t c summary opinion united_states tax_court alcmene and peter haloftis petitioners v commissioner of internal revenue respondent docket no 5925-00s filed date alcmene and peter haloftis pro sese richard a stone for respondent goldberg 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 the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the year in issue respondent determined a deficiency in petitioners’ federal_income_tax for of dollar_figure the issues for decision are whether petitioners are entitled to a student_loan_interest_deduction and whether petitioners are subject_to the alternative_minimum_tax at the time the petition was filed petitioners lived in boyds maryland petitioners are husband and wife alcmene haloftis ms haloftis is a chemical engineer with the u s department of labor office of general industry compliance she holds a bachelor of science degree in chemical engineering from the university of maryland college park anda master of science degree in environmental engineering from george washington university at the time of trial ms haloftis had worked for the department of labor for approximately years including the year in issue mr haloftis an electrical engineer worked for ma bioservices inc in rockville maryland during the year in issue in petitioners paid dollar_figure in student_loan interest to the student_loan marketing association the underlying student_loan was incurred for petitioners’ continued education the parties do not dispute the nature of this loan or the amount of interest_paid during in their timely filed joint federal_income_tax return petitioners claimed on their schedule a itemized_deductions a deduction of dollar_figure for student_loan interest_paid during petitioners did not file form_6251 alternative minimum tax----individuals with their federal_income_tax return in a notice_of_deficiency respondent determined that petitioners were not entitled to the student_loan_interest_deduction because they were not eligible for the deduction under sec_221 respondent further determined that petitioners were subject_to the alternative_minimum_tax for a deduction is allowed on interest_paid by a taxpayer on any qualified_education_loan in the year paid sec_221 a qualified_education_loan means any indebtedness incurred to pay gualified higher education expenses which are incurred by the taxpayer or the taxpayer’s spouse paid_or_incurred within a reasonable period of time before or after the indebtedness was incurred and attributable to education during a period the recipient was an eligible_student sec_221 married taxpayers must file joint returns in order to qualify for the deduction sec_221 the maximum deduction allowed for tax_year was dollar_figure sec_221 b for a moderate-income taxpayer the deduction for gualified education loan interest is phased out according to the taxpayer’s modified_adjusted_gross_income modified agi sec_221 the phaseout begins at a modified agi level of over dollar_figure for joint_return filers sec_221 b ii the deduction is completely phased out at a modified agi level of dollar_figure for joint_return filers sec_221 b b petitioners contend that respondent improperly disallowed their education loan interest_deduction because the irs treated the interest as a new loan and not a loan in the repayment stage we are unsure why petitioners make a distinction between a new loan and a loan in repayment stage but the distinction 1s irrelevant the limitations of sec_221 entitled maximum deduction apply to all education loan interest deductions so long as the education loan is qualified and with respect to the first months of repayment sec_221 respondent does not contest that the loan payments were within the 60-month period petitioners’ next argument is that they are not subject_to any limitation on the education loan interest_deduction because line of schedule a states that if line is over dollar_figure your deduction is not limited petitioners are misguided in this assertion line refers to the itemized_deduction phaseout amount’ and has no bearing on petitioners’ entitlement to the education loan interest_deduction sec_1 sec_68 establishes an overall_limitation_on_itemized_deductions for the phaseout begins at adjusted_gross_income of dollar_figure for joint_return filers petitioners correctly assert and respondent does not contest that petitioners are not subject_to the sec_68 limitation on itemized_deductions b sets the deduction limit specifically on qualified_education_loan interest_paid in at dollar_figure therefore assuming all other requirements of sec_221 are met for petitioners’ student_loan interest of dollar_figure they would be entitled to deduct only dollar_figure as their education loan interest_deduction sec_221 respondent contends that petitioners are not entitled to the deduction because their modified agi exceeds the phaseout amount of sec_221 we agree for tax_year petitioners reported an adjusted_gross_income of dollar_figure petitioners’ modified agi equals the adjusted_gross_income determined without regard to the deduction for the education loan interest sec_221 c for tax_year petitioners’ modified agi was dollar_figure because petitioners’ modified agi for is more than dollar_figure we hold that interest_paid on petitioners’ qualified_education_loan is not deductible under sec_221 respondent is sustained on this issue sec_55 imposes an alternative_minimum_tax on noncorporate taxpayers equal to the excess of the tentative_minimum_tax over the regular_tax the alternative minimum dollar_figure adjusted_gross_income plus dollar_figure student_loan interest dollar_figure for petitioners the term regular_tax means the regular_tax_liability for the taxable_year as defined in sec continued tax is the amount in excess of and in addition to any regular_tax owed the tentative_minimum_tax for noncorporate taxpayers is equal to percent of so much of the taxable_excess as does not exceed dollar_figure sec_55 a i the taxable_excess is that amount by which the alternative_minimum_taxable_income amti exceeds the exemption_amount sec_55 a xthe exemption_amount for married couples filing a joint_return is dollar_figure sec_55 a amti equals the taxpayer’s taxable_income for the year determined with the adjustments provided in sec_56 and increased by the amount of tax preference items described in sec_57 sec_55 in calculating amti no deduction is allowed for state_and_local_income_taxes paid and miscellaneous_itemized_deductions sec_56 a also no deduction for personal exemptions under sec_151 is allowed sec_56 eb petitioners did not file form_6251 with their return in computing petitioners’ amti for the year in issue respondent disallowed petitioners’ deductions for taxes paid and for job expenses and other miscellaneous_itemized_deductions we have reviewed respondent’s computations of the alternative_minimum_tax continued b sec_55 and find that they comport with the provisions of sec_55 and sec_56 the following computation shows the proper amount of alternative_minimum_tax i individual_income_tax_return - form_1040 adjusted_gross_income form_1040 line sec_33 dollar_figure less itemized_deductions schedule a -43 dollar_figure balance form_1040 line dollar_figure less exemptions form_1040 line --10 dollar_figure taxable_income form_1040 line dollar_figure tax secs l a c dollar_figure regular_tax sec_26 a c dollar_figure ‘this amount reflects the disallowance of petitioners’ student_loan_interest_deduction as discussed above dollar_figure petitioners’ reported agi plus dollar_figure student_loan interest dollar_figure ii itemized expenses -- schedule a taxes paid line dollar_figure interest_paid line dollar_figure charitable_contributions line dollar_figure miscellaneous_itemized_deductions unreimbursed employee_expenses line dollar_figure total itemized_deductions dollar_figure tii alternative_minimum_taxable_income taxable_income form_1040 line dollar_figure adjustments taxes dollar_figure miscellaneous_itemized_deductions unreimbursed employee_expenses dollar_figure exemptions dollar_figure refund of taxes -dollar_figure balance dollar_figure plus items of tax preference alternative_minimum_taxable_income dollar_figure iv alternative_minimum_tax alternative_minimum_taxable_income dollar_figure less exemption_amount -dollar_figure taxable_excess dollar_figure times applicable amt rate x tentative_minimum_tax dollar_figure less regular_tax_alternative_minimum_tax -7 dollar_figure dollar_figure petitioners’ taxable_income for was dollar_figure the amount reported on line of form_1040 as relevant herein the adjustments provided in sec_56 include the disallowance of the following miscellaneous_itemized_deductions as defined in sec_67 taxes described in paragraph or of sec_164 and personal exemptions defined in sec_151 sec_56 a and eb any amount refunded by way of taxes paid that is includable in computing adjusted_gross_income is not subject_to disallowance see sec_56 a after we take into account the foregoing adjustments petitioners’ amti for equals dollar_figure amti exceeds the applicable exemption_amount of dollar_figure by dollar_figure see sec_55 c petitioners’ tentative_minimum_tax is therefore percent of the excess or dollar_figure see sec_55 b a because petitioners’ tentative_minimum_tax exceeds the regular_tax of dollar_figure petitioners are liable for the alternative_minimum_tax in the amount of the excess ée dollar_figure less dollar_figure or dollar_figure see sec_55 in view of the foregoing we hold that petitioners are liable for the alternative_minimum_tax respondent is sustained on this issue reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


internal_revenue_service number release date index number ----------------------------- ----------------------------------------- ------------------------------------------ -------------------------------- - legend legend debtors department of the treasury washington dc person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b1 - plr-133405-03 date nov ----------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ------------------------------- ----------------------- ------------------- ------------------- ------------------- trust d1 d2 d3 dear ---------------- this is in reply to a letter dated date submitted on behalf of trust requesting rulings regarding the classification of trust as a liquidating_trust under sec_301_7701-4 of the procedure and administration regulations and that trust will be a grantor_trust and the beneficiaries of trust will be treated as owners of trust under and facts debtor filed a voluntary petition under chapter of the bankruptcy code in the bankruptcy court on d1 on d2 the bankruptcy court confirmed the modified second amended plan_of_reorganization under chapter of the bankruptcy code as amended by the order technically amending the plan_of_reorganization the plan plr-133405-03 pursuant to the plan trust was created to prosecute litigation claims and provide a mechanism for the liquidation and distribution of the assets of debtor under the trust agreement the agreement the liquidating trustee is authorized and directed to take all reasonable and necessary action to hold conserve and protect trust's assets and to collect on sell or otherwise liquidate or dispose_of trust's assets and to distribute the net_proceeds of such disposition to the trust beneficiaries as provided in the plan in as prompt efficient and orderly a fashion as possible the agreement generally provides that trust will terminate no later than ten years after its formation trust represents that its time frame for termination is required because the litigation against trust cannot be resolved until after litigation undertaken by trust against a third party is resolved among trust’s assets is an intangible asset the value of which the trustee believes can be maximized by licensing it trust represents that it has no employees and will not engage in any support or development functions with regard to the asset if the asset has not been permanently sold by d3 trust will abandon it trust shall not receive or retain cash in excess of a reasonable amount to meet claims and contingent liabilities including disputed claims or to maintain the value of the assets during liquidation cash not available for distribution and cash pending distribution will be held in demand and time deposits such as short-term certificates of deposit in banks or other savings institutions or other temporary liquid investments such as treasury bills trust is required under the terms of the agreement to distribute to the beneficiaries at least annually its net_income and all net_proceeds from the sale of trust's assets or licensing of the intangible asset except that trust may retain an amount of net_proceeds or net_income reasonably necessary to maintain the value of the property or to meet claims or contingent liabilities the agreement provides that the beneficiaries will be treated as the grantors and deemed owners of trust it further provides that the parties agree to value all assets transferred to trust consistently and to use such values for all federal_income_tax purposes the agreement provides that the trustee shall file returns as a grantor_trust pursuant to sec_1_671-4 of the income_tax regulations the agreement consistent with the requirements set out in revproc_94_45 1994_2_cb_684 provides that the transfer of the liquidating_trust assets to the liquidating_trust will be treated for all federal tax purposes eg sec_61 sec_483 sec_1001 sec_1012 and sec_1274 as a transfer from the bankruptcy_estate to the beneficiaries followed by a deemed transfer by the beneficiaries to the liquidating_trust plr-133405-03 law and analysis sec_671 of the code provides that where it is specified in subpart e that the grantor or another person shall be treated as the owner of any portion of a_trust there then shall be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust that are attributable to that portion of the trust to the extent that such items would be taken into account under chapter of the code in computing taxable_income or credits against the tax of an individual sec_1_671-4 of the income_tax regulations provides that except as provided in sec_1_671-4 and items of income deduction and credit attributable to any portion of a_trust which under the provisions of subpart e sec_671 and following part i subchapter_j chapter of the code are treated as owned by the grantor or another person should not be reported by the trust on form_1041 but should be shown on a separate statement attached to that form sec_301_7701-4 of the regulations provides that certain organizations sec_677 of the code provides in part that the grantor shall be treated as the owner of any portion of a_trust whether or not the grantor is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a non-adverse party or both may be distributed to the grantor or the grantor's spouse or held or accumulated for future distribution to the grantor or the grantor's spouse which are commonly known as liquidating trusts are treated as trusts for purposes of the internal_revenue_code an organization will be considered a liquidating_trust if it is organized for the primary purpose of liquidating and distributing the assets transferred to it and if its activities are all reasonably necessary to and consistent with the accomplishment of that purpose a liquidating_trust is treated as a_trust for purposes of the code because it is formed with the objective of liquidating particular assets and not as an organization having as its purpose the carrying on of a profit-making business which normally would be conducted through business organizations classified as corporations or partnerships however if the liquidation is unreasonably prolonged or if the liquidation purpose becomes so obscured by business activities that the declared purpose of liquidation can be said to be lost or abandoned the status of the organization will no longer be that of a liquidating_trust revproc_94_45 provides the conditions under which the service will consider issuing advance rulings classifying certain trusts as liquidating trusts under sec_301 d plr-133405-03 conclusions revproc_94_45 states that the service will issue a ruling classifying an entity created pursuant to a bankruptcy plan under chapter of the bankruptcy code u s c sec_1101 et seq as a liquidating_trust under sec_301_7701-4 of the regulations if certain specified conditions are met based on the information submitted and the representations made we conclude that the conditions of revproc_94_45 have been satisfied accordingly based on the representations made and the information submitted we rule as follows trust will be classified for federal_income_tax purposes as a liquidating_trust under sec_301_7701-4 of the regulations trust will be a grantor_trust and the beneficiaries of trust will be treated as the owners of trust under sec_671 and sec_677 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent s david r haglund sincerely david r haglund senior technician reviewer associate chief_counsel passthroughs and special industries enclosure copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ----------------------------------------- ------------------------------------------------------------ ----------- -------------------------------------------- --------------------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number -------------------- refer reply to cc psi b1 plr-130190-07 date date ------------------ ----------------------- ----------------------------------------- legend x country date dear --------------------------- this is in response to a letter dated date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to file an election to treat x as an entity disregarded as separate from its owner for federal tax purposes under sec_301_7701-3 facts according to the information submitted x is an entity organized under the laws of country x intended to make an election to be treated as a disregarded_entity effective date however due to an oversight form_8832 entity classification election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect either to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner plr-130190-07 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally unless the entity makes an election to be treated otherwise a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability if a foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 further provides that an entity classification election must be filed on form_8832 entity classification election and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the federal_register 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 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 based solely upon the information submitted we conclude that the requirements conclusion of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result an extension of days from the date of this letter is granted to elect to treat x as a disregarded_entity for federal tax purposes effective date the entity classification election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose plr-130190-07 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely william p o’shea associate chief_counsel passthroughs special industries copy of this letter copy for sec_6110 purposes enclosures cc


internal_revenue_service number release date index number ----------------------------- ------------------------------------ ------------------------------------------- ----------------------------------- ------------------------------ legend 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 b3 plr-137800-16 date date distributing --------------------------------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------------- distributing ----------------------------------------------------------------------------------- --------------------------------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------- business c controlled --------------------------------------------------------------------- ----------------------------------------------------------------------------- ------------------------------------------ state a -------------- shareholder a entities ----------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- shareholder b ------------------------------------------------------------------------- -------------------------------------------- date a date b date c date d ---------------------- --------------------------- ------------------------ ---------------------- plr-137800-16 date e date f date g a b c d e ----------------------- ------------------ -------------------------- ------ ---- ------ ---- -------------- business a ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ dear ------------------- this letter responds to your date request submitted by your authorized representatives for rulings under sec_355 relating to a proposed transaction the information submitted in that request and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by penalties of perjury statements executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this letter is issued pursuant to section dollar_figure of revproc_2016_1 2016_1_irb_1 regarding significant issues presented in a transaction described under sec_332 sec_351 sec_355 sec_368 or sec_1036 the rulings contained in this letter only address one or more discrete legal issues involved in the transaction this office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the rulings below summary of facts distributing a state a corporation is the parent of a worldwide group of domestic and foreign entities distributing is the common parent of an affiliated_group_of_corporations that join in filing a consolidated federal_income_tax return distributing plr-137800-16 has a single class of common_stock outstanding which is publicly traded pursuant to transactions described in plr-130090-15 issued on date distributing proposed to effectuate the distribution of the stock of distributing and business c controlled each a state a corporation to distributing 2’s shareholders together the distributions the distributions are intended to qualify under sec_355 the distributions were accomplished on or before date a before date b approximately a percent of distributing 2’s outstanding common_stock was owned by affiliated entities the shareholder a entities the shareholder a entities sold approximately b percent of distributing 2’s outstanding common_stock in a public offering on date b and disposed of an additional approximately c percent of such stock shortly thereafter pursuant to a stock purchase agreement entered into on date c the shareholder a entities sold approximately d percent of the outstanding shares of common_stock of each of distributing distributing and business c controlled to an unrelated party shareholder b on date d a date that occurred after date a the shareholder a entities may dispose_of additional shares of distributing distributing or business c controlled stock shareholder b is not a public shareholder ie a shareholder who is not a controlling shareholder or percent shareholder within the meaning of sec_1_355-7 and public shareholder prior to the distributions on date e and date f as well as on certain other dates distributing publicly announced or disclosed distributing 2’s intention to engage in a stock buyback program to return capital to its shareholders following the distributions on date g distributing publicly announced that its board_of directors had authorized share repurchases of up to e distributing also may engage in additional share repurchases in the future certain share repurchases will be made through i open market purchases ii one or more accelerated share repurchase asr programs iii one or more tender offers open to all public holders of distributing common_stock or iv a combination thereof the share repurchases it is anticipated that only public shareholders will participate in the share repurchases it is expected that under the asr program distributing will purchase a specified number or dollar amount of its shares from a third-party investment bank at a price per share that is determined over a specified calculation period which often may be terminated early at the bank’s option and may be subject_to certain caps and or floors distributing would pay for the shares upfront and the bank would obtain shares that it delivers upfront by borrowing shares eg from customers or mutual funds then the bank would buy shares generally in the open market over time to return the borrowed shares and to obtain any additional shares it owes to distributing with a possible true-up adjustment as between distributing and the bank at maturity of the asr program the amount and timing of the share repurchases would be dependent upon among other factors the performance of distributing 2’s share price and the amount of free cash_flow from business a plr-137800-16 representations a the share repurchases will be motivated by a business_purpose and the stock to be repurchased in the share repurchases will be widely held b c the share repurchases including at the time the tender offer is initiated will not be motivated by a desire to increase or decrease the ownership percentage of any particular shareholder or group of shareholders at the time that a share repurchase is consummated distributing will not know the identity of any beneficial shareholder i from which distributing stock is repurchased in the open market ii in the case of an asr program from which the third-party investment bank borrows distributing stock or purchases distributing stock to fulfill the bank’s obligation to return borrowed shares or iii that participates in a tender offer except to the extent that the shareholder is the record holder of tendered shares or provides an identifying tax-related form or statement to distributing in connection with such participation rulings based upon the facts and information submitted and the representations made we rule as follows to the extent the share repurchases are treated as part of a plan or series of related transactions with the distributions for purposes of sec_355 the share repurchases will be treated as being made from all public shareholders of distributing common_stock on a pro_rata basis for purposes of testing the effect of the share repurchases on the distributions under sec_355 any increase directly or indirectly in the percentage of either voting power or value of the stock of distributing owned by a shareholder by virtue of the share repurchases or acquisitions of the stock of distributing if any as part of a plan or series of related transactions with the distributions will be taken into account for purposes of sec_355 only after reducing such increase for any reduction in such percentage interest directly or indirectly resulting from the share repurchases and any disposition of stock of distributing by such shareholder or issuance of stock by distributing if any as part of a plan or series of related transactions with the distributions the effect of the share repurchases will be taken into account under sec_355 and these rulings only to the extent such share repurchases are otherwise treated for purposes of sec_355 as part of a plan or series of related transactions with the distributions plr-137800-16 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the proposed transaction under any provision of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings procedural matters 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 a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely susan e massey assistant to the branch chief branch office of associate chief_counsel corporate


internal_revenue_service p o box cincinnati oh release number release date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil b name of state w name of community x dollar_figure amount dear we have considered your request for advance approval of your grant-making programs 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 that you are classified as a private_foundation as defined in sec_509 the purpose of the program is to provide scholarships primarily to w males for higher education so they in turn will strengthen the w community in state b your scholarships will be for students attending accredited schools that fall under irs code sec_170 potential applicants will be made aware of the scholarship through community contacts within the public school system the scholarship selection committee members are selected by your board because of their outstanding community service and because they are recognized leaders in the w community the selection committee will consist of three independent community leaders your board will receive nominations for any additions or replacements to the scholarship selection committee but the foundation’s board will retain the authority to approve any changes to the committee members of the selection committee will not be in a position to receive private benefit directly or indirectly if certain potential grantees are selected over others a recipient can not be related to any member of the selection committee or a disqualified_person in relation to you the selection criteria for the scholarship will include but will not be limited to the student’s demonstrated academic ability and desire character good citizenship and economic circumstances the scholarship selection committee will determine if an application’s qualification meet the criteria of the scholarship all applicants will be required to submit a written essay name ein explaining why the student believes that they are deserving of the award additionally all applicants will be required to submit a recent official transcript from their high school or current higher education institution and a letter of recommendation from teachers pastors or others adults that attest to their character and citizenship applicants will be encouraged to list any community awards or recognitions they have received in the past that demonstrate their good character and citizenship finally applicants will be encouraged to submit financial information from their family the selection committee will rank applicants on their merits and financial need and select the most deserving applications for awards the class of eligible recipients will include all w males in state b you anticipate that you will receive hundreds of applications from the eligible pool but will award between ten to twenty scholarships every year that average about dollar_figurex per award the scholarship funds will be paid directly to the accredited educational_institution ensuring that funds will be used for their intended purpose you will notify each school in writing that the funds are restricted to tuition books and class fees in the event that scholarships funds have been found to be misused you will withhold additional funds while an investigation takes place in addition you will contact the appropriate authorities contact legal counsel conduct an internal investigation and seek to recover any misused funds the scholarship will not be renewable and no commitment will be made beyond the initial award to the recipient if the applicant wishes to pursue additional awards he she must reapply and repeat the initial application process in the event that a recipient stops withdraws or leaves the school you will withhold additional payments on behalf of the scholarships recipient if the tuition can be refunded you will seek a refund from the recipient’s school under the school’s normal terms of refunding educational payments you agree to keep and maintain records that include the information used to evaluate the qualifications of potential scholarship recipients the identification of the scholarship recipient the amount and purpose of the scholarship awarded and all other reports and follow-up information obtained in administering the program 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 name ein 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 such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and 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 scholarship program will be conducted as proposed with objectivity and nondiscrimination in awarding grants and loans we determined that your procedures in awarding scholarship grants comply with the requirements of sec_4945 of the code and that scholarships granted according to these procedures will not be taxable_expenditures within the meaning of sec_4945 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 or loans 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 grant-making procedure sec_1s a one-time approval of your system standards and procedures that will result in grants and loans which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to succeeding grant and loan programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we have not considered whether grants made under your procedures are excludable from the gross_income of recipients under sec_117 if the code 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 grant 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 name ein you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois lerner director exempt_organizations rulings and agreements


department of the treasury_department of the treasury_department of the treasury int ernal revenue service int ernal revenue service int ernal revenue service washington d c washington d c washington d c o f f i c e o f o f f i c e o f o f f i c e o f c h i e f c o u n s e l c h i e f c o u n s e l c h i e f c o u n s e l date number release date uil cc intl br1 frev-130740-01 memorandum for from associate area_counsel w ed williams subject this responds to your memorandum requesting that we reconsider certain advice that we gave to the revenue service representative in on date legend team a team b league c country d country e country f issue whether signing bonuses paid_by team a to nonresident_alien baseball players in league c are subject_to_withholding under sec_1441 conclusion no under sec_872 a nonresident_alien is subject_to u s tax only on income that is derived from u s sources and not connected to a u s trade_or_business and on income effectively connected with the conduct of a u s trade_or_business under sec_862 compensation_for labor or personal services performed outside the united_states is not sourced in the united_states if the nonresident_alien baseball players did not perform services in the united_states in the year in which they received the signing bonuses from team a it is our view that they are not subject_to u s tax however if they performed services in the united_states and also abroad in that year the bonus must be allocated to sources both within and without the united_states as required by sec_863 background major league baseball mlb consists of thirty teams with two in canada and the remainder in the united_states mlb teams are affiliated with a number of minor league baseball teams the minor league consists of the following competitive levels class aaa aa a short a rookie advanced and rookie different leagues exist within each level for instance class aaa consists of the international league pacific coast league and mexican league team a has entered into uniform player contracts with a number of individuals who are nonresident_aliens these players primarily reside in country d the only differences in the contracts signed by particular players is in the dollar amount of their salaries and signing bonuses relevant provisions of the uniform contract state vii payment a for the performance of all of the skilled services by player and for player’s other promises herein contained club will pay player at the monthly rate set out in addendum c-1 by this minor league uniform contract xv player’s representations d player is not a party to and will not enter into any contract or any contractual obligation to render skilled services as a professional baseball player with any person or organization other than club xvii playing for others a for the purposes of avoiding physical injuries player agrees that during the term of this minor league uniform player contract player will not play baseball other than for club without the written consent of the club addendum b of each uniform contract outlines the bonus if any which team a agrees to pay a player the signing bonuses for each contract vary addendum b generally contains the following language player is to receive a signing bonus of dollar_figurex xxx to be paid upon approval of this contract by the commissioner of baseball addendum c-1 of each uniform contract outlines the monthly salary that team a will pay each player initially team a assigned the nonresident_alien players to team b team b competes in the rookie league which is a part of the minor league system and plays exclusively in country d it is not a franchise of team a and team a does not have an ownership_interest in team b team a simply directs various players under contract to play in league c in an attempt to develop talent suitable for playing major league baseball in the united_states the issue presented to you was whether team a had an obligation to withhold tax from the signing bonuses that it paid to team b’s nonresident_alien players there is no withholding obligation if the bonuses are characterized as advance compensation however if the bonuses are characterized as compensation in exchange for covenants not to compete team a has a withholding obligation you have concluded that the bonuses paid_by team a should be treated as payments for covenants not to compete stating the uniform contract in this case provides that a player will not render professional baseball services to any other person or organization the uniform contract does not indicate whether the bonuses were paid for a player’s promise not to render services to any other team or whether the payments were some form of compensation however because the players received monthly salaries for their services and the bonuses were nonrefundable we believe that the bonuses should be characterized as covenants not to compete not compensation your view is that t o the extent the bonuses were paid for the player’s promises not to compete in the united_states the signing bonuses are subject_to_withholding under sec_1441 recognizing that baseball is played in a number of countries other than the united_states you ask that we determine a method for allocating a bonus to u s and non-u s sources the conclusion that the bonuses in question are paid for a covenant_not_to_compete is contrary to the advice that we previously issued in a case with facts almost identical to this one in that case we concluded that a signing bonus that a player received after signing an employment contract is advance compensation_for_personal_services you believe that our prior advice is incorrect because of its reliance on 55_tc_85 and bouchard v commissioner 13_tcm_1223 in both of those cases the court found that the funds received by the petitioners was advance compensation in beaver the court’s decision in part rested on the fact that the recipient of the advances had agreed to forgo future salary payments until the funds were repaid similarly in bouchard the recipient had to repay the advances through future profits you believe our reliance on beaver and bouchard is misplaced because in our advice issued in and in this case the baseball players receive monthly salaries for their services and are under no obligation to repay the bonuses discussion revrul_74_108 revrul_74_108 1974_1_cb_248 considers the source of a sign-on bonus paid_by a u s soccer team to a nonresident_alien prior to the individual signing an employment contract in the revenue_ruling a u s soccer club that played games both in the united_states and abroad enters into an agreement with a nonresident_alien as described by the revenue_ruling t he agreement does not require the player actually to play for the club it is merely a preliminary agreement that is separate and distinct from a uniform player contract which binds a player to play soccer for a salary when a player enters into an agreement the taxpayer places him on its reserve list thereby protecting such player from recruiting efforts of any other club and preventing him from negotiating to play or playing for any other professional soccer club no part of the sign on fee is attributable to future services but the team anticipates the agreement and fee will induce the player to sign and become bound by the uniform player contract if the club wishes to use his services and a separate employment contract is negotiated for this purpose emphasis added the revenue_ruling concludes that a preliminary agreement that does not require a player to perform any services is a covenant_not_to_compete for which the sign-on bonus serves as consideration because the player promises not to compete inside and outside the united_states the revenue_ruling concludes that the bonus must be apportioned to sources within and without the united_states according to the revenue_ruling this should be done in a way that is reasonable in light of all the facts and circumstances of the particular case such as relative value of the player’s services within and without the united_states or alternatively on the basis of the portion of the year during which soccer is played within and without the united_states the revenue_ruling concludes by noting that if no reasonable basis for allocating a sign-on bonus is presented by the taxpayer all the income should be sourced in the united_states linseman v commissioner the commissioner defended revrul_74_108 in 82_tc_514 in linseman the taxpayer a canadian citizen and resident received a dollar_figure sign-on bonus from a u s hockey team as consideration for entering into the following agreement whereas the club wishes to enter into a contractual relationship with player in order to engage his services and whereas player is a highly skilled athlete and is currently under no contractual commitment to a professional hockey team and is therefore a free agent and maintains his amateur status now therefore this agreement witnesseth that player will relinquish both his free agent and amateur status and enter into an agreement with club as consideration for player accomplishing the above club shall pay player the sum of dollar_figure to be paid on or before date an addendum to this agreement increased the sign-on bonus to dollar_figure the bonus was nonrefundable regardless of whether the player signed an employment contract on the same day that the sign-on agreement was executed the player signed a standard player’s contract that obligated him to play for the team from the through the hockey seasons in linseman the irs argued that there was no reasonable basis for allocating the sign- on bonus and therefore it should be sourced entirely in the united_states alternatively the irs argued that the bonus should be allocated on the basis of the number of games that the team played within and outside the united_states during the first year of linseman’s contract at the outset the tax_court stated that in order to make its decision it would have to determine the nature of the sign-on bonus received by linseman the court stated resolution of this question involves an analysis of the nature of a sign-on bonus if as respondent suggests in revrul_74_108 supra and in the instant case the sign-on bonus is essentially a payment for a covenant_not_to_compete and its locus is where the taxpayer forfeits his right to act the further question is posed as to where that forfeiture takes place if the covenant_not_to_compete is worldwide it can be argued that at least in theory the taxpayer forfeits his right to act in any place where he might otherwise act on a worldwide basis that forfeiture would seem to occur wherever the activity in this case hockey is played or indeed might be played however the court did not accept the commissioner’s view that the sign-on bonus was paid for a covenant_not_to_compete in discussing revrul_74_108 the court observed that i f the covenant_not_to_compete is worldwide it can be argued that at least in theory the taxpayer forfeits his right to act in any place where he might otherwise act on a worldwide basis that forfeiture would seem to occur wherever the activity in this case hockey is played or indeed might be played the required analysis thus becomes exceedingly complex footnote and citations omitted instead the court found that the primary purpose of the sign-on bonus was to induce the player to sign a contract to play and thus to perform the affirmative act of playing the court stated the reality of this approach is clear in the instant case where the sign-on agreement provided that petitioner will enter into an agreement with club bulls and petitioner did in fact enter into such an agreement however in pointing to this fact we are not suggesting that we would necessarily reach a different conclusion had the sign-on agreement not contained the above language or been limited to a promise not to play hockey for anyone else whatever the specifics of the sign-on agreement the fact remains that the underlying purpose of such an agreement is to induce the player to perform the affirmative act of playing emphasis added the court then turned to the task of sourcing the income from the sign-on bonus the court concluded that based on the facts and circumstances the sign-on bonus should be allocated based on the number of games that the bulls contemplated playing within and without the united_states in the season which was the season in which linseman received his bonus the court noted that t he fact that the sign-on bonus is not itself compensation_for service does not preclude us from using the places where the contemplated services were to be performed as the basis for allocation chief_counsel_advice on date our office issued advice based on facts that were almost identical to this case in response to a request from a revenue service representative who wanted to know whether advice we had issued in was still our position we confirmed that it was however we thought that the two cases were factually distinct accordingly we issued additional advice in our advice concerned the proper tax treatment of a sign-on bonus paid_by a u s hockey team to a citizen of country e the player had signed a contract in which he agreed to sign an employment contract with the hockey team upon signing the first agreement the player received dollar_figure later that day the player signed a one-year employment contract the player and the team sourced the bonus 50-percent within the united_states and the team withheld 30-percent of this amount exams took the position that revrul_74_108 had been overruled by linseman we concluded that exams should continue to follow revrul_74_108 however we noted that the revenue_ruling and linseman require income that can be attributed to u s and non-u s sources to be allocated on a reasonable basis and both approve an allocation method that is based on the location of the games to be played by the team accordingly we recommended that the irs argue that the source of the sign-on bonus should be based on the location of the team’s games chief_counsel_advice the facts on which the cca was requested are basically identical to those in this case the taxpayer a citizen and resident of country f was recruited by a u s professional baseball club he signed a minor league uniform player contract pursuant to which he agreed to play for a baseball club in league c the terms of the contract in the chief_counsel_advice are the same as those in the contract used by team a the cca discussed the factual distinctions between the bonuses paid in its case and the bonuses paid in linseman and revrul_74_108 with respect to linseman and rev_rul the sign-on bonus was paid in connection with an agreement that preceded the particular player signing an employment contract the cca concluded that the bonuses in those cases were also inducements for the player to sign the employment contract the cca contrasted the bonuses paid in linseman and revrul_74_108 to the bonus in its case which was paid only upon approval of the uniform player contract the cca found that the sign-on bonus paid_by the u s baseball club was not an inducement to sign an employment contract as in linseman or for a covenant_not_to_compete as in rev_rul because the taxpayer had a right to the bonus only after signing an employment contract stating that he would provide his services exclusively during the contract term instead the cca treated the sign-on bonus as payment for future services and for the player’s agreement to play for no other team during the term specified in the contract because it was paid only after the execution of the employment contract in making this determination the cca relied on 55_tc_85 and bouchard v commissioner 13_tcm_1223 for support in both of those cases the court found that funds received by the petitioners was advance compensation in beaver the court’s decision rested in part on the fact that the recipient of the advances had agreed to forgo future salary payments until the funds were repaid similarly in bouchard the recipient had to repay the advances through future profits you believe our reliance on beaver and bouchard is misplaced because in our advice issued in and in this case the baseball players receive monthly salaries for their services and are under no obligation to repay the bonuses however you do not say why these facts should result in any change to the analysis in our cca there we noted that we think the bonus paid to the taxpayer is properly characterized as advance compensation_for the services he agreed to perform even though he is under no apparent obligation to repay the bonus if he does not perform any services the situation here is similar to that in bouchard v commissioner in bouchard a manufacturing company juneau advanced the taxpayer funds to cover his living_expenses with the understanding that the taxpayer would work on developing certain inventions the advances would be recoverable by juneau only if the taxpayer developed a marketable product thus we were aware of the differences between the facts in our case and those in beaver and bouchard but still found the latter cases to be relevant for the reasons detailed above conclusion we have reexamined the advice that we issued in and are of the view that it remains the position of this office because the sign-on bonuses were paid_by team a after the employment contracts were signed they are distinguishable from the sign-on bonuses under consideration in revrul_74_108 and linseman we have concluded that the bonuses are properly characterized as advance compensation_for_personal_services please contact if you have additional questions w edward williams senior technical reviewer branch international


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division juli uniform issue list legend taxpayer spouse plan financial_institution amount dear this is in response to a letter dated date in which you request a waiver of the 60-day rollover requirement contained in sec_402of the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer received a distribution from plan of amount taxpayer asserts that her failure to accomplish a rollover of amount within the 60-day period prescribed by sec_402 of the code was due to a severe medical_condition that has caused a variety of debilitating effects including memory loss taxpayer further represents that amount has not been used for any other purpose taxpayer's husband spouse was a participant in plan spouse died in taxpayer was named as beneficiary of plan upon spouse's death page spouse's account balance of amount was distributed from plan to taxpayer in date taxpayer who suffers from a severe medical_condition that has caused a variety of debilitating effects including memory loss placed the unopened letter containing the check in her drawer it was discovered after the 60-day period by a family_member who deposited it into taxpayer's checking account where it remains unused based on the facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_402 of the code with respect to the distribution of amount from plan sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 a sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement revproc_2003_16 i r s date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer including a written_statement from her physician is consistent with her assertion that her failure to page 2gl440025 accomplish a timely rollover was due to a severe medical_condition that has caused a variety of debilitating effects including memory loss therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from plan taxpayer is granted a period starting with the distribution of amount from plan and ending 60-days from the issuance of this ruling letter to contribute amount into a rollover ira provided all other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_402 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 a of the code 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_611 o k of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you have any questions please contact please address all correspondence to se t ep ra t2 sincerely yours manager technical group enclosures deleted copy of ruling letter notice of intention to disclose cc