fund dear this letter responds to the request of taxpayer dated and supplemental information as submitted by taxpayer for a revised schedule of ruling amounts in accordance with sec_1_468a-3 and sec_1_468a-6 of the income_tax regulations taxpayer was previously granted a revised schedule of ruling amounts on information for the schedule of ruling amounts was submitted on behalf of the taxpayer pursuant to sec_1_468a-3 taxpayer represents the facts and information relating to its request for a revised schedule of ruling amounts as follows taxpayer has a direct ownership_interest of percent in plant which is situated at location taxpayer is under the audit jurisdiction of the director plr-115718-02 on taxpayer’s predecessor old co and co entered into a merger agreement which resulted in the transfer of old co’s assets including its funds to taxpayer in a transaction qualifying for nonrecognition treatment pursuant to sec_351 of the code further as part of the merger as approved by the commissions taxpayer has accepted the rights and obligations of old co through the change in corporate structure without the regulatory agencies having to re-establish new rate structures or depreciation recovery associated with nuclear decommissioning in place before the merger taxpayer represents that this transaction qualifies for the treatment specified in sec_1_468a-6 and has for the year of transfer allocated the prior schedule of ruling amounts between old co and the taxpayer plant's operating license expires on taxpayer is subject_to the jurisdiction of commission a which covers percent of the taxpayer's total electric sales commission b which covers percent commission c which covers percent commission d which covers percent and commission e which covers percent for a total of percent these percentages may vary slightly from year to year the estimated base cost for decommissioning the plant is based on an independent study and is premised on the prompt removal immediate dismantling method commission a in docket no effective authorized nuclear decommissioning costs to be included in cost of service for ratemaking purposes for the plant in the amount of dollar_figure for dollars and estimated an after-tax rate of return on assets of percent the commission also determined the total estimated cost of decommissioning to be dollar_figure dollars this base cost escalated using an estimated inflation rate of percent results in an estimated future decommissioning cost of the commission a portion of the plant of dollar_figure dollars the tax and investment changes made to sec_468a of the internal_revenue_code made by section of the energy policy act of were taken into consideration in setting these rates commission b in docket nos and effective authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes for the plant in the amount of dollar_figure for dollars and estimated an after-tax rate of return on assets of percent the commission also determined the total estimated cost of decommissioning to be dollar_figure dollars this base cost escalated using an estimated inflation rate of percent results in an estimated future decommissioning cost of the commission b portion of the plant of dollar_figure dollars the tax and investment changes made to sec_468a of the internal_revenue_code made by section of the energy policy act of were not taken into consideration in setting these rates plr-115718-02 commission c in docket no effective authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes for the plant in the amount of dollar_figure for dollars and estimated an after-tax rate of return on assets of percent the commission also determined the total estimated cost of decommissioning to be dollar_figure dollars this base cost escalated using an estimated inflation rate of percent results in an estimated future decommissioning cost of the commission c portion of the plant of dollar_figure dollars the tax and investment changes made to sec_468a of the internal_revenue_code made by section of the energy policy act of were not taken into consideration in setting these rates commission d in docket no effective authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes for the plant in the amount of dollar_figure for dollars and estimated an after-tax rate of return on assets of percent the commission also determined the total estimated cost of decommissioning to be dollar_figure dollars this base cost escalated using an estimated inflation rate of percent results in an estimated future decommissioning cost of dollar_figure dollars the tax and investment changes made to sec_468a of the internal_revenue_code made by section of the energy policy act of were not taken into consideration in setting these rates commission e in docket no effective authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes for the plant in the amount of dollar_figure dollars and estimated an after-tax rate of return on assets of percent the commission also determined the total estimated cost of decommissioning to be dollar_figure dollars this base cost escalated using an estimated inflation rate of percent results in an estimated future decommissioning cost of the commission e portion of the plant of dollar_figure dollars the tax and investment changes made to sec_468a of the internal_revenue_code made by section of the energy policy act of were not taken into consideration in setting these rates there are no proceedings pending before any of the commissions that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer's cost of service for ratemaking purposes the funding_period and level_funding limitation period for the plant extends from through the estimated period for which the fund will be in effect is years through for commission a commission b and commission c and years through for commission d and commission e the estimated_useful_life of the plant is years through for commission a commission b and commission c and years through for commission d and commission plr-115718-02 e thus the taxpayer has calculated its qualifying percentage to be percent for commission a commission b and commission c and percent for commission d and commission e sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to that year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any taxable_year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the taxable_year if the payment is made on account of the taxable_year within 2½ months after the close of the taxable_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any taxable_year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such taxable_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the taxable years remaining in the funding_period as of the date plr-115718-02 the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a taxable_year sec_1_468a-3 of the regulations permits the internal_revenue_service to provide a schedule of ruling amounts that is identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes plr-115718-02 sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning the plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that the estimated period for which a nuclear decommissioning fund is to be in effect begins on the later of the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund or deemed made or the first day of the taxable_year that includes the date that the nuclear power plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the estimated_useful_life of a nuclear power plant begins on the first day of the taxable_year that includes the date that the plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on plr-115718-02 which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any taxable_year is the sum of the ruling amounts for such taxable_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant to which the nuclear decommissioning fund relates has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service for any plr-115718-02 taxable_year and b the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year sec_1_468a-6 generally provides rules for the transfer of an interest in a nuclear power plant and transfer of the qualified_fund where after the transfer the transferee is an eligible_taxpayer sec_1_468a-6 of the regulations provides that a transferee of a qualifying interest in a nuclear power plant must file a request for a revised schedule of ruling amounts with respect to that interest on or before the deemed payment deadline for the first taxable_year of the transferee beginning after the disposition see sec_1_468a-2 if the transferee does not timely file such a request the transferee’s ruling_amount with respect to that interest for the affected year or years will be zero unless the internal_revenue_service waives the application of sec_1_468a-6 upon a showing of good cause for the delay sec_1_468a-7 of the regulations provides in general that an eligible_taxpayer is allowed a deduction for the taxable_year in which the taxpayer makes a cash payment or is deemed to make a cash payment to a nuclear decommissioning fund only if the taxpayer elects the application of sec_468a a separate election is required for each nuclear decommissioning fund and for each taxable_year with respect to which payments are to be deducted under sec_468a in the case of an affiliated_group_of_corporations that join in filing a consolidated_return for a taxable_year the common parent must make a separate election on behalf of each member whose payments to a nuclear decommissioning fund during such taxable_year are to be deducted under sec_468a the election under sec_468a for any taxable_year is irrevocable and must be made by attaching a statement election statement and a copy of the schedule of ruling amounts provided pursuant to the rules of sec_1_468a-3 to the taxpayer's federal_income_tax return or in the case of an affiliated_group_of_corporations that join in filing a consolidated_return the consolidated_return for such taxable_year the return to which the election statement and a copy of the schedule of ruling amounts is attached must be filed on or before the time prescribed by law including extensions for filing the return for the taxable_year with respect to which payments are to be deducted under sec_468a plr-115718-02 section a and c of the energy act eliminated for taxable years beginning after date the investment restrictions contained in sec_468a of the code section b and c of the energy act revised sec_468a by lowering the tax_rate applicable to a nuclear decommissioning fund for taxable years beginning after date we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in the sec_468a of the code and the regulations thereunder based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commissions a b c d and e have determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations taxpayer has determined that pursuant to sec_1_468a-3 of the regulations the qualifying percentage is percent for commission a commission b and commission c and percent for commissions d and e taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commissions a b c d and e and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the maximum amount of cash payments made or deemed made to the fund during any taxable_year is restricted to the lesser amount of the decommissioning costs applicable to the fund or the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations taxpayer subject_to the jurisdiction of public_utility commissions for ratemaking purposes has calculated its share of the total decommissioning costs allocable to commissions a b c d and e as plr-115718-02 required by sec_1_468a-3 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts taxable years through commissions a b c d and e year comm a comm b comm c comm d comm e total with agreement of the taxpayer this revised schedule of ruling amounts is limited to a 5-year period for the portion of the schedule of ruling amounts for commission c commission d and commission e because these commissions have not taken into account the statutory changes made to sec_468a of the code by the energy act the elimination of the investment restrictions and the reduction of the tax_rate applicable to income earned by the fund may result in a greater after-tax of return than was estimated prior to the enactment of the energy act by these commissions this increased after-tax rate of return could over the life of the fund result in a balance in the fund on the last day of the funding_period that could exceed the amount of decommissioning costs allocable to the fund thus in order to prevent the excess accumulation in the fund this schedule of ruling amounts is being limited to a 5-year period except the amounts for commission a and commission b which took into account the amendments made by the energy act to sec_468a of the code approval of a revised schedule of ruling amounts may be granted after a determination by commission c commission d and commission e of an after-tax rate of return that accounts for the reduced_tax_rate and unrestricted investments plr-115718-02 approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time this ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated above payments made to the fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to the fund or the ruling amounts applicable to the fund in the taxable_year this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized legal_representative a copy of this letter_ruling also is being sent to the director pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each taxable_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours peter c friedman senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries


t c memo united_states tax_court roger g cotner and marlan w cotner petitioners v commissioner of internal revenue respondent docket no filed date roger g cotner pro_se and for petitioner marlan w cotner james f mauro for respondent memorandum findings_of_fact and opinion carluzzo special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 1all section references are to the internal_revenue_code in effect for the year in issue all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioners' federal_income_tax in the amount of dollar_figure and an accuracy-related_penalty pursuant to sec_6662 in the amount of dollar_figure with the exception of the sec_6662 accuracy-related_penalty all of the issues resulting from adjustments made in the notice_of_deficiency have been conceded by petitioners in their petition petitioners claim they are entitled to a capital_loss deduction not included on their original federal_income_tax return consequently the issues for decision are whether petitioners are entitled to a deduction for a long-term_capital_loss sustained in connection with the sale of a horse and whether the underpayment of petitioners' federal_income_tax was due to negligence so as to render them liable for the accuracy-related_penalty under sec_6662 for that year findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the exhibits attached thereto are incorporated herein by this reference during the year in issue petitioners were husband and wife and filed a joint federal_income_tax return at the time the petition was filed 2in addition to the issues framed by the pleadings respondent agrees that petitioners understated by dollar_figure a depreciation deduction claimed on their federal_income_tax return although no issue involving an additional_depreciation deduction is formally before the court the parties in response to a suggestion by the court have agreed that the allowance of this additional_depreciation deduction will be reflected in their rule_155_computations petitioners resided in grand haven michigan roger g cotner is and was during the year in issue a practicing attorney he has been a member of the bar of this court since references to petitioner are to marlan w cotner petitioners filed a joint federal_income_tax return for the year on or about date after completion of respondent's audit and during the preparation of the notice_of_deficiency which was issued on date petitioners submitted to respondent a form 1040x amended u s individual_income_tax_return dated date the form 1040x contained an amended schedule d claiming a long-term_capital_loss roger g cotner prepared petitioners' original return as well as the form 1040x petitioners now concede the adjustments made in the notice_of_deficiency in their petition however petitioners raise the issue of whether they are entitled to the capital_loss deduction claimed on their amended_return during the year in issue petitioner worked as a self- employed artist and as indicated roger g cotner was employed as an attorney petitioner has apparently had a lifelong interest in horses and horseback riding she began riding horses in the third grade she purchased her first horse while she was attending college as an art major her particular interest is in dressage riding a form of riding in which the horse is required to execute a variety of precision movements upon command from its rider dressage riders are rated at different levels from training through grand prix petitioner had taken horseback riding lessons once or twice per week for a period of years prior to the year in issue some of her lessons were taken from a former olympic rider as of the date of trial she had progressed to the second level of dressage riding there is nothing in the record that suggests that petitioner's riding dressage or otherwise was done on other than a personal recreational basis at various times during her life petitioner owned a total of horses during petitioner owned only one horse which was named sassy sassy was purchased in at the age of for dollar_figure petitioner acquired sassy because of her belief that the horse would perform well in dressage riding petitioner did not acquire sassy with the intent to breed her it would appear that petitioner acquired the horse solely for riding purposes however shortly after she purchased sassy petitioner decided to breed her after considering several potential stallions sometime in the spring of petitioner decided upon a stallion named reckless blade petitioner entered into a standard breeding contract with the owners of reckless blade and paid a stud fee of dollar_figure in the spring of as a result of the breeding sassy produced a live foal which was given the barn name of daisy the parties stipulated that petitioners incurred actual expenses related to the breeding of sassy and the maintenance of daisy in the amount of dollar_figure included in this amount are the following expenditures expenditures explanation dollar_figure - stud fee boarding and care for daisy and boarding care of sassy during pregnancy dollar_figure - costs to maintain horses plus a moving expense in february of petitioners sold daisy for dollar_figure daisy was sold at the approximate age of months a dressage horse reaches its peak value between age and and only after extensive training petitioners did not provide any training to daisy between her birth in and sale in nor did they enter daisy in any dressage competitions prior to sale petitioner testified that personal family matters precluded her from spending the time with daisy that would have been necessary to train the horse for dressage riding opinion petitioners claim that they incurred a loss on the sale of daisy and that pursuant to sec_165 they are entitled to deduct the loss as a long-term_capital_loss in calculating the amount of the long-term_capital_loss petitioners computed their cost_basis in daisy by taking into account all of the expenditures incurred in connection with daisy's care respondent offers a variety of reasons why petitioners are not entitled to the deduction here in dispute as we have pointed out in numerous opinions deductions are a matter of legislative grace a taxpayer who claims entitlement to a deduction must identify the specific statute that allows for the deduction and prove that all of the requirements of that statute have been satisfied 292_us_435 generally sec_165 allows as a deduction any loss sustained during the taxable_year and not_compensated_for_by_insurance_or_otherwise disregarding certain parts of sec_165 that have no application to this case sec_165 provides that in the case of an individual the deduction is limited to losses_incurred in any transaction entered into for profit in this case we consider the relevant transaction to be the production of the foal daisy to be entitled to a loss under sec_165 petitioner's primary motive for entering into the transaction must have been to make a profit 82_tc_1001 by primary we mean of first importance or principally see 383_us_569 fox v commissioner supra 81_tc_210 although profit need not be the sole motive if we find that petitioner's intent to make a profit was merely incidental petitioners will not be entitled to the loss under sec_165 whether a transaction is entered into for profit is a question of fact the burden_of_proof is on petitioners to show that petitioner entered into the transaction primarily for profit rule a greater weight is accorded objective facts than is given to petitioner's self-serving statements characterizing her intent fox v commissioner supra 78_tc_659 72_tc_659 taking petitioner's testimony as presented there is simply very little to suggest that the decision to produce and sell a foal was made primarily for profit purposes petitioner testified that she did not purchase sassy with the intent to breed her we must assume from that testimony that her investigation and beliefs with respect to sassy's heritage were more in connection with sassy's performance riding than with the horse's breeding potential petitioner's only testimony with respect to a profit intent came in the form of the following generalized responses to a series of questions put to her during direct examination q a q a prior to actually breeding sassy did you investigate how much you'd be able to sell a foal for well the market at the time was quite strong when i bought sassy she was dollar_figure she was four so she was age four she was age four a three- or four-year old you could command big_number to big_number if petitioner's primary purpose in breeding sassy was to produce a foal that could be sold for a profit we would have expected that petitioners would have produced some evidence as to how she intended to implement her plan with some references to projected expenses anticipated training programs for the foal and revenue estimates that were based upon more than what she paid for sassy see eg hartford v commissioner tcmemo_1995_351 as it turns out it would appear that petitioner's decision to sell daisy was not in accordance with a previously developed plan to do so but rather resulted from the extra expenses petitioners were forced to incur in maintaining an additional horse following daisy's birth petitioners who each maintained a career unrelated to horse breeding displayed little interest in developing the foal so that it could be sold at a profit petitioner testified that a horse with daisy's bloodlines would reach a peak value between age and and only with extensive training however petitioners did not provide any training to the foal between its birth in and its sale in nor did they enter daisy in any dressage competitions prior to sale moreover daisy was sold at approximately months old well before she could possibly reach her peak value it is clear from the record that petitioner had a keen interest in horses in general and dressage riding in particular it is equally clear that petitioner's interest in horses and dressage riding was on a personal recreational basis we think it more_likely_than_not that petitioner's decision to breed sassy was for the primary purpose of perpetuating what she believed to be an excellent bloodline and that any profit_motive was merely incidental to her primary purpose in light of the foregoing we find that petitioner's motivation behind producing the foal was primarily personal in nature and that any profit_motive that existed was merely incidental the transaction in which daisy was sold was nothing more than the sale of petitioner's personal albeit capital asset the loss from the transaction is not within the categories of losses allowed by sec_165 or any other provision of the internal_revenue_code accordingly petitioners are not entitled to a long-term_capital_loss deduction for the year in connection with the sale of daisy in view of the foregoing we need not address respondent's other arguments related to this issue accuracy-related_penalty respondent determined that petitioners are liable for the accuracy-related_penalty imposed by sec_6662 sec_6662 and b imposes a penalty on any portion of an underpayment which is attributable to negligence or disregard of 3respondent in her brief suggests that daisy was not a capital_asset in the hands of petitioner no authority for this proposition was stated and it would appear to us that given the express language of sec_1221 which provides the definition of a capital_asset daisy clearly fits within that definition rules or regulations the term negligence includes any failure to make a reasonable attempt to comply with the statute and the term disregard includes any careless reckless or intentional disregard sec_6662 the penalty does not apply to any portion of an underpayment for which there was reasonable_cause and with respect to which the taxpayer acted in good_faith sec_6664 respondent's imposition of the sec_6662 penalty is presumptively correct and petitioners bear the burden of proving that they are not liable for the accuracy-related_penalty under sec_6662 rule a cf 290_us_111 58_tc_757 petitioners have conceded all of the adjustments made in the notice_of_deficiency which adjustments gave rise to respondent's imposition of the accuracy-related_penalty they have offered no evidence or explanation of the circumstances surrounding the filing of their federal_income_tax return other than it was prepared by roger g cotner respondent argues that as an attorney roger g cotner should have known that certain of the deductions claimed on the form_1040 were blatantly wrong evidenced by their concessions in this case we note that as a practicing attorney roger g cotner is held to a higher standard of care than other taxpayers 104_tc_518 petitioners' failure to explain the circumstances surrounding the preparation and filing of their federal_income_tax return particularly in view of roger g cotner's background leads us to conclude that respondent's imposition of the accuracy-related_penalty is appropriate accordingly petitioners are liable for the accuracy-related_penalty under sec_6662 for the year to reflect the foregoing decision will be entered under rule


t c summary opinion united_states tax_court jonathan l hall petitioner v commissioner of internal revenue respondent docket no 26741-06s filed date jonathan l hall pro_se innessa glazman-molot for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code as amended and rule references are to the tax_court rules_of_practice and procedure this collection case is before the court on respondent’s motion for summary_judgment filed pursuant to rule and petitioner’s objection thereto the issue for decision is whether as a matter of law respondent’s determination sustaining a levy action for tax_year should be upheld background the following facts are uncontested or established by the record petitioner lived in virginia when he filed the petition petitioner worked as a laborer in and received one or more forms 1099-misc miscellaneous income reporting his income his federal_income_tax return for reports no withholding and no estimated_tax payments and dollar_figure in tax due including dollar_figure of self-employment_tax the internal_revenue_service irs assessed the tax petitioner reported as due on his return together with interest and an addition_to_tax for failure to pay the irs sent petitioner notice_and_demand for payment but did not receive payment on date the irs mailed a final notice_of_intent_to_levy and notice of your right to a hearing petitioner requested a collection hearing to challenge the irs’s intent to levy to collect the tax due for in his hearing request petitioner asserted that it was premature for the irs to levy upon his property that withdrawing the levy would facilitate collection of the tax and that withdrawal was in his and the government’s best interest the irs assigned a settlement officer so to handle petitioner’s collection hearing the so wrote to petitioner on date requesting certain documents as a condition of her considering collection alternatives informing petitioner that he had to provide her with a copy of an amended_return for if he wished to challenge the underlying tax_liability and scheduling a telephone conference for date petitioner wrote to the so and asked for a delay from date to date in the collection hearing for he sought to postpone the levy hearing until after the court resolved his challenge to the result of his collection hearing for tax years through he asserted that collecting by levy would impose a hardship on him asked for a hardcopy of the internal_revenue_manual irm and requested a face-to-face hearing he did not provide the requested information petitioner’s assertions mirror three of the four circumstances provided in sec_6323 for withdrawing a federal_tax_lien see infra note petitioner also claimed that his pending tax_court case already encompasses tax_year ‘if applicable’ the so determined that the pending case involved a notice_of_federal_tax_lien for through and verified that the internal_revenue_service irs had not filed a federal_tax_lien for she concluded that the instant collection case was independent of that case the so declined to postpone the hearing for explained that the levy action was separate from the lien action for through informed petitioner that he could access the irm over the internet and asked him to submit a completed form 433-a collection information statement for wage earners and self-employed individuals and a copy of his return with evidence of filing in order for her to evaluate his financial situation and consider collection alternatives the so wrote that she would conduct a face-to-face hearing only after petitioner provided the information required to evaluate his eligibility for collection alternatives she also explained that she was willing to place petitioner’s account in currently noncollectible cnc status if warranted by the information contained in the requested documents on date petitioner sent a letter to the so by facsimile and certified mail he included a form 433-a without supporting documentation and marked draft the draft form 433-a listed the following assets a truck used in petitioner’s business and valued at dollar_figure furniture and personal effects valued at dollar_figure and tools used in petitioner’s business and valued at dollar_figure petitioner stated in his letter i have attached a draft of 433-a it does not have attachments because they would take vastly too many pages the information contained in the form 433-a is a best reasonable rounded off guess-timate giving you an approximate snapshot of my current financial situation which is dire in addition i am at least two months behind on my rent and two months behind on my credit card payments with this information you can probably make a reasonable decision about my financial condition and accurately categorize the levy as currently noncollectible and you may temporarily suspend collection action at your discretion if there is supporting paperwork you would like to review which would have otherwise been part of the attachments requested you may review those receipts bills expenses etc at a face to face meeting i do not anticipate filing any further 1040s for any additional tax years until the prior years sic issues have been resolved petitioner did not submit a copy of his return and the so determined that no return had been filed as of date the so concluded that petitioner failed to document his financial status adequately and that he was not in compliance with his filing_requirements she further concluded from petitioner’s not submitting an amended_return for that he did not contest the underlying tax_liabilities respondent’s appeals_office appeals issued a notice_of_determination concerning collection actions under sec_6320 and or notice sustaining the intent to levy the notice recited that the so verified that all applicable laws and procedures were met considered all issues raised and balanced the efficiency and intrusiveness of the proposed collection action the notice described the so’s instructing petitioner that he had to submit completed financial information and his return in order for her to consider collection alternatives and her later reiterating this requirement the notice concluded that petitioner was not eligible for appeals consideration of collection alternatives because he was not in filing compliance and because he did not provide required financial information petitioner filed a timely petition requesting judicial review of respondent’s determination respondent filed a motion for summary_judgment asserting that there are no genuine issues of material fact that petitioner did not develop any issue to challenge the underlying tax_liability before appeals that petitioner’s failure to submit complete financial information and his noncompliance with filing obligations precluded appeals consideration of collection alternatives and that respondent is entitled to judgment as a matter of law petitioner objects arguing that respondent abused his discretion in sustaining the intent to levy because the so denied him a face-to-face hearing because she refused to the relief petitioner requested and the reasons presented in par of the petition are nearly identical to those included in his petition relating to the collection action for through docket no 11674-06s which challenges the filing of federal tax_liens for those years to the extent that the instant petition complains of the failure to withdraw a tax_lien under sec_6323 that issue is not relevant to this levy case and will not be addressed further entertain his dispute over the underlying tax_liability and because she ignored legal and procedural requirements related to cnc status for low-income taxpayers claiming hardship petitioner and respondent’s counsel appeared and were heard at a hearing on the motion discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule a and b the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences are viewed in the light most favorable to the nonmoving party 119_tc_252 85_tc_812 79_tc_340 the party opposing summary_judgment must set forth specific facts that show a genuine question of material fact exists and may not rely merely on allegations or denials in the pleadings 91_tc_322 87_tc_214 in reviewing the commissioner’s decision to sustain collection actions where the validity of the underlying tax_liability is properly at issue the court reviews the commissioner’s determination of the underlying tax_liability de novo 114_tc_604 114_tc_176 the court reviews any other administrative determination regarding proposed collection actions for abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite an abuse_of_discretion occurs when the exercise of discretion is without sound basis in fact or law 125_tc_301 if the court finds that a taxpayer is liable for deficiencies additions to tax and or penalties then the commissioner’s administrative determination sustaining the collection action will be reviewed for abuse_of_discretion see 118_tc_22 godwin v commissioner tcmemo_2003_289 affd 132_fedappx_785 11th cir sec_6330 provides that the secretary shall furnish taxpayers with written notice of their right to a hearing before any property is levied upon sec_6330 further provides that the taxpayer may request administrative review of the matter in the form of a hearing within a prescribed 30-day period collection hearings are to be conducted by the commissioner’s office of appeals and the appeals officer conducting the hearing must verify that the requirements of any applicable law or administrative procedure have been met sec_6330 c pursuant to sec_6330 a taxpayer may raise at the hearing any issue relevant to the proposed collection activities including spousal defenses challenges to the appropriateness of the intended collection action s and alternative means of collection sego v commissioner supra pincite goza v commissioner supra pincite if a taxpayer received a statutory_notice_of_deficiency for the year in issue or otherwise had the opportunity to dispute the underlying tax_liability the taxpayer is precluded from challenging the existence or amount of the underlying tax_liability sec_6330 sego v commissioner supra pincite goza v commissioner supra pincite at the conclusion of the hearing the appeals officer must determine whether and how to proceed with collection and shall consider the verification that the procedural and statutory requirements have been followed the relevant issues raised by the taxpayer where permitted the taxpayer’s challenges to the underlying tax_liability and whether the collection action properly balances collection efficiency and intrusiveness sec_6330 the tax_liability results from the tax reported as due by petitioner on his federal_income_tax return the irs did not audit or adjust the return and did not issue a notice_of_deficiency the record does not reflect that petitioner had any other opportunity to contest the existence or amount of his self- assessed tax_liability for accordingly he was entitled to challenge the liability during the collection hearing the so invited petitioner to challenge the tax due for by submitting an amended_return petitioner did not submit an amended_return nor did he challenge the underlying tax_liability during the collection hearing accordingly we review respondent’s determination for abuse_of_discretion the so informed petitioner that she could not consider any collection alternatives without a complete financial disclosure from petitioner and that he was not eligible for consideration of any collection alternatives unless he was current with his federal_income_tax filing obligations petitioner submitted a draft form 433-a without supporting documentation he did not submit his federal_income_tax return the commissioner’s refusal to consider collection alternatives is not an abuse_of_discretion where the taxpayer has failed to file all required tax returns or to provide complete financial information see roman v commissioner tcmemo_2004_20 rodriguez v commissioner the irs was not obliged to issue a notice_of_deficiency to petitioner because the assessment was entered under sec_6201 based on the amount petitioner reported due on his tax_return along with statutory interest and additions to tax moreover sec_6211 excludes from the definition of a deficiency the tax that taxpayers report due on their returns 122_tc_1 tcmemo_2003_153 and cases cited therein an appeals officer who fails to take into account information he requested but that the taxpayer did not provide in a reasonable_time has not abused his discretion murphy v commissioner supra pincite thus the so did not abuse her discretion in refusing to consider petitioner’s request to place his account in cnc status the applicable regulation is clear that a face-to-face collection hearing is not required by the code sec_301 d q a-d6 q a-d7 and q a-d8 proced admin regs petitioner did not present the information required by the so and did not make any justiciable arguments or present any information that properly addressed the merits of the underlying tax_liability the validity of the assessment the conduct of the proceeding or compliance with sec_6330 requirements under these circumstances as a matter of law the so did not abuse her petitioner’s concern with the proposed levy was that the internal_revenue_service irs would take his truck and with it his ability to conduct his landscaping and window washing business in his draft collection information statement petitioner lists as assets dollar_figure of furniture and personal effects dollar_figure of business tools and a dollar_figure truck which he used for his business it is noted that sec_6334 exempts from levy tools necessary for a taxpayer’s business with an aggregate value far greater than the tools petitioner claimed including the value of his truck furthermore sec_6334 exempts tangible_personal_property which would include petitioner’s truck in the event that sec_6334 did not unless the irs follows the procedure outlined in sec_6334 discretion in not affording petitioner a face-to-face hearing see davis v commissioner tcmemo_2007_160 finally as stated in the notice_of_determination the so verified that the procedural and administrative requirements had been met and considered whether the proposed collection action balanced intrusiveness and collection efficiency see sec_6330 conclusion although petitioner was not statutorily barred from challenging the existence or amount of his income_tax_liability for he failed to raise any such challenge petitioner also failed to raise a spousal defense or make a valid challenge to the appropriateness of respondent’s intended collection action petitioner failed to provide the documents required for consideration of any alternative means of collection these issues are now deemed conceded see rule b petitioner demonstrated that he was in filing compliance and disclosed his financial status to a different settlement officer so on date in connection with his lien case respondent filed the instant motion on date and the so handling the lien hearing on remand issued a supplemental notice_of_determination in that case on date sustaining the filing of the federal tax_liens for those years and determining that petitioner’s account should be reported currently noncollectible this determination in date has no bearing on whether respondent abused his discretion in this case in date or on whether there is a genuine issue for trial in this case accordingly we conclude that respondent is entitled to judgment as a matter of law sustaining the notice_of_determination to give effect to the foregoing an appropriate order and decision will be entered


internal_revenue_service number release date index number -------------------------------- -------------------------------------- --------------------- -------------------- ------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------------ id no ------ ------------------ telephone number -------------------- refer reply to cc corp b05 plr-104149-16 date may parent date date date ----------------------------------------------------------- ----------------------------------- ----------------------------------------------------------- ------------------------------------------------- ----------------- -------------------- company official tax professional ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------- dear ------------- this letter_ruling responds to a letter from your authorized representative dated date requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election the extension is being requested for parent and the members of its affiliated_group the parent group to make an election to file a consolidated federal_income_tax return with parent as the common parent under sec_1_1502-75 of the income_tax regulations the election for the taxable_year ending date the information submitted in that request is summarized below on date parent was incorporated in connection with the acquisition of an affiliated_group which filed a consolidated federal_income_tax return the acquired group on date a wholly owned indirect subsidiary_corporation of parent merged into the common parent of acquired group in a cash_merger plr-104149-16 an election for parent group to file a consolidated_income_tax_return with parent as the common parent for the taxable_year ending date was due on the last day prescribed by law including extensions of time for the filing of parent’s return parent intended to file the election but for various reasons a valid election ie the filing of the consolidated_return was not filed by the due_date of parent’s return after the due_date for the election it was discovered that the election had not been 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 ending date or any subsequent taxable_year parent has represented that it does not seek to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time of the request for relief taking into account any qualified_amended_return within the mean of sec_1_6664-2 sec_1_1502-75 of the income_tax regulations provides in part that an affiliated_group_of_corporations which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents in accordance with sec_1_1502-75 of the regulations to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return such consolidated_return must be filed not later than the last day prescribed by law including extensions of time for the filing of the common parent’s return 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 to the satisfaction of the commissioner that the taxpayer 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 parent and company official tax professional explain the circumstances that resulted in the failure to timely file the election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make a valid election and that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v plr-104149-16 based on the facts and information submitted including the representations made we conclude that parent 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 provided that parent group qualifies substantively to file a consolidated_return for the applicable tax_year we grant an extension of time under sec_301_9100-3 for sixty days from the date on this letter for parent to file the election by filing a consolidated_return with parent as the common parent and attaching a form_1122 for each member of parent group for its taxable_year ending date parent group must attach a copy of this ruling letter to such return or if parent group files the return electronically a statement must be attached to the return that provides the date and the control number of this ruling letter the above extension of time is condition on parent group’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 parent group’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 we express no opinion with respect to whether in fact parent group qualifies substantively to file a consolidated_return in addition we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the return or the election late that are not specifically set forth in the above ruling for the purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by parent and company official tax professional 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 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 copies of this letter are being sent to your authorized representatives sincerely ken cohen___________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division may uniform issue list tt ecpeatts legend taxpayer a ira x financial_institution s financial_institution r account t amount m date dear this is in response to a request dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution from ira x totaling amount m taxpayer a asserts that her failure to accomplish a rollover of amount m within the day period prescribed by sec_408 of the code was due to financial_institution error in failing to follow taxpayer a’s written instructions to rollover amount m taxpayer a further represents that amount m has not been used for any other purpose financial_institution s maintained ira x on behalf of taxpayer a on date taxpayer a wrote to the financial_institution s main office and requested a rollover of ira x to page financial_institution r by wire transfer without consulting with taxpayer a ira x was wired into a financial_institution r checking account account t a non-ira account shortly after the expiration of the 60-day period during a call with financial_institution r taxpayer a learned that pursuant to the date request amount m from ira x had been wired into a non-ira account in that conversation taxpayer a communicated that her intended rollover was ignored she was informed that amount m could not be placed in an ira based on the facts and representations you request a ruling that the internal_revenue_service the service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount m sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ra shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 pages do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a rollover of amount m within the day period prescribed by sec_408 of the code was due to financial_institution error in failing to follow taxpayer a’s written instructions to rollover amount m therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution to taxpayer a of amount m from ira x taxpayer a is granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of amount m to an ira or iras described in code sec_408 provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such ira contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office this letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent 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 page if you wish to inquire about this ruling please contact to se t ep ra t3 please address all correspondence sincerely yours laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


t c memo united_states tax_court eugene jim kipp and billie jo kipp petitioners v commissioner of internal revenue respondent docket no 18765-13l filed date eugene jim kipp and billie jo kipp pro sese s mark barnes for respondent memorandum findings_of_fact and opinion vasquez judge pursuant to sec_6330 petitioners seek review of respondent’s determination to proceed with collection by levy of their unpaid federal_income_tax for and the sole issue for decision is unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times whether respondent abused his discretion in sustaining the proposed levy action for these years i background findings_of_fact the tax_liabilities at issue arose from self-reported underpayments on petitioners’ federal_income_tax returns for and in petitioners submitted two separate offers-in-compromise oics to the internal_revenue_service irs to settle their outstanding tax_liabilities for and on date the irs returned the first oic as not processable on date the irs returned the second oic for among other reasons failure to make estimated_tax payments for the current tax_year on date the irs mailed petitioners letter 1058a final notice--notice of intent to levy and notice of your right to a hearing with respect to their outstanding income_tax liabilities for and on date the irs received petitioners’ form request for a collection_due_process or equivalent_hearing on that form petitioners petitioners submitted both offers in so neither offer included the tax_liability for by date petitioners were aware that the second oic had been returned indicated an interest in submitting an oic and acknowledged that they owed the tax due ii collection_due_process cdp hearing on date settlement officer aaron hansen of the irs office of appeals appeals mailed petitioners a letter stating that appeals had received their request for a cdp hearing and scheduling a telephone cdp hearing for date in the letter settlement officer hansen stated that he could consider collection alternatives such as an installment_agreement or an oic only if petitioners provided a completed form 433-a collection information statement for wage earners and self-employed individuals proof of estimated_tax payments for and a completed form_656 offer_in_compromise with the required fee payments and supporting documentation settlement officer hansen instructed petitioners to submit the listed items by date he also informed petitioners that they could request a face-to-face hearing by date petitioners neither submitted the requested information nor requested a face-to-face hearing by date in the letter settlement officer hansen instructed petitioners to call him at the scheduled hearing time petitioners however did not call settlement officer hansen at the scheduled time because they mistakenly thought that settlement officer hansen was supposed to initiate the call approximately an hour after the scheduled time petitioner husband realized his mistake and called settlement officer hansen but settlement officer hansen did not answer petitioner husband left a message on settlement officer hansen’s voicemail settlement officer hansen called petitioners back about minutes later but they did not answer settlement officer hansen left a message on their voicemail informing them that they had days to respond on date settlement officer hansen mailed petitioners a letter offering them another opportunity to submit the requested information in the letter he informed petitioners that they had failed to submit the requested information by the original deadline and that he was extending the deadline to date settlement officer hansen received a fax from petitioners dated date of a partially completed form 433-a on date petitioner husband called settlement officer hansen to inform him that he had recently faxed in the form 433-a but settlement officer hansen did not answer settlement officer hansen called petitioners back but petitioners did not answer and he left a the form 433-a did not include any of petitioner husband’s income in the gross monthly income calculation message with petitioners’ son petitioners and settlement officer hansen made several more attempts to reach each other by phone but were unsuccessful each time settlement officer hansen did not receive any further correspondence from petitioners as a result he concluded that their prior fax and voicemail correspondence adequately constituted petitioners’ cdp hearing throughout the course of the cdp hearing petitioners did not submit a written proposal for a collection alternative as noted above petitioners submitted two oics relating to and but both offers were returned to them more than a year before the cdp hearing on date the irs issued petitioners a notice_of_determination concerning collection action s under sec_6320 and or petitioners while residing in montana timely petitioned this court for review of the determination before the notice_of_determination was issued settlement officer hansen verified that all legal and administrative requirements for collection had been met opinion i statutory framework sec_6331 authorizes the secretary to levy upon property and property rights of a taxpayer liable for tax if the taxpayer fails to pay the tax within days after notice_and_demand for payment is made sec_6330 provides that no levy may be made on any property or right to property of any person unless the secretary has notified such person in writing of the right to a hearing before the levy is made if a taxpayer requests a hearing in response to a notice_of_levy pursuant to sec_6330 a hearing shall be held before an impartial officer_or_employee of appeals sec_6330 at the hearing the taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives sec_6330 following a hearing appeals must determine whether proceeding with the proposed levy action is appropriate in making that determination appeals is required to take into consideration verification presented by the secretary during the hearing process that the requirements of applicable law and administrative procedure have been met relevant issues raised by the taxpayer and whether the proposed levy action appropriately balances the need for efficient collection_of_taxes with the taxpayer’s concerns regarding the intrusiveness of the proposed collection action sec_6330 ii standard of review sec_6330 grants this court jurisdiction to review the determination made by appeals in connection with the sec_6330 hearing where as here the underlying tax_liabilities are not at issue we review the commissioner’s determination for abuse_of_discretion see 114_tc_604 114_tc_176 an abuse_of_discretion occurs when the exercise of discretion is arbitrary capricious or without sound basis in fact or law 129_tc_107 citing sego v commissioner t c pincite and 112_tc_19 acting without a sound basis in fact or law means that an agency such as the irs makes an error of law or rests its determination on a clearly erroneous finding of fact or ‘applies the correct law to facts which are not clearly erroneous but rules in an irrational manner ’ 249_f3d_1121 9th cir citations omitted quoting 85_f3d_1400 9th cir see also 496_us_384 in reviewing for abuse_of_discretion we generally consider only the arguments issues and other matters that were raised at the cdp hearing or otherwise brought to the attention of appeals giamelli v commissioner t c pincite see also sec_301_6330-1 q a-f3 proced admin regs iii determination to sustain the proposed levy action petitioners argue that settlement officer hansen abused his discretion in denying a collection alternative respondent argues that petitioners were ineligible for a collection alternative because they failed to provide the required forms and information it is not an abuse_of_discretion for appeals to reject collection alternatives and sustain a proposed collection action when taxpayers do not submit the requested financial information see balsamo v commissioner tcmemo_2012_109 slip op pincite huntress v commissioner tcmemo_2009_161 slip op pincite cavazos v commissioner tcmemo_2008_257 slip op pincite additionally it is not an abuse_of_discretion for appeals to decline to consider a collection alternative where no written proposal is placed before the reviewing officer 124_tc_69 furthermore we do not require the irs to reopen an oic that it returned to a taxpayer years before a cdp hearing commenced see 141_tc_248 supplemented by tcmemo_2014_41 finally it is not an abuse of discretion for appeals to consider a taxpayer ineligible for an oic on the ground that the taxpayer is not in compliance with current tax obligations see giamelli v commissioner t c pincite internal_revenue_manual pt date on form petitioners indicated an interest in submitting an oic at the hearing however petitioners did not submit a form_656 for an oic although petitioners had submitted two oics to the irs they were both disposed of more than a year before the commencement of the cdp hearing thus petitioners had no outstanding requests for any collection alternative for settlement officer hansen to consider petitioners assert that they did not submit a form_656 to settlement officer hansen because they had been waiting for the irs to respond to their previously submitted oic the record shows however that by date petitioners were aware that the irs had returned their previously submitted oic furthermore petitioners submitted an incomplete form 433-a and did not provide proof of estimated_tax payments for given that petitioners did not submit form_656 adequate financial information and proof of estimated_tax payments for we cannot find that settlement officer hansen abused his discretion in denying a collection alternative petitioners also argue that settlement officer hansen abused his discretion in concluding that the correspondence between him and petitioners constituted a proper cdp hearing we disagree a cdp hearing is an informal proceeding not a formal adjudication 115_tc_329 115_tc_35 sec_301_6330-1 q a-d6 proced admin regs although a cdp hearing may occur face-to-face a proper hearing may also occur by telephone or by correspondence katz v commissioner t c pincite barry v commissioner tcmemo_2011_ slip op pincite once a taxpayer has been given a reasonable opportunity for a hearing but does not avail himself of that opportunity the appeals officer may make a determination based on the administrative file 127_tc_219 petitioners did not request a face-to-face hearing settlement officer hansen scheduled a telephone cdp hearing for petitioners and when they did not call in gave them a final opportunity to submit the requested information by extending the deadline settlement officer hansen gave petitioners multiple opportunities to contest the proposed levy but petitioners did not take advantage of these opportunities thus we find that the correspondence hearing in this case constituted a proper cdp hearing finally petitioner husband argues in his posttrial brief that his posttraumatic stress disorder ptsd prevents him from functioning and causes unwarranted consequences however petitioner husband presented no facts of his ptsd at trial and there is nothing in the administrative record that indicates that he mentioned his condition at any time during the appeals process even if we were to accept that petitioner husband suffers from ptsd we do not have authority to consider sec_6330 issues that were not raised before appeals see giamelli v commissioner t c pincite 118_tc_488 the record reflects that settlement officer hansen determined that the requirements of applicable law and administrative procedure were met and concluded that sustaining the proposed levy action appropriately balanced the need for efficient collection_of_taxes with petitioners’ interest in a collection alternative accordingly we hold that respondent did not abuse his discretion in sustaining the proposed levy action in reaching our holding we have considered all arguments made and to the extent not mentioned we consider them irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent