department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division release number release date legend org - organization name xx - date address - address org address certified mail dear date date person to contact badge number contact telephone number contact address employer_identification_number this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated may 20xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason s you have failed to produce documents to establish that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and that no part of your net_earnings inure to the benefit of private shareholders or individuals failed to keep adequate books_and_records as required by sec_6001 and the regulations there under in our letters dated april 20xx may 20xx june 20xx august 20xx and september 20xx we requested information necessary to conduct an examination of your form_990 for the year ended december 20xx we have not received all of the requested information also you have sec_1_6033-2 of the income_tax regulations provides in part that every organization which is exempt from tax shall submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status you have not provided the requested information contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code effective january 20xx you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all the tax years thereafter in accordance with instructions of the return if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition in one of these three courts must be filed before the 91st day after the date that this determination was mailed to you if you wish to seek review of our determination please contact the clerk of the respective court for rules regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the untied states tax_court at the following address please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll free and ask for the taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely nanette m downing director eo examinations enclosures publication ae tax exempt an government entities division org address department of the treasury internal_revenue_service mail code dal commerce st dallas tx date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary lf you accept our findings take no further action we will issue a final revocation letter lf you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice if we issue a determination_letter to you based on technical_advice no letter catalog number 34809f lf we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely nanette m downing director eo examinations letter catalog number 34809f form 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended december 20xx org legend org - organization name 1st dir co-1 xx - date state - state dir-1 dir-2 - co-2 co-3 - companies issue whether org continues to qualify for exemption under sec_501 of the internal_revenue_code facts the above named organization received exemption under c of the code on may 20xx exhibit the organization was formed to provide an after school riding program for underprivileged children from the local school the organization was initially contacted by telephone on august 20xx and a field_examination was tentatively scheduled for september 20xx pending the program director confirming the appointment the taxpayer never called to re- confirm on january 20xx the taxpayer was again contacted exhibit the organization did not have an active board and according to dir-1 the executive director the after school program had not been active since the spring of 20xx agent allowed the organization time to resurrect the board in order to make decisions regarding the organization as of april 20xx no response was received from the organization letter and information_document_request idr exhibit was sent to the organization when no response was received from the organization by may 20xx agent again called dir-1 who confirmed receiving letter and idr the board was still not formed at that time agent mailed idr exhibit with a response due_date of june no response was received so idr was mailed again certified on june 20xx with a response due_date of july 20xx idr exhibit was mailed to the organization on august 20xx with a due_date of september 20xx no response was received and a follow-up letter was mailed on september 20xx with a due_date of september 20xx again no written response was received a third letter was mailed certified on october 20xx the response to idr initially mailed on august was received on october the following information was requested in the idrs but never received e copies of articles of incorporation including any amendments or changes that have occurred at the state level form acrey department of the treasury - internal_revenue_service page -1- schedule no or exhibit year period ended december 20xx form sec_86a name of taxpayer explanation of items department of the treasury - internal_revenue_service org e e e e e board meeting minutes showing election of current officers signed statement from the co-1 that they will participate in the organization’s program a list of all activities in 20xx including the date of the event class how many participants names of workers and compensation amounts paid to them complete contact information for the officers current statement regarding conflict of interest procedures regarding the exclusive use of dir-1’s facilities and the related payments the organization filed the form 990-n e-postcard on may 20xx naming dir-2 as an officer of the organization based on this filing and the lack of a board_of directors dir-2 was used as the primary contact law sec_6001 provides that every person liable for any_tax imposed by the irc or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of form acrev department of the treasury - internal_revenue_service page -2- schedule no or exhibit year period ended december 20xx form 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service org information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax taxpayer’s position the taxpayer’s position is unknown at this time government’s position sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law the organization did not provide complete books_and_records upon request a the organization did not provide original articles of incorporation b the state of state website shows the organization was dissolved and reinstated at the state level exhibit the organization did not provide any information regarding these changes c the organization provided copies of a document titled restated articles of incorporation they are not copies filed with the state no state stamp present no board meeting minutes were provided to show the election of officers d form acrev department of the treasury - internal_revenue_service page -3- department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items schedule no or exhibit year period ended december 20xx org e the organization stated they were beginning operations again agent requested f the local school provide a signed statement of their participation in the new program this was not provided the organization did not provide activity information as requested including dates of classes number of students workers and related compensation only a partial list of officer contact information was provided g h the organization did not provide current conflict of interest policies in place the only information provided were documents submitted over three years ago with the form_1023 application the organization did not provide any proof of elections of officers or board members at this time there is no evidence that a board even exists without this election process it is unclear who is authorized to make financial and operational decisions on behalf of the exempt_organization sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 agent was unable to complete a thorough review of the organization’s books_and_records and is unable to verify they still qualify for exemption under c of the code originally dir-1 indicated the organization had not been active since the spring of 20xx however the financial statements showed payments being made to her for profit business through the end of the 20xx year the organization did not provide the details of these payments as requested in item idr there are several inconsistencies in their financial records in the response received october 20xx the exempt_organization states in response to item that the instructor fee is dollar_figure weekly and the barn and horse fee is dollar_figure weekly their financials provided in the same response show the actual instructor fee paid is dollar_figure weekly and the barn and horse fee paid is dollar_figure weekly payments for both instructor fees and the barn and horse fee are paid to co-2 co-2 owned by dir-1 the actual amounts paid to co-2 are dollar_figure more per week then stated by the exempt_organization dir-1 is the original incorporator and former director of the exempt_organization she is currently the program director of the after school program and is the owner of co-2 the facilities used exclusively by the exempt_organization as shown in exhibit attached dir-1’s for-profit business is intertwined with org individuals interested in org must navigate through the co-2 business website as stated above there are also discrepancies in the fees paid_by org to dir-1 _ the exempt_organization also did not form arev department of the treasury - internal_revenue_service page -4- form_886 a name of taxpayer explanation of items department of the treasury - intemal revenue service schedule no or exhibit year period ended december 20xx org provide current conflict of interest policies as requested without this information the agent could not perform a thorough review of private benefit and inurement issues the cash disbursements statement for 20xx listed payments totaling dollar_figure payed to co- as instructor's fees instructors fees are for the teaching of the after school classes it is unclear why this compensation was paid to a home and office business conclusion it is the internal revenue service's position that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 accordingly the organization's exempt status is revoked effective january 20xx form_1120 returns should be filed for the tax periods ending december 20xx and forward form arev department of the treasury - internal_revenue_service page -5-


internal_revenue_service number release date index number ---------------- -------------------------------- ------------------------ --------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc intl b04 plr-123275-08 date date taxpayer parent entity entity date separate_unit ----------------------------------------------------------------- separate_unit --------------------------------------------------------------------- ---------------- -------------------------------- ------------------ ----------------------- ---------------------- dear ---------------------- this replies to a letter in which taxpayer requests an extension of time under sec_301_9100-3 to satisfy the dual_consolidated_loss triggering event rebuttal under sec_1_1503-2 the information submitted for consideration is substantially as set forth below the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request_for_ruling verification of the factual information representations and other data may be required as a part of the audit process taxpayer is a domestic_corporation that is a wholly-owned subsidiary of parent a foreign_corporation taxpayer wholly owns entity effective as of date taxpayer sold all of its interest in entity to entity the sale of entity was a presumptive triggering event under sec_1_1503-2 with respect to dual consolidated losses previously incurred by separate_unit and separate_unit taxpayer did not timely file documentation under sec_1_1503-2 to rebut the occurrence of a presumptive triggering event taxpayer did request relief before the failure to timely file was discovered by the internal_revenue_service plr-123275-08 pursuant to notice_2006_13 which was effective when taxpayer’s request for relief was submitted taxpayer chose to seek relief under sec_301_9100-1 through rather than under prop sec_1_1503_d_-1 see also sec_1_1503_d_-8 providing that taxpayers with requests for relief under sec_301_9100-1 through pending as of date may withdraw their request and seek relief under sec_1_1503_d_-1 rather than under sec_301_9100-1 through sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government based on the facts and circumstances of this case we conclude that the standards of sec_301_9100-3 have been satisfied accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to satisfy the requirements of sec_1_1503-2 with respect to the dual consolidated losses of separate_unit and separate_unit the granting of an extension of time is not a determination that taxpayer is otherwise eligible to satisfy the requirements of sec_1_1503-2 sec_301_9100-1 no opinion is expressed as to the application of any other section of the code or regulations to the facts presented 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 plr-123275-08 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely ___________________ thomas d beem senior technical reviewer associate chief_counsel international branch


internal_revenue_service number release date index number ------------------------------------ --------------------------------------- ------------------------------- ------------------------------------- ------------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc ita b05 plr-140955-08 date february ty ------- ty ------- legend taxpayer trust a trustee trust b_trust c trustee x trustee y trustee z farmland father mother child b child c ------------------------------------------------------ ------------------------------- ------------------------- -------------------------------------------------------- ----------------------------------------- ---------------------------- --------------------------------- --------------------------------------- ---------------------------------------------------------------------- -------------------- ------------------ --------------------------------- --------------------------------- dear -------------- this is in response to your request for a private_letter_ruling dated date and submitted on your behalf by your authorized representative specifically you have requested a ruling that taxpayer and trust c are not related_persons for purposes of sec_1031 of the internal_revenue_code and that an exchange of property is not a transaction to which sec_1031 applies facts farmland was owned by father upon father’s death farmland was placed into two testamentary trusts with income payable to mother for life and remainder to taxpayer plr-140955-08 child b and child c upon the death of mother farmland was transferred to taxpayer child b and child c in equal shares as tenants in common the three children subsequently deeded each of their interests in farmland to three grantor trusts trust a_trust b and trust c through trust a taxpayer holds its interest in farmland for use in a trade_or_business or for investment taxpayer and trustee are the co-trustees of trust a child c subsequently died pursuant to the terms of trust c child c’s interest in farmland is to remain in trust with trust income to be paid to her surviving_spouse for life and remainder to her children for federal_income_tax purposes the current owners of farmland are taxpayer through trust a child b through trust b and trust c in equal shares as tenants in common the co-trustees of trust c are trustee x the spouse of child c and trustees y and z the children of child c trust c now wishes to liquidate its ownership_interest in farmland taxpayer and child b wish to remain invested in farmland through trust a and trust b to facilitate each others’ wishes and to increase the marketability of the interest to be sold the trusts have agreed to exchange each of their undivided interest in farmland for percent fee simple interests in the same property this exchange will be based upon the division suggested in a recent survey and appraisal the division will split farmland into three parcels of equal value none of the trusts will assume any liabilities of the other trusts or receive money or other_property as a result of the exchange however as a result of the death of child c trust c will have a different and higher basis in its parcel than the other owners due to the step up in basis received when child c died after the exchange of the undivided interests for whole parcels trust c will sell its parcel to a third party taxpayer and child b will retain their respective parcels each a portion of farmland for use in a trade_or_business or for investment law and analysis sec_1031 of the code provides that no gain_or_loss shall be recognized on the exchange of property held for productive use in a trade_or_business or for investment if such property is exchanged solely for property of like_kind which is to be held either for productive use in a trade_or_business or for investment sec_1031 of the code generally provides that if -- a a taxpayer exchanges property with a related_person b there is nonrecognition_of_gain_or_loss to the taxpayer under this section with respect to the exchange and exchange -- c before the date years after the date of the last transfer which was part of such i the related_person disposes of such property or plr-140955-08 ii the taxpayer disposes of the property received in the exchange from the related_person which was of like_kind to the property transferred by the taxpayer there shall be no nonrecognition_of_gain_or_loss under this section to the taxpayer with respect to such exchange except that any gain_or_loss recognized by the taxpayer by reason of this subsection shall be taken into account as of the date on which such subsequent disposition occurs sec_1031 of the code provides that for purposes of sec_1031 the term related_person means any person bearing a relationship to the taxpayer described in sec_267 or sec_707 under sec_267 members_of_a_family as defined in sec_267 are considered related_persons sec_267 provides that the family of an individual includes only the individual’s brothers and sisters whether by the whole or half blood spouse ancestors and lineal_descendants the relationships described in sec_707 include a a partnership and a person owning directly or indirectly more than percent of the capital interest or the profits interest in such partnership and b two partnerships in which the same persons own directly or indirectly more than percent of the capital interests or profits interests revrul_73_476 1973_2_cb_300 holds that exchanges of undivided interests in multiple parcels of real_estate for percent ownership of one or more parcels of the same real_estate qualify as valid like-kind_exchanges the above-described exchange and subsequent sale by trust c of its fee simple interest in a portion of farmland is not a transaction to which sec_1031 applies in general a transaction is described in sec_1031 if related parties engage in an exchange and then one of the related parties disposes of their acquired property within two years of the acquisition in the present case taxpayer and child b are related_persons under sec_267 but neither intend to sell their respective property within years of the exchange further while trust c intends to sell its interest within years of the exchange taxpayer is not related to trust c or trustees x y and z within the meaning of sec_1031 accordingly with respect to taxpayer and trust c there is no exchange between related_persons for purposes of sec_1031 ruling taxpayer and trust c are not related_persons for purposes of sec_1031 consequently the application of sec_1031 to taxpayer is not affected by trust c’s sale of its interest including the interest it acquired from taxpayer in farmland within years of its acquisition by trust c caveats plr-140955-08 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 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely george f wright senior technician reviewer branch office_of_chief_counsel income_tax accounting enclosure


cca_2016022211570202 id uilc number release date from sent monday date am to cc ------------------------------------------------------------------------------------- bcc subject re sec_9832 and state medicaid health_plans hi ---------------------------- these are responses to the questions raised in your email please let us know if we can be of more help thanks ----- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- ------------------ issue whether an entity providing medicaid services is a health_insurance_issuer receiving premiums from providing health_insurance_coverage as those terms are defined in sec_9832 and thus within the definition of covered_health_insurance_provider for purposes of sec_162 in particular is a non-risk bearing entity a health_insurance_issuer within the meaning of sec_9832 is a risk-bearing entity a health_insurance_issuer within the meaning of sec_9832 if a risk-bearing entity becomes licensed as an insurance_company under state law in order to submit a bid for a medicaid contract is that entity a health_insurance_issuer within the meaning of sec_9832 do payments from a state under a medicaid contract to a risk-bearing entity that is a health_insurance_issuer qualify as premiums so that the entity may be a covered_health_insurance_provider under sec_162 if for taxpayer years beginning after date not less than percent of the gross premiums received from providing health_insurance_coverage is from minimum_essential_coverage as defined in sec_5000a background covered_health_insurance_provider the statute and regulations under sec_162 limit the available compensation deduction for a covered_health_insurance_provider for a taxable_year to dollar_figure per service provider which includes an employee the statute and regulations define the term covered_health_insurance_provider as a a health_insurance_issuer as defined in sec_9832 which b receives premiums from providing health_insurance_coverage as defined in sec_9832 sec_9832 and sec_54_9801-2 provide that the term health_insurance_issuer means an insurance_company insurance service or insurance organization including a health_maintenance_organization as defined in paragraph b which is licensed to engage in the business of insurance in a state and which is subject_to state law which regulates insurance within the meaning of sec_514 of the employee_retirement_income_security_act_of_1974 as in effect on the date of the enactment of this section sec_9832 and sec_54_9801-2 provide that the term health_insurance_coverage means benefits consisting of medical_care provided directly through insurance or reimbursement or otherwise under any hospital or medical service policy or certificate hospital or medical service plan contract or health_maintenance_organization contract offered by a health_insurance_issuer sec_1_162-31 provides that for purposes of sec_162 premiums from providing health_insurance_coverage are premiums written determined in a manner consistent with the requirements for reporting under the supplemental health care exhibit published by the naic or the mlr annual reporting form filed with the center for medicare medicaid services’ center for consumer information and insurance oversight of the u s department of health and human services sec_1_162-31 excludes direct service payments from the definition of premiums sec_1 b iv defines a direct service payment as a payment made by a health_insurance_issuer or other entity that received premiums from providing health_insurance_coverage as defined in sec_9832 to another organization as compensation_for providing managing or arranging for the provision of healthcare services by physicians hospitals or other healthcare providers neither the internal_revenue_code nor any accompanying regulations define the term_insurance or insurance_contract the united_states supreme court however has explained that in order for an arrangement to constitute insurance for federal_income_tax purposes both risk-shifting and risk- distribution must be present see 312_us_531 neither sec_162 nor the accompanying regulations categorically except from the definition of covered_health_insurance_provider an entity that provides medicaid services the preamble of the final regulations specifically notes that the treasury_department and the irs do not adopt the suggestion to provide in the final regulations that clinical risk-bearing entities medicare and medicaid providers and other recipients of payments from government entities in connection with providing benefits under government sponsored health care programs are categorically excluded from being covered health insurance providers or that the amounts received by these organizations are categorically excluded from classification as premiums from providing health_insurance_coverage the preamble further acknowledges that to be a covered_health_insurance_provider under sec_162 a person must be a health_insurance_issuer as defined in sec_9832 that receives premiums from providing health_insurance_coverage as defined in sec_9832 and that meets certain other requirements therefore if a person is not a health_insurance_issuer or does not receive premiums from providing health_insurance_coverage the person is not a covered_health_insurance_provider for purposes of sec_162 medicaid the medicaid program provides medical benefits to low-income people who have no medical insurance or have inadequate medical insurance the medicaid program is jointly funded by the federal government and states the federal government pays states for a specified percentage of program expenditures the federal government establishes general guidelines for the administration of medicaid benefits however specific eligibility requirements to receive medicaid benefits as well as the type and scope of services provided are determined by each individual state states generally pay for medicaid services through risk-bearing and non-risk-bearing arrangements under non-risk-bearing arrangements states pay providers directly for services such arrangements can include an entity paid an administrative fee for case management services although actual medical_care is reimbursed on a fee-for-service basis that is the states reimburse providers directly for each individual to whom services are furnished under risk-bearing arrangements in exchange for capitation payments or other set payments an entity provides the prescribed medical services or arranges for providers to provide the prescribed medical services to medicaid enrollees on a similar basis as services are provided to other medicaid beneficiaries under risk-bearing arrangements the entity assumes risk for the cost of furnishing the services under the arrangement and incurs loss if the cost of furnishing the services exceeds the set payments under the arrangement or gain if the cost of services is less than the set payments in many cases licensure as an insurance_company under state law is a requirement that must be satisfied before an entity may participate in a state medicaid contract bidding process the entity participating in the bidding process may be either a risk-bearing or non-risk-bearing entity analysis and conclusions is a non-risk bearing entity a health_insurance_issuer under sec_9832 a non-risk-bearing entity providing services under a state medicaid program does not have the risk- shifting or risk-distribution elements of insurance and consequently a non-risk-bearing entity is not a health_insurance_issuer under sec_9832 because the state reimburses the entity for medical_care provided on a fee-for-service basis based on the actual services provided to the covered individuals the entity generally is not at risk for the cost of the services exceeding the amount of reimbursements paid_by the state is a risk-bearing entity a health_insurance_issuer under sec_9832 a risk-bearing entity that is licensed to engage in the business of insurance in a state and is subject_to state law which regulates insurance and that has the risk-shifting or risk-distribution elements of insurance is a health_insurance_issuer under sec_9832 because a risk-bearing entity is at risk of loss for the cost of the services exceeding the amount of payments received from the state or has the possibility of gain in cases in which the amount of payments paid_by the state exceeds the cost of services provided the entity is at risk for the cost of the services exceeding the amount of reimbursements paid_by the state if a risk-bearing entity becomes licensed as an insurance_company under state law in order to submit a bid for a medicaid contract is that entity considered to be a health_insurance_issuer under sec_9832 a risk-bearing entity that becomes licensed as an insurance_company under state law whether to satisfy a contractual requirement or otherwise is licensed to engage in the business of insurance in the state and satisfies the requirement under sec_9832 that a health_insurance_issuer be an insurance_company licensed to engage in the business of insurance in a state moreover as an insurance_company licensed to engage in the business of insurance in a state that entity is also subject_to the state laws which regulate insurance which is the other requirement under sec_9832 for an entity to be a health_insurance_issuer as such that entity is a health_insurance_issuer this is in contrast to situations in which the entity’s contract with the state imposes conditions similar or identical to the state law requirements but the entity is not in fact directly subject_to the state insurance laws do payments from a state under a medicaid contract to a risk-bearing entity that is a health_insurance_issuer qualify as premiums so that the entity is a covered_health_insurance_provider under sec_162 even if an entity is a health_insurance_issuer under sec_9832 there remains the question of whether payments received by the risk-bearing entity are premiums from providing health_insurance_coverage direct service payments under sec_1_162-31 are excluded from the definition of premiums a direct service payment is a payment made by a health_insurance_issuer or other entity that received premiums from providing health_insurance_coverage as defined in sec_9832 to another organization sec_1_162-31 provides that premiums from providing health_insurance_coverage are premiums written determined in a manner consistent with the requirements for reporting under the supplemental health care exhibit published by the naic or the mlr annual reporting form filed with the cms ciiio of hhs but as reflected in the treatment of direct service payments to constitute the payment of a premium for health_insurance_coverage the payment must result in a legal relationship between the covered individual and the entity receiving the payment whether this relationship exists depends on whether the medicaid beneficiaries could assert rights against the entity analogous to those between covered individuals and health insurance issuers in the private market and as required under state law this type of relationship exists between the entity and the medicaid beneficiaries whether directly or indirectly the payments received by the entity are premiums from provided health_insurance_coverage paid_by the state on behalf of the medicaid beneficiaries because for example the individual’s rights under the arrangement are only enforceable against the state then the relationship between the state and the entity is more akin to a direct service provider see the preamble to the sec_162 proposed_regulations reg-106796-12 pincite fr whether there is an insurance relationship between the covered individual and the state is not necessary to determine because a state would not meet the definition of a health_insurance_issuer under sec_9832 if this type of relationship does not exist if


internal_revenue_service number release date index number ------------------------------------ --------------------- ------------------------------------ in re ---------------------------- -------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------------------------- telephone number --------------------- refer reply to cc psi b04 plr-142529-08 date march legend grantor son grandson granddaughter trust trust trust trust trust trust trust date date date date dear ------------- ------------------------ ------------------------------------------------------ --------------------------- ------------------------------------ --------------------------------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------- --------------------------- --------------------------- --------------------------- ---------------------------- --------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------- -------------------------- ------------------- --------------------------- ------------------------ this letter responds to your date letter and other correspondence requesting rulings regarding the estate and generation-skipping_transfer gst tax consequences of a beneficiary’s proposed exercise of a power_of_appointment over assets in several trusts plr-142529-08 the facts submitted are as follows on date before date grantor established trusts on date before date grantor established trust trusts are irrevocable trusts are administered by grantor’s son son in the capacity of a co- trustee and an independent_trustee grantor died on date trusts provide that each trust will terminate at the death of son trust will terminate at the death of the later of son and grandson trust will terminate at the death of the later of son and granddaughter trusts provide that upon the termination_date the trust estate is to be distributed to such persons trusts and or corporations in such shares manner and proportions as son may appoint by will no power to appoint by will is to be exercised in favor of son’s estate son’s creditors or the creditors of son’s estate any such power_of_appointment is to be exercisable only by a separate clause in son’s will which identifies the power by specific reference and disposes of no property other than the property subject_to the power trust provides similar language except that grandson is given the power to appoint and any portion of the trust assets not appointed by grandson is to be appointed by son if son survives grandson trust provides similar language except that granddaughter is given the power to appoint and any portion of the trust assets not appointed by granddaughter is to be appointed by son if son survives granddaughter trusts provide that during the term of each trust the income of such trust estate may be accumulated and retained in whole or in part or the independent_trustee may distribute from time to time to any one or more of son and his issue such amounts as the independent_trustee in his sole discretion decides are in the best interest of the beneficiary taking into account the age of the beneficiary the cost of the beneficiary’s support maintenance and education any income of the beneficiary and any other factors deemed relevant by the independent_trustee trust provides similar language for the benefit of son grandson and grandson’s issue trust provides similar language for the benefit of son granddaughter and granddaughter’s issue trusts provide that no trust created or continued herein is to continue in force and effect for longer than years after the last to die of grantor and all of grantor’s issue living at the date of the execution of the respective trust in son’s current will son exercises his powers of appointment over all the assets in trusts in favor of son’s surviving grandchildren in equal shares subject_to the trusts created for them under article of trust if any of son’s grandchildren fail to survive him then the share that grandchild would have received will pass to that plr-142529-08 grandchild’s surviving descendants subject_to the trusts created for them under article of trust article of trust establishes trusts for the benefit of the grandchildren of son during the life of the grandchild the trustee will distribute to grandchild and any of his or her descendants so much of the income and principal as the trustee determines to be appropriate to provide for the continued health maintenance support and education of the beneficiary upon the death of the grandchild the grandchild has a general testamentary_power_of_appointment over the gst taxable_portion of the trust and a limited testamentary_power_of_appointment over the remaining trust property article of trust provides for similar trusts for other descendants of son paragraph dollar_figure of trust provides in relevant part that any trust created or funded by son’s exercise of a limited_power_of_appointment under a predecessor trust shall not postpone or suspend the vesting absolute ownership or power of alienation of an interest in that property for a period measured from the date of creation of the predecessor trust extending beyond any life in being at the date of creation of the predecessor trust plus a period of years plus if necessary a reasonable period of gestation and the trustee shall distribute any property then held in the trust i to the beneficiary for whom the trust is named if any otherwise ii per stirpes to the then living descendants of the named beneficiary if any otherwise iii my grandchildren subject_to article otherwise iv the trust estate shall be distributed as provided in sec_4 you have requested the following rulings the property in trusts will not be includible in son’s gross_estate for federal estate_tax purposes son’s proposed exercise of the testamentary powers of appointment in trusts will not subject trusts or the property transferred from trusts to trust pursuant to son’s proposed exercise of the power_of_appointment to the gst tax ruling sec_2033 of the internal_revenue_code provides that a decedent's gross_estate shall include the value of all property to the extent of the decedent's interest at the time of death sec_2041 provides for the inclusion in the gross_estate of a decedent any property with respect to which the decedent possesses at the time of his death a general_power_of_appointment created after date plr-142529-08 sec_2041 provides for the inclusion in the gross_estate of a decedent any property with respect to which the decedent by will exercises a power_of_appointment created after date by creating another power_of_appointment which under the applicable local law can be validly exercised so as to postpone the vesting of any estate or interest in such property or suspend the absolute ownership or power of alienation of such property for a period ascertainable without regard to the date of the creation of the first power sec_2041 provides that the term general_power_of_appointment means a power that is exercisable in favor of the decedent decedent’s estate decedent’s creditors or the creditors of decedent’s estate except that a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent is not deemed a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides that a power_of_appointment is not a general_power_of_appointment if by its terms it is either a exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent’s estate or the creditors of his estate or b expressly not exercisable in favor of the decedent or his creditors or the creditors of decedent’s estate in this case each of the trusts trusts grant son a testamentary_power_of_appointment which may not be exercised in favor of son son’s estate son’s creditors or the creditors of son’s estate therefore son’s testamentary powers of appointment over trusts are not general powers of appointment accordingly based upon the facts presented and representations made we conclude that the exercise by son of the limited powers of appointment will not cause the property transferred to be included in son’s gross_estate under sec_2041 further son as the co-trustee of the trusts has no power to make distributions from trusts to himself accordingly based on the facts submitted and representations made we conclude that the property in trusts will not be includible in son’s gross_estate for federal estate_tax purposes ruling sec_2601 imposes a tax on every generation-skipping_transfer the term generation-skipping_transfer is defined in sec_2611 as a taxable_distribution a taxable_termination or a direct_skip under a of the tax_reform_act_of_1986 act and sec_26_2601-1 of the generation-skipping_transfer gst tax regulations the gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer under a_trust that was irrevocable on date but only to the plr-142529-08 extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added in this case trusts are generation-skipping trusts because they provide for distributions to more than one generation of beneficiaries below the grantor's generation however date and date are prior to date and trusts were irrevocable on date therefore trusts are exempt from the generation-skipping_transfer gst tax under sec_2601 however the rule under sec_26_2601-1 does not apply to a transfer of property pursuant to the exercise release or lapse of a general_power_of_appointment that is treated as a taxable transfer under chapter or chapter the transfer is made by the person holding the power at the time the exercise release or lapse of the power becomes effective and is not considered a transfer under a_trust that was irrevocable on date in this case son’s powers of appointment are testamentary and we concluded under ruling that son’s powers of appointment which are not exercisable in favor of son son’s estate son’s creditors or the creditors of son’s estate are not general powers of appointment under sec_2041 therefore the transfers of property from trusts pursuant to son’s exercise of his powers of appointment are not taxable transfers under chapter the exercise of a limited_power_of_appointment will be treated as a post- date transfer and therefore subject the property to chapter unless the power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise the power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of years plus if necessary a reasonable period of gestation the perpetuities period sec_26_2601-1 this rule is illustrated in example of sec_26_2601-1 in example on date t established an irrevocable_trust as defined in sec_26_2601-1 under the terms of the trust instrument the trustee is required to distribute the entire income annually to t’s child c for life then to t’s grandchild gc for life gc has the power to appoint any or all of the trust assets to trust which is irrevocable_trust as defined in sec_26_2601-1 that was established on date the terms of trust 2’s governing instrument provide that the trustee shall pay income to t’s great grandchild ggc for life upon ggc’s death the remainder is to be paid to ggc’s issue ggc was alive on date when trust was created c died on date on date gc exercised the power_of_appointment the exercise of gc’s power does not subject future transfers from trust to tax under chapter because the exercise of the power in favor of trust does not suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from plr-142529-08 the date of creation of trust extending beyond the life of ggc a beneficiary under trust who was in being at the date of creation of trust plus a period of years the result would be the same if trust had been created after the effective date of chapter in this case son’s testamentary limited_power_of_appointment was created under trusts all of which are irrevocable trusts not subject_to chapter under sec_26_2601-1 therefore the first requirement of sec_26_2601-1 is satisfied the second requirement of sec_26_2601-1 is also satisfied in this case under paragraph dollar_figure of trust any trust created or funded by son’s exercise of the limited powers of appointment under trusts must not postpone or suspend the vesting absolute ownership or power of alienation of an interest in that property for a period measured from the date of creation of trusts extending beyond any life in being at the date of creation of trusts plus a period of years plus if necessary a reasonable period of gestation therefore son’s powers of appointment cannot be exercised in a manner that may postpone or suspend the vesting beyond the perpetuities period in trusts accordingly based on the facts submitted and representations made we conclude that son’s proposed exercise of the limited testamentary powers of appointment in trusts will not subject trusts and the property transferred from trusts to trust pursuant to the exercise to the gst tax the last sentence in example states that the result would be the same if trust had been created after the effective date of chapter in this case trust was created on date a date after the effective date of chapter the conclusion above does not change however we note that trust will have a non-chapter portion the assets transferred from trusts pursuant to son’s exercise of his power_of_appointment and a chapter portion the other assets in trust the inclusion_ratio for the non-chapter portion is deemed to be the inclusion_ratio for the chapter portion of trust is dependent upon whether son allocates his available gst_exemption to those assets in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 specifically we are not opining on whether assets transferred to trust other than those transferred pursuant to son’s exercise of his powers of appointment are includible in son’s gross_estate and whether these assets are exempt from gst tax the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the plr-142529-08 material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 of provides that it may not be used or cited as precedent sincerely _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosure copy of letter 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 b01 plr-135226-15 date date legend x ------------------------------------------- -------------------------------------------------- y -------------------------------------------- -------------------------------- date1 -------------------------- date2 ---------------------------- date3 ---------------------- date4 ---------------------- state ------- dear ---------------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative and supplemental information requesting relief pursuant to sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to elect to treat y as a qualified_subchapter_s_subsidiary qsub under section sec_1361 of the internal_revenue_code the code facts plr-135226-15 according to the information submitted and representations within x was incorporated and elected to be treated as an s_corporation under the laws of state on date y was incorporated under the laws of state on date y elected to be treated as an s_corporation effective date x represents that at all times on and after date x has owned all of the outstanding_stock of y and intended to elect to treat y as a qsub effective date however due to inadvertence x failed to file form_8869 qualified_subchapter_s_subsidiary election law and analysis sec_1361 generally provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is owned by the s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations prescribes the time and manner for making an election to be classified as a qsub sec_1_1361-3 provides that an election may be effective up to two months and days prior to the date the election is filed or not more than months after the election is filed the proper form for making the election is form_8869 qsub election section a provides that an extension of time to make a qsub election may be available under procedures applicable under sec_301_9100-1 and sec_301_9100-3 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the plr-135226-15 commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of days from the date of this letter to elect to treat y as a qsub effective date the election should be made by filing form_8869 with the appropriate service_center and a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion concerning whether x is a valid s_corporation or whether y is eligible to be a qsub this ruling is directed only to the taxpayer requesting it sec_6110 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 mailed to x's authorized representative sincerely david r haglund david r haglund branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c jun - uniform issue list set ep erts legend irax amounta date date date company a companyb dear this is in response to a request you submitted on date as supplemented by correspondence dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 d of the intemal revenue code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested you are years old you had an individual_retirement_arrangement ira ira x you represent that you intended o roll over the which was maintained by company a distribution of amount a from ira x within the 60-day period prescribed by sec_408 a of the code but were unsuccessful your intent was to roll over amount a from ira x to an ira with company b you assert that your failure to accomplish this rollover of amount a was due to an ertor caused by an employee of company b you assert that your intent was to complete a direct roliover of the assets of ira x to an you expiain that you had discussed the rollover of ira established with company amount a with a financial advisor representing company b before the distribution from page ira x and that you had submitted paperwork to effectuate a direct_rollover of the ira x assets however on date company a mailed a distribution check to you the amount of the distribution was amaunt a you document that on date you deposited amount a with company you state that you maintain an ira and non-ira account with company b you represent that amount a was erroneously deposited into a non- jra account by an employee of company b on date you discovered this error on date and contacted your financial advisor representing company b company employee's error was discovered at that time based on the facts and representations you request a ruling that the intemal revenue service waive the 60-day rollover requirement with respect to the distribution of amount a contained in sec_408 d of the code in this instance sec_408 d of the code provides that except as otherwise provided in sec_408 d any amount_paid or distributed out of an ira 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 coda sec_408 d of the code defines and provides the rules applicable to ira_rollovers sec_408 d a of the code provides that sec_408 d 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- the entire ammount 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 tater 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 d sec_408 d b of the code provides that sec_408 d does not apply to any amount described in sec_408 d a i 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 d a i from an ira which was not includible in gross_income because of the application of sec_408 a sec_408 d e of the code provides that the rollover provisions of sec_408 d do not apply to any amount requirad to be distributed under sec_408 a sec_408 d of the code provides that the secretary may waive the 60-day requirement under sec_408 d a and d d of the code where the failure to waive such requirement would be against equity or good conscience including page casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement are eligible for the waiver under sec_408 d i of the code only distributions that occurred after date revproc_2003_16 ilr b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 d i 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 decumentation you submitted is consistent with your assertion that your failure to accomplish a timely rollover was due to an error caused by an employee of company b therefore pursuant to sec_408 d i of the cade the service hereby waives the 60-day rollover requirement with respect to the distribution of amount a less amounts described below from ira x you are granted a period of days from tha issuance of this letter_ruling to contribute amount a less amounts described below into a rollover ira provided all other requirements of sec_408 d of the code except the day requirement are met with respect to such contribution amount a less amounts described below will be considered a rollaver contribution within the meaning of sec_408 d of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 a of the cade made applicable to iras pursuant to sec_408 a no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the cade or regulations which may be applicable thereto this letter expresses no opinion as to whether ira x satisfied the requirements of sec_408 of the code this letter is directad only to the taxpayer who requested it section k of the code provides that it may not be used or cited as precedent ff you wish to inquire about this ruling please address all correspondence to se t ep ra t3 fances v sloan employee_plans enclosures osleted copy of ruling letter notice of intention to disclose


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 intl bo2 plr-135542-10 date date internal_revenue_service number release date index number ------------- -------------------- ----------------------------- ---------------------------------------- in re ty ------- legend partnership x --------------------- ein ---------------- corporation a -------------------------------------- corporation b ------------------------ country --------------------- state ------------- s --- t --- dear ------------- this is in response to a letter dated date requesting certain rulings on behalf of partnership x the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts partnership x is a limited_liability_company formed under the laws of state and treated as a partnership for u s federal tax purposes partnership x has s members t of which are u s persons us members the us members consist of u s individuals and a domestic_corporation collectively non-partnership members that each own less than percent of partnership x and domestic partnerships partnership members that each own more than percent of partnership x taxpayer has represented that notice_2010_41 2010_22_irb_715 does not apply to partnership x’s structure plr-135542-10 partnership x wholly-owns corporation a a limited_liability_company formed under the laws of state that is disregarded as an entity separate from partnership x for u s federal tax purposes corporation a in turn wholly-owns corporation b an entity formed under the laws of country which is treated as a corporation for u s federal tax purposes corporation b will earn income that is expected to be passive_income within the meaning of internal_revenue_code code sec_1297 corporation b qualifies as a controlled_foreign_corporation cfc as defined under code sec_957 because partnership x is a domestic_partnership that wholly owns corporation b for u s federal tax purposes in addition corporation b expects to qualify as a passive_foreign_investment_company pfic without taking into account the application of code sec_1297 as defined under code sec_1297 ruling requested corporation b will not be treated as a pfic with respect to partnership x the non- partnership members or any direct or indirect owner of a partnership member pursuant to code sec_1297 during the portion of partnership x’s holding_period that partnership x is a u s shareholder within the meaning of code sec_951 with respect to corporation b and corporation b is a cfc law code sec_957 defines a cfc as a foreign_corporation with regard to which more than percent of the total combined voting power of all classes of stock entitled to vote or the total value of the stock of the corporation is owned directly indirectly or constructively by u s shareholders code sec_951 defines a u s shareholder for cfc purposes as a u_s_person who owns directly indirectly or constructively percent or more of the total combined voting power of all classes of stock entitled to vote of the foreign_corporation u s shareholder code sec_7701 defines a u_s_person as a u s citizen or resident a domestic_partnership a domestic_corporation and any domestic estate_or_trust code sec_702 provides generally that each partner in a partnership takes into account a distributive_share of the partnership’s income or gain in determining the partner’s income_tax code sec_702 provides that the character of an item_of_income or gain included in a partner’s distributive_share is determined as if such item were realized directly from plr-135542-10 the source from which realized by the partnership or incurred in the same manner as incurred by the partnership code sec_1297 defines a pfic as any foreign_corporation if either at least percent of the corporation’s income for the taxable_year is passive_income or the average percentage of assets held by the corporation during the taxable_year that produce or are held for the production of passive_income is at least percent code sec_1297 defines passive_income for purposes of the pfic income test as income which is of a kind which would be foreign_personal_holding_company_income as defined in code sec_954 subject_to certain exceptions code sec_1298 provides that a foreign_corporation is treated as a pfic with respect to a u s shareholder and the u s shareholder is subject_to the excess_distribution regime if the foreign_corporation qualified as a pfic but not a qualified_electing_fund at any point during the u s shareholder’s holding_period code sec_1297 provides that a corporation shall not be treated with respect to a shareholder as a pfic during the qualified_portion of such shareholder’s holding_period with respect to the stock in such corporation overlap rule code sec_1297 defines qualified_portion to mean the portion of a shareholder’s holding_period which is after date and during which the shareholder is a u s shareholder of the corporation and the corporation is a cfc the legislative_history to code sec_1297 provides that the overlap rule was enacted because of a concern about the unnecessary complexity caused by the application of the subpart_f and pfic regimes to the same shareholders to address this concern the legislative_history to code sec_1297 states that a shareholder that is subject_to current inclusion under the subpart_f rules with respect to stock of a pfic that is also a cfc generally is not subject also to the pfic provisions with respect to the same stock analysis it is expected that corporation b will qualify as a pfic as defined under code sec_1297 partnership x a domestic_partnership is a u_s_person within the meaning of code sec_7701 partnership x is the sole owner of corporation b for u s federal tax purposes and thus is a u s shareholder with respect to corporation b accordingly partnership x will be subject_to the subpart_f rules with respect to corporation b and will not be subject_to the pfic regime with respect to corporation b pursuant to the overlap rule the non-partnership members will take into account their distributive shares of partnership x’s income including any sec_951 inclusion with respect to corporation b the partners in the partnership members will take into plr-135542-10 account their distributive_share of their respective partnership member’s distributive_share of partnership x’s income including any sec_951 inclusion with respect to corporation b ruling based on the information submitted and the representations made we rule as follows corporation b will not be treated as a pfic with respect to partnership x the non- partnership members or the direct or indirect owners of the partnership members pursuant to code sec_1297 during the qualified_portion within the meaning of code sec_1297 of partnership x’s holding_period that partnership x is a u s shareholder of corporation b and corporation b is a cfc taxpayer has represented that notice_2010_41 does not apply to partnership x’s structure in the event a u_s_person does beneficially own an interest in partnership x directly or indirectly through a cfc as described in notice_2010_41 this ruling does not apply to such u_s_person 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_ruling this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling must be attached to any federal_income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely jeffrey mitchell branch chief branch associate chief_counsel international


internal_revenue_service number release date index numbers ------------------------------- -------------------------- -------------------------------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b3 plr-145165-08 date march x --------------------------------------------------------------------------------------------------- ------------------------ legend country ---------------- date -------------------------- dear ---------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 facts x was formed under the laws of country on date x represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes x intended to be classified as a disregarded_entity effective date however due to inadvertence form_8832 entity classification election was not timely filed law sec_301_7701-3 provides in part 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 as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a plr-145165-08 partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than 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 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer plr-145165-08 acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 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 internal_revenue_code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely s curtis g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court clyde franklin craig petitioner v commissioner of internal revenue respondent docket no filed date clyde franklin craig pro_se sandra veliz for respondent memorandum findings_of_fact and opinion jacobs judge respondent determined a dollar_figure deficiency in petitioner's federal_income_tax and additions to tax pursuant to sec_6651 and sec_6654 in the respective amounts of dollar_figure and dollar_figure the issues for decision are whether petitioner failed to report income during the year in issue whether petitioner is liable for a sec_6651 addition_to_tax for failure_to_file a federal_income_tax return and whether petitioner is liable for a sec_6654 addition_to_tax for failure to make estimated_tax payments for all 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 findings_of_fact some of the facts have been stipulated and are found accordingly the stipulation of facts and the attached exhibits are incorporated herein by this reference background clyde franklin craig petitioner resided in seattle washington at the time he filed his petition between and he studied physics and electrical engineering at ucla but did not graduate petitioner has worked in the electronics engineering field petitioner concedes that he did not file a federal_income_tax return petitioner's sources of income in petitioner worked as a television engineer for king broadcasting co kbc a major television broadcast station in the seattle area his duties included maintaining and repairing the station's electronic equipment petitioner received dollar_figure in wages from kbc dollar_figure was withheld for federal_income_tax purposes petitioner had an individual_retirement_account ira at key trust co of the northwest during the year in issue he received a dollar_figure distribution from this ira petitioner did not roll over the distribution into a qualified retirement account petitioner also received dollar_figure in interest_income from seattle telco federal credit_union in notice_of_deficiency respondent found no record of petitioner's having filed a form_1040 for accordingly respondent determined the deficiency and additions to tax set forth in the notice_of_deficiency based upon payor information indicating that petitioner had received unreported wage interest and ira income in issue unreported income opinion respondent's determinations as to petitioner's tax_liability are presumed to be correct petitioner bears the burden of proving the contrary see rule a 503_us_79 290_us_111 sec_61 defines gross_income as all income from whatever source derived included within the definition of gross_income are compensation_for services interest_income and pensions sec_61 petitioner argues that paying income taxes is strictly voluntary we disagree petitioner was required to file a federal_income_tax return and was required to pay taxes see sec_1 a petitioner raised traditional protester arguments this court as well as the court_of_appeals for the ninth circuit where an appeal in this case would lie have disapproved of tax_protester rhetoric and legalistic gibberish see eg 848_f2d_1007 9th cir affg tcmemo_1987_225 784_f2d_1006 9th cir 76_tc_1027 affd 696_f2d_1234 9th cir we hold that petitioner received taxable wage interest and pension income in accordingly we uphold respondent's deficiency determination for such year issue sec_6651 addition_to_tax respondent determined an addition_to_tax pursuant to sec_6651 for petitioner's taxable_year petitioner can avoid this addition_to_tax by proving that his failure_to_file was due to reasonable_cause and not due to willful neglect sec_6651 rule a 469_us_241 38_f3d_440 9th cir reasonable_cause requires a taxpayer to demonstrate that he exercised ordinary business care and prudence and was nevertheless unable to file a return within the prescribed time united_states v boyle supra pincite sec_301_6651-1 proced admin regs willful neglect means a conscious intentional failure_to_file or reckless indifference united_states v boyle supra pincite petitioner was required to file a federal_income_tax return for sec_6012 he failed to do so and presented no evidence to prove that his failure_to_file was due to reasonable_cause and not willful neglect accordingly respondent's determination of the sec_6651 addition_to_tax is sustained issue sec_6654 addition_to_tax respondent also determined an addition_to_tax pursuant to sec_6654 for asserting that petitioner failed to pay estimated_tax where payments of tax either through withholding or by making estimated quarterly tax_payments during the course of the year do not equal the percentage of total liability required under the statute imposition of the sec_6654 addition_to_tax is mandatory unless the taxpayer shows that one of several statutory exceptions applies sec_6654 99_tc_202 91_tc_874 75_tc_1 petitioner bears the burden of proving qualification for such exception see 78_tc_304 although certain amounts were withheld from petitioner's wages petitioner did not make any estimated_tax payments for and introduced no evidence on this issue accordingly we sustain respondent's determination pursuant to sec_6654 for petitioner's taxable_year we have considered all of petitioner's arguments and to the extent not discussed above find them to be without merit to reflect the foregoing decision will be entered for respondent