department of the treasury internal_revenue_service washington d c - may tax_exempt_and_government_entities_division uics legend taxpayer a taxpayer b taxpayer c taxpayer d trust t bank u date date date date date year year year ira x sum sum page sum sum sum sum sum state n dear mr this is in response to the request for letter rulings under sec_401 of the internal_revenue_code submitted on your behalf by your authorized representative as supplemented by correspondence dated and the request for letter rulings is based on the following facts and representations taxpayer a died on date at age while residing in state n as of his date of death taxpayer a was the owner of an individual_retirement_arrangement ira x bank u is the trustee and custodian of ira x ira x had a value of approximately sum as of the date of taxpayer a’s death taxpayer a was divorced as of the date of his death taxpayer a was survived by three children taxpayers b c and d taxpayer b was born in year taxpayer c was born in year and taxpayer d was born in year taxpayer b is the eldest surviving child of taxpayer a taxpayers b c and d were alive as of the date of this ruling_request on date taxpayer a named the trustee s of trust t as the beneficiary ies of his ira x bank u was and remains the trustee of trust t trust t was signed and adopted by taxpayer a on date on date taxpayer a amended and restated trust t in its entirety as of the date of taxpayer a’s death trust t held or was entitled to hold no assets other than ira x trust t in pertinent part provides that assuming taxpayer a was either not survived by his spouse or was not married to her at his death the remaining trust estate page if any was to be distributed by the trustee of trust t in equal shares to taxpayer a’s issue per stirpes paragraph of article ii of trust t provides in relevant part that upon the death of taxpayer a the trustee of trust t shall pay from the principal of the trust estate the expenses of the last illness and the funeral and burial expenses of taxpayer a as well as the probate administration_expenses and estate_taxes to the extent that the probate_estate is insufficient to cover these items as of the date of this ruling_request the trustee of trust t had withdrawn sum from ira x to pay estate and administration_expenses attributable to taxpayer a’s death the trust t trustee also withdrew sum from ira x to pay trust t’s administration_expenses and approximately sum for the payment of estate_taxes additionally as of date the trustee of trust t also withdrew sum from ira x which was then paid to the personal representative of taxpayer a’s estate and which was intended to fully cover any additional probate administration_expenses other than additional federal_estate_taxes withdrew sum from ira x which amount represented the estimated amount of income taxes attributable to withdrawals from ira x after date only trust related expenses may be paid from assets held by trust t specifically the trustee asserts that trust related expenses are trustee fees investment management fees attorney’s fees for services provided to the trustee with regard to estate_taxes your authorized representative asserts that the federal a the personal representative of and all federal and state estate_taxes believed to be due form_706 associated with the estate of taxpayer a was timely filed on date date before were paid on the same date on or about date taxpayer a’s estate filed a claim_for_refund in the amount of sum as of the date of the most recent correspondence associated with the ruling_request the personal representative has received neither the estate_tax_return closing letter from the service nor any correspondence from the service that the form_760 associated with taxpayer a’s estate has been chosen for audit if additional estate_taxes are determined to be due said taxes will be paid from estate assets other than trust t assets ie ira x trust t assets will be used only afier all other estate assets have been depleted in this regard your authorized representative asserts that such payment is required by code sec_6324 pases your authorized representative has asserted on your behalf that after receipt of the service closing letter ira x will be subdivided by means of trustee to trustee transfers into three sub-iras each of the sub-iras will be set up and maintained in the name of taxpayer a one of the sub-iras will be set up to benefit taxpayer b as beneficiary of taxpayer a deceased the second sub-ira will be set up to benefit taxpayer c as beneficiary of taxpayer a deceased and the third sub-ira will be set up to benefit taxpayer d as beneficiary of taxpayer a deceased as of date said subdivision had not occurred your authorized representative has asserted on your behalf that trust t is valid under the laws of state n and that trust t became irrevocable at the death of taxpayer a furthermore your authorized representative has asserted that there will be compliance with the requirements of sec_1_401_a_9_-4 of the final income_tax regulations question and answer-6 based on the above facts and representations you through your authorized representative request the following letter rulings that for purposes of code sec_401 taxpayers b c and d may be considered the sole beneficiaries of taxpayer a’s trust t furthermore taxpayers b c d are the only individuals or entities who need be considered for purposes of determining who is the designated beneficiary’ for purposes of code sec_401 of taxpayer a’s ira x that for purposes of code sec_401 minimum required distributions taxpayer a’s trust t is a see-through trust as that term is defined in the final income_tax regulations and that for code sec_401 purposes taxpayer b’s life expectancy may be used to determine minimum required distributions both from the remainder of ira x to trust t and from the sub-ira to be created in the name of taxpayer a for the benefit of taxpayer c as beneficiary of taxpayer a deceased payments from said sub-ira will be made directly to taxpayer c free of trust t with respect to your ruling requests code sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 a shall apply to the distribution of the entire_interest of an individual for whose benefit the ira trust is maintained page code sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee- i ii will be distributed to such employee not later than the required_beginning_date or will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary code sec_401 provides in summary that a_trust shall not constitute a qualified_trust under this section unless the plan provides that if an employee dies before the distribution of the employee’s interest has begun in accordance with subparagraph a ii the entire_interest of the employee will be distributed within years after the death of the employee code sec_401 provides in general that if any portion of the interest of a deceased plan participant ira holder is payable to or for the benefit of a designated_beneficiary such portion will be distributed beginning not later than year after the date of the deceased’s death or a later date as prescribed by the secretary under regulations in accordance with regulations over the life of the designated_beneficiary or a period not extending beyond the life expectancy of the beneficiary sec_401 of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee ira holder attains age with respect to your ruling requests final income_tax regulations under code sec_401 and sec_408 were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite lr b date the preamble to the final regulations in relevant part provide that the regulations apply for determining required minimum distributions for calendar years beginning after date sec_1_401_a_9_-3 of the final regulations q a-1 describes in relevant part the life expectancy exception to the 5-year rule sec_1_401_a_9_-3 of the final regulations q a-3 a provides in general that with respect to the life expectancy exception to the 5-year rule described in code sec_401 and in a-1 distributions are required to begin to a non-spouse page beneficiary on or before the end of the calendar_year immediately following the calendar_year in which the employee died q a-3 a adds that this rule also applies to the distribution of the entire remaining benefit if another individual is a designated_beneficiary in addition to the employee’s ira holder’s surviving_spouse sec_1_401_a_9_-5 of the final regulations q a-5 b provides in general that if an employee dies before his required_beginning_date in order to satisfy the requirements of code sec_401 or iv and the life_expectancy_rule described in a-1 of sec_1_401_a_9_-3 the applicable distribution period for distribution calendar years after the distribution calendar_year containing the employee’s date of death is determined in accordance with paragraph c of this a-5 sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to a non-spouse beneficiary the applicable distribution period measured by the beneficiary’s remaining life expectancy is determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar_year immediately following the calendar_year of the employee’s death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee’s death sec_1_401_a_9_-4 of the final regulations q a-4 a provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s or ira holder’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1_401_a_9_-4 of the final regulations q a-4 a further provides in relevant part that any person who was a beneficiary as of the date of the employee’s death but who is not a beneficiary as of that september eg because the person receives the entire benefit to which he is entitled before that september is not taken into account in determining the employee's designated_beneficiary for purposes of determining the distribution period after the employee’s death the rule in sec_1_401_a_9_-4 of the final regulations q a-4 a applies to amounts distributed from either a qualified_plan or an ira which pass through a valid see-through trust sec_1_401_a_9_-5 of the final regulations q a-7 a provides that except as otherwise provided in paragraph c of this a-7 not pertinent to this ruling_request if more than one individual is designated as a beneficiary with respect to an employee as of the applicable_date the designated_beneficiary with the shortest life page expectancy will be the designated_beneficiary for purposes of determining the applicable distribution period sec_1_401_a_9_-4 of the final regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary however q a-5 of sec_1_401_a_9_-4 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact that there is no corpus the trust is irrevocable or the trust contains language to the effect it becomes irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable within the meaning of a-1 of this section from the trust instrument the documentation described in a-6 of this section has been provided to the plan_administrator sec_1_401_a_9_-4 of the final regulations q a-6 b provides generally with respect to required minimum distributions after the death of the employee that documentation described therein must be provided by the trustee of the trust_beneficiary to the plan_administrator by october of the calendar_year following the calendar_year in which the employee died sec_1_401_a_9_-8 of the final regulations q a-2 a provides the separate_account rules with respect to defined contribution plans a separate_account is an account under which the beneficiary or beneficiaries differ from the beneficiary or beneficiaries of the other accounts in general if separate_accounts are set up for years subsequent to the calendar_year containing the date on which the separate_accounts were established or the date of death if later a separate_account under a plan is not aggregated with the other separate_accounts under the plan in order to determine whether the distributions from such separate_account satisfy the requirements of code sec_401 instead the rules in code sec_401 apply separately to each separate_account under the plan sec_1_401_a_9_-8 of the final regulations q a-3 provides that a separate_account is a separate portion of an employee’s benefit which reflects the separate interest pages of an employee’s beneficiary under the plan as of the employee’s death for which separate_accounting is maintained the separate_accounting must allocate all post-death investment gains and losses contributions and forfeitures for the period prior to the establishment of the separate_accounts on a pro-rata basis in a consistent and reasonable manner among the separate_accounts sec_1_401_a_9_-4 of the final regulations q a-5 c provides in relevant part that the separate_account rules under a-2 of sec_1_401_a_9_-8 are not available to beneficiaries of a_trust with respect to the trust’s interest in the employee’s benefit sec_1_401_a_9_-9 of the final regulations provides the life expectancy and distribution period tables used to determine minimum required distributions the uniform lifetime table is the table to be used to determine the life expectancy of an individual with respect to your ruling requests as noted above trust t is valid under the laws of state n trust t became irrevocable as of the date of death of taxpayer a the beneficiaries of trust t are identifiable from the language of trust t and the relevant documentation was provided to the custodians of taxpayer a’s ira x by the date required under the final regulations as noted above if distributions are made to a_trust even if the trust is a see- through trust within the meaning of q a-5 of sec_1_401_a_9_-4 of the final regulations the separate_account rules of a-2 of sec_1_401_a_9_-8 of the final regulations are not available to the beneficiaries of the trust thus in general each beneficiary of a_trust must receive minimum required distributions over the life expectancy of the eldest beneficiary we note in this case that after the death of taxpayer a ira x will be subdivided into three equal iras including one set up for the benefit of taxpayer c as the beneficiary of taxpayer a deceased the ira that will be set up to benefit taxpayer c will be designed to pay distributions directly to taxpayer c free of trust t said design will be accomplished pursuant to the terms of trust t although neither the code nor the final regulations promulgated under code sec_401 preclude the posthumous division of ira x into three iras the final regulations do preclude separate_account treatment for code sec_401 purposes where amounts pass through a_trust in this case initially the ira x amounts pass through trust t thus even though ira x will be divided into three iras which will be set up and designed to pay beneficiaries free of trust t the life expectancy of the eldest beneficiary of all of the iras or in other words the beneficiary with the shortest life expectancy including the trust t beneficiaries of ira x is the life expectancy to be page used to determine the code sec_401 payout period for distributions from the ira set up and maintained to benefit taxpayer c with further respect to your ruling requests the issues to be resolved are whether under the final regulations only taxpayers b c and d must be considered in determining whose life expectancy is the shortest and as a result who is the designated_beneficiary for purposes of determining required_distribution from ira x and from the three iras including the ira set up to benefit taxpayer c created after the death of taxpayer a and taxes associated with taxpayer a’s death and with his estate were withdrawn from ira x no later than date additional_amounts will be used to pay estate_taxes only if there is a determination that additional estate_taxes are due and there are no remaining assets of the estate to pay the taxes in this regard we note that amounts sufficient to pay then known expenses after careful consideration of the facts in this case we believe that it is appropriate to treat said fact pattern as coming within sec_1_401_a_9_-4 of the final regulations q a-4 a because on date the only remaining beneficiaries of trust t were taxpayers b c and d only the life expectancies of taxpayers b c and d must be considered to determine which is the life expectancy that must be used to calculate minimum required distributions from ira x to trust t and the beneficiaries thereof the use of trust t assets to pay expenses associated with the administration of trust t in effect expenses associated with the administration of the trust t assets for the benefit of taxpayers b c and d or the possibility under these facts that trust t assets may be required to be used to pay any estate_taxes due in addition to the amount reported on form_706 does not change this conclusion as noted above the final issue raised in this ruling_request is whether the conclusion above continues to apply where ira_distributions are made directly to a beneficiary of trust t outside of the trust when such direct distribution is authorized under the terms of the trust in this case trust t was the named beneficiary of taxpayer a’s ira x pursuant to the terms of trust t ira x will be subdivided and distributions from the three sub- iras created out of taxpayer a’s ira x will to made directly to the beneficiaries thereof specifically taxpayers b c and d thus of taxpayer a’s ira x will be paid directly to taxpayer c free of and not through trust t in the absence of the subdivision of ira x into three sub-iras distributions from ira x would continue to be made to trust t a valid conduit see-through trust over the life expectancy of taxpayer b upon distribution to trust t ira x amounts would then be used for the benefit of taxpayers b c and d beneficiaries of said trust t page after subdivision of era x into three sub-iras one of which is for the benefit of taxpayer c distributions from the sub-iras will be made directly to taxpayers b c and d the same individuals who were the beneficiaries of ira x and who were receiving amounts due them through trust t a valid conduit see-through trust over the same life expectancy that was used to determine the amount of distributions to trust t ie the life expectancy of taxpayer b thus based on the specific facts and representations surrounding this ruling_request we conclude as follows that for purposes of code sec_401 taxpayers b c and d may be considered the sole beneficiaries of taxpayer a’s trust t furthermore taxpayers b c d are the only individuals or entities who need be considered for purposes of determining who is the designated_beneficiary for purposes of code sec_401 of taxpayer a’s ira x that for purposes of code sec_401 trust t is a qualified_beneficiary a valid see-through trust within the meaning of sec_1_401_a_9_-4 of the regulations question and answer-5 and that for code sec_401 purposes taxpayer b’s life expectancy may be used to determine minimum required distributions both from the remainder of ira x and from the sub-ira to be created in the name of taxpayer a for the benefit of taxpayer c as beneficiary of taxpayer a deceased taxpayer c free of trust t payments from said sub-ira will be made directly to this ruling letter is based on the assumption that ira x and the ira created after the death of taxpayer a for the benefit of taxpayer c as beneficiary thereof either have met are meeting or will meet the requirements of code sec_408 at all times relevant thereto it also assumes that trust t is valid under the laws of state n as represented pursuant to a power_of_attorney on file with this office the original of this letter_ruling is being sent to your authorized representative page this letter is directed-only to the taxpayer that requested it and is based solely on the representations made with respect thereto sec_6110 of the code provides that it may not be used or cited as precedent any questions regarding this letter_ruling should be addressed to dc whose phone number is sincerely yours aum l dlen frances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


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 ita plr-125773-12 date december re request for extension of time to make the election under sec_169 and the election provided in sec_3 b of revproc_2011_26 p -------------------------------------------------- sec_1 ------------------------------------------------------------------ sec_2 ------------------------------------------------------------------- sec_3 ------------------------------------------------------------------ sec_4 ---------------------------------------------------------------- sec_5 ------------------------------------------------------------------ s6 --------------------------------------------------------------------------------- s7 ----------------------------------------------------------------------------- s8 ---------------------------------------------------------------------------------------- s9 --------------------------------------------------------------- s10 ---------------------------------------------------------------------------------------- sec_11 -------------------------------------------------------------------------------------- sec_12 --------------------------------------------------------- s13 ------------------------------------------------------------------------------- s14 --------------------------------------------------------------------- sec_15 ------------------------------------------------------------------- a --------------------------- date1 --------------------------- date2 ---------------------------- year1 ------- year2 ------- year3 ------- state1 ------- state2 ------------------- dear ----------------- plr-125773-12 this letter responds to a letter dated date submitted by p on behalf of sec_1 requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_169 of the internal_revenue_code to amortize certain pollution_control_facilities placed_in_service in the taxable_year ended date1 and by p on behalf of sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election provided in sec_3 b of revproc_2011_26 2011_16_irb_664 to deduct the 100-percent additional first year depreciation under sec_168 for certain components of certain larger self-constructed properties placed_in_service in the taxable_year ended date1 the year1 taxable_year facts p represents that the facts are as follows p is the parent and holding_company of an affiliated_group_of_corporations which includes sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 the companies are engaged in energy-related businesses the affiliated_group_of_corporations files consolidated federal_income_tax returns on a calendar-year end basis the consolidated federal_income_tax return for the taxable_year ended date1 was timely filed on date2 and was prepared by the tax staff of sec_5 which performs all tax functions for p and its subsidiaries s9 wholly owns sec_1 s9 provides energy related products and services to wholesale and retail electric customers sec_1 owns and operates fossil coal and hydroelectric_generating_facilities located primarily in state1 and state2 and sec_1 sells its entire electric output to s9 pursuant to an intercompany power sales agreement one of the fossil plants that sec_1 owns and operates is the a different units of the a went into service in different years but everything at the a was originally in operation prior to the end of year2 subsequent improvements replacements of more than percent of adjusted_basis resulted in a new placed_in_service_date after year3 during year1 sec_1 placed_in_service certain pollution_control_equipment and related property at the a for purposes of sec_169 all of the pollution_control_equipment was placed_in_service in year1 equipment for different pollution control units went into service in different months during year1 and the units began to be amortized under sec_169 the month following the month that the unit was placed_in_service sec_1 represents that it will claim 84-month amortization on the pollution_control_equipment that is the subject of this letter_ruling request sec_1 has received the required state certification for the pollution_control_equipment at this time sec_1 is not in receipt of a copy of the federal certification plr-125773-12 for sec_1 p intended to make an election to deduct amortization under sec_169 for the a on its timely filed consolidated federal_income_tax return for the taxable_year ended date1 on such return p claimed the sec_169 amortization deduction but p did not identify the need to attach an election statement to the return for sec_1 p was otherwise unaware of the necessity to file an election statement to properly claim the sec_169 deduction for sec_1 p’s failure to attach the sec_169 election statement for sec_1 as required by the regulations was simply an oversight on p’s timely filed year1 consolidated federal_income_tax return sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 claimed i the 100-percent additional first year depreciation under sec_168 for the components that are described in sec_3 b of revproc_2011_26 and ii the 50-percent additional first year depreciation under sec_168 for the corresponding larger self- constructed properties that are described in sec_3 b of revproc_2011_26 however p inadvertently failed to attach the election statement required by sec_3 b of revproc_2011_26 with respect to the components to the year1 consolidated federal_income_tax return for sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 sec_1 did not claim the 100-percent additional first year depreciation for the a on p’s timely filed year1 consolidated federal_income_tax return rulings requested sec_1 requests an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_169 to amortize certified pollution_control_facilities with respect to the a that are placed_in_service in the taxable_year ended date1 and sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 request an extension of time pursuant to sec_301_9100-3 to make the election provided in sec_3 b of revproc_2011_26 to deduct the 100-percent additional first year depreciation under sec_168 for certain components of certain larger self-constructed properties placed_in_service in the taxable_year ended date1 law and analysis sec_169 allows a taxpayer to elect to take a deduction for the amortization of the amortizable_basis of any certified_pollution_control_facility as defined in sec_169 based on a period of months the 60-month period shall begin as to any pollution_control_facility at the election of the taxpayer with the month following the month in which such facility was completed or acquired or with the succeeding taxable_year under sec_169 the taxpayer makes the election to take the amortization deduction and to begin the 60-month period with the month following the month in which plr-125773-12 the facility is completed or acquired or with the taxable_year succeeding the taxable_year in which such facility is completed or acquired by filing with the secretary in such manner in such form and within such time as the secretary may by regulations prescribe a statement of such election sec_169 defines a certified_pollution_control_facility as a new_identifiable_treatment_facility which is used in connection with a plant or other_property in operation before date to abate or control water or atmospheric pollution or contamination by removing altering disposing storing or preventing the creation or emission of pollutants contaminants wastes or heat additionally under sec_169 the state_certifying_authority having jurisdiction with respect to such facility has certified the facility to the federal_certifying_authority as having been constructed reconstructed erected or acquired in conformity with the state program or requirements for abatement or control of water or atmospheric pollution or contamination similarly under sec_169 the federal_certifying_authority has certified the facility to the secretary as being in compliance with the applicable regulations of federal agencies and as being in furtherance of the general policy of the united_states for cooperation with the states in the prevention and abatement of water pollution under the federal water pollution control act as amended u s c et seq or in the prevention and abatement of atmospheric pollution and contamination under the clean air act as amended u s c et seq finally under sec_169 the facility does not significantly increase the output or capacity extend the useful_life or reduce the total operating costs of such plant or other_property or any unit therof or significantly alter the nature of the manufacturing or production process or facility under sec_169 for purposes of sec_169 a new_identifiable_treatment_facility includes only tangible_property not including a building and its structural_components other than a building which is exclusively a treatment facility which is of a character subject_to the allowance for depreciation provided in sec_167 which is identifiable as a treatment facility additionally the taxpayer must complete the construction reconstruction or erection of this property after date or taxpayer must acquire this property after date if the original_use of the property commences with the taxpayer and commences after such date in applying this section in the case of property the taxpayer constructs reconstructs or erects after date there shall be taken into account only that portion of the basis properly attributable to construction reconstruction or erection after date plr-125773-12 under sec_169 in the case of any facility described in sec_169 solely by reason of sec_169 sec_169 shall be applied by substituting date for date each place it appears therein under sec_169 in the case of any atmospheric pollution_control_facility which is placed_in_service after date and used in connection with an electric generation plant or other_property which is primarily coal fired sec_169 shall be applied without regard to the phrase in operation before date under sec_169 in the case of a facility placed_in_service in connection with a plant or other_property placed in operation after date this section shall be applied by substituting for each place it appears in sec_169 and sec_169 under sec_1_169-4 of the income_tax regulations a taxpayer making the election under sec_169 shall make the election by attaching a statement of such election to its return for the taxable_year in which falls the first month of the month amortization so elected such statement must include the information specified in sec_1_169-4 through ix specifically sec_1_169-4 requires in part that if the facility has not been certified by the federal_certifying_authority the statement of election must include a statement that application has been made to the proper state_certifying_authority together with a copy of such application and a copy of the application filed or to be filed with the federal_certifying_authority sec_1_169-3 provides in part that the amortizable_basis of a certified_pollution_control_facility for the purpose of computing the amortization deduction under sec_169 is the adjusted_basis of the facility for purposes of determining gain see part ii sec_1011 and following subchapter_o chapter of the code in conjunction with paragraphs b c and d of sec_1_169-3 sec_1_169-3 provides in part that before computing the amortization deduction allowable under sec_169 the adjusted_basis for purposes of determining gain for a facility that is placed_in_service by a taxpayer after date and that is qualified_property under sec_168 or sec_1_168_k_-1 or 50-percent bonus_depreciation property under sec_168 or sec_1_168_k_-1 must be reduced by the amount of the additional first year depreciation deduction allowed_or_allowable whichever is greater under sec_168 for the facility sec_168 provides that in the case of qualified_property acquired by the taxpayer under rules similar to the rules of sec_168 and iii after date and before date and which is placed_in_service by the taxpayer before date date in the case of property described in sec_168 or c a 100-percent additional first year depreciation deduction plr-125773-12 for the taxable_year in which such qualified_property is placed_in_service by the taxpayer is allowable section dollar_figure of revproc_2011_26 provides that depreciable_property is eligible for the 100-percent additional first year depreciation deduction if the property is qualified_property as defined in sec_168 and also meets the additional requirements in section dollar_figure of revproc_2011_26 further it provides that for purposes of determining whether depreciable_property is qualified_property rules similar to the rules in sec_1_168_k_-1 for qualified_property or for 30-percent additional first year depreciation deduction apply sec_3 of revproc_2011_26 provides that for purposes of sec_168 qualified_property is eligible for the 100-percent additional first year depreciation deduction if the property meets all of the following requirements in the first taxable_year in which the property is subject_to depreciation by the taxpayer whether or not depreciation_deductions for that property are allowable a the taxpayer acquires the qualified_property after date and before date before date in the case of qualified_property described in sec_168 or c solely for purposes of sec_168 and sec_3 a of revproc_2011_26 a taxpayer acquires the qualified_property when the taxpayer pays or incurs the cost of the property qualified_property that a taxpayer manufactures constructs or produces as defined under sec_1 k - b iii a and modified by sec_3 a of revproc_2011_26 solely for purposes of sec_168 for use in its trade_or_business or for its production_of_income is acquired by the taxpayer for purposes of sec_168 and sec_3 a of revproc_2011_26 when the taxpayer begins constructing manufacturing or producing that property as determined under sec_1_168_k_-1 b the taxpayer places the qualified_property in service after date and before date before date in the case of qualified_property described in sec_168 or c c the original_use of the qualified_property commences with the taxpayer after date sec_3 a of revproc_2011_26 provides in relevant part that if a taxpayer manufactures constructs or produces qualified_property for use by the taxpayer in its trade_or_business or for its production_of_income rules similar to the self- constructed property rules in sec_1_168_k_-1 apply for determining whether this property meets the acquisition requirement of sec_3 a of revproc_2011_26 plr-125773-12 sec_3 b of revproc_2011_26 however provides a limited exception to sec_1_168_k_-1 and for certain components of a larger self- constructed property solely for purposes of sec_168 and sec_3 a of revproc_2011_26 if before date a taxpayer begins the manufacture construction or production of the larger self-constructed property that is qualified_property for use in its trade_or_business or for its production_of_income but this larger self-constructed property meets the requirements of sec_3 b and c of revproc_2011_26 the taxpayer may elect to treat any acquired or self-constructed component of that larger self-constructed property as being eligible for the 100-percent additional first year depreciation deduction if the component is qualified_property and is acquired or self-constructed by the taxpayer after date and before date before date in the case of qualified_property described in sec_168 or c the taxpayer may make this election for one or more components that are described in sec_3 b of revproc_2011_26 the taxpayer must make the election in sec_3 b of revproc_2011_26 by the due_date including extensions of the federal tax_return for the taxpayer’s taxable_year in which the larger self-constructed property is placed_in_service by the taxpayer and by attaching a statement to that return indicating that the taxpayer is making the election provided in sec_3 b of revproc_2011_26 and whether the taxpayer is making the election for all or some of the components described in sec_3 b of revproc_2011_26 under sec_301_9100-1 the commissioner of internal revenue has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly sec_1 is granted calendar days from the date of this letter to make the election under sec_169 for the certified pollution_control_facilities with respect to the a that are placed_in_service by sec_1 in the taxable_year ended date1 this election must be made by p filing plr-125773-12 an amended consolidated federal tax_return for the taxable_year in which falls the first month of the 84-month amortization period elected by sec_1 the election must comply with the requirements of sec_1_169-4 including the information required by sec_1_169-4 through ix further sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 are granted calendar days from the date of this letter to make the election provided in sec_3 b of revproc_2011_26 to deduct the 100-percent additional first year depreciation under sec_168 for components i that are described in sec_3 b of revproc_2011_26 of larger self-constructed properties that are described in sec_3 b of revproc_2011_26 and ii that are placed_in_service by respectively sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 in the taxable_year ended date1 this election must be made by p filing an amended consolidated federal tax_return for that taxable_year with a statement indicating that sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 and sec_15 are making the election provided in sec_3 b of revproc_2011_26 for the taxable_year ended date1 and indicating whether each such company is making this election for all or only for some of the components described in sec_3 b of revproc_2011_26 if the period of limitations on assessment under sec_6501 for the taxable_year in which the sec_169 election with respect to the a should have been made or for any taxable_year that would have been affected by such election had it been timely made will expire before p has filed the certifications from the federal_certifying_authority with the appropriate internal_revenue_service official in the operating division that has examination jurisdiction over p’s federal tax returns p must consent under sec_6501 to an extension of the period of limitations on assessment for such taxable years except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code specifically no opinion is expressed or implied on whether the facilities subject_to this letter_ruling are certified pollution_control_facilities as defined in sec_169 or whether the facilities subject_to this letter_ruling qualify for or month amortization periods further no opinion is expressed or implied on whether any item of depreciable_property placed_in_service by sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 or sec_15 during the taxable_year ended date1 is qualified_property as defined in sec_168 and sec_1_168_k_-1 or is eligible for the 100-percent additional first year depreciation deduction or whether any component or larger self-constructed property placed_in_service by sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 sec_12 s13 s14 or sec_15 in the taxable_year ended date1 is described in sec_3 b of revproc_2011_26 plr-125773-12 in accordance with the power_of_attorney we are sending a copy of this letter_ruling to p’s authorized representatives we are also sending a copy of this letter_ruling to the appropriate operating division director this letter_ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely kathleen reed kathleen reed branch chief branch office of associate chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court bradley w wignall petitioner v commissioner of internal revenue respondent docket no filed date gary p compa and douglas chiapuzio for petitioner nhi t luu and kimberly t packer for respondent memorandum opinion kroupa judge respondent determined a dollar_figure deficiency in and a dollar_figure accuracy-related_penalty under sec_6662 with respect to petitioner’ sec_1 all monetary amounts are rounded to the nearest dollar all section references are to the internal_revenue_code in effect for and all rule references are to the tax_court rules_of_practice and procedure continued federal_income_tax for we must decide two issues the first issue is whether petitioner is entitled to deduct support payments he made to his former spouse as alimony we hold that he is the second issue is whether petitioner is liable for an accuracy-related_penalty we hold that he is not background the parties submitted this case fully stipulated pursuant to rule and the facts are so found the stipulation of facts and its accompanying exhibits are incorporated by this reference petitioner resided in oregon when he filed the petition petitioner married marci lee wignall ms wignall in and the couple had three children the couple’s marriage ended in an oregon circuit_court entered a stipulated general judgment of marital dissolution judgment the judgment required petitioner to pay ms wignall spousal support of dollar_figure per month support provision from date through date payment term the support provision did not address whether petitioner had to continue to make payments if ms wignall died before the payment term ended continued unless otherwise indicated petitioner paid dollar_figure in spousal support support payments in petitioner filed an individual_income_tax_return for and claimed an alimony deduction for the support payments respondent issued petitioner a deficiency_notice that disallowed the claimed alimony deduction and determined an accuracy- related penalty petitioner timely filed a petition challenging respondent’s determinations discussion this is another instance where we are required to determine whether the amount a spouse paid to the former spouse qualifies as alimony we must decide whether the support payments meet the definition of alimony under sec_71 and sec_215 we begin with the alimony deduction a deduction from gross_income is allowed for alimony payments to the extent such payments are includible in the gross_income of the recipient spouse under sec_71 sec_215 and b whether a payment constitutes alimony within the meaning of sec_71 and the taxpayer generally bears the burden of proving the commissioner’s determinations are erroneous rule a the burden_of_proof may shift to the commissioner if the taxpayer satisfies certain conditions sec_7491 resolution of all factual issues here is based on a preponderance_of_the_evidence therefore we need not consider which party has the burden_of_proof see 124_tc_95 a is determined by reference to sec_71 a payment that does not meet the definition is deemed a disguised property division neither taxable to the payee nor deductible by the payor 541_f3d_973 9th cir aff’g tcmemo_2006_105 the payor must have no liability to continue payments after the payee’s death termination requirement for a payment to be deductible as alimony sec_71 we therefore must decide whether petitioner would have been obligated to continue making the support payments after ms wignall’s death we apply a three-step approach to decide whether a payment satisfies the termination requirement see johanson v commissioner f 3d pincite the first step is to evaluate whether the divorce decree provides that the payments terminate upon the payee’s death id pincite if there is no such provision then sec_71 has three other requirements first the payment must be received by a spouse under_a_divorce_or_separation_instrument sec_71 second the divorce_or_separation_instrument must not designate the payment as not includible in gross_income or not allowable as a deduction under sec_215 sec_71 third the payee and the payor must not be members of the same household when the payment is made sec_71 respondent concedes that these requirements have been met an appeal in this case would lie to the court_of_appeals for the ninth circuit absent stipulation to the contrary and accordingly we follow the law of that circuit see 54_tc_742 aff’d 445_f2d_985 10th cir the court looks to whether the payments would terminate at the payee’s death by operation of state law id and if state law is ambiguous the court will look solely to the divorce decree to determine whether the payments would terminate at the payee’s death id petitioner and respondent agree that the judgment did not expressly terminate petitioner’s obligation to continue payments if ms wignall died accordingly we look to oregon law we now consider whether a spousal support obligation terminates by operation of oregon law we consider both relevant statutes and common_law in deciding this question see eg delong v commissioner tcmemo_2013_70 the parties agree that oregon statutes do not address this issue and we concur see eg or rev stat sec_107 d thus we consider whether oregon common_law establishes that the obligation to pay spousal support terminates upon the death of the payee spouse petitioner argues that this proposition is unambiguously established see prime v prime p 2d or the oregon supreme court in prime stated that t he right to receive alimony and the corresponding duty to pay it are generally considered to have terminated on the death of either of the two parties at least where no statute to the contrary exists and the judgment or decree is silent on the subject id pincite citing c j s divorce p sec 240-b petitioner interprets this as a statement of oregon law respondent on the other hand suggests this is a statement of multijurisdictional law and merely dicta respondent suggests the court included a statement of multijurisdictional law because the issue decided in prime according to respondent was whether the payee’s right to receive alimony survives the payor’s death respondent further contends that prime did not decide whether the obligation to pay support terminated upon the payee’s death thus respondent contends that oregon courts have not decided this issue we disagree with respondent on appeal the legal issue the oregon supreme court addressed in prime was whether a court may modify the equitable portion of a dissolution agreement that also incorporated contractual elements id pincite thus the issue in prime v prime p 2d or former spouses entered into a court-approved dissolution agreement with property settlement and alimony provisions the spouses had agreed however that the payee’s right to support survived the payor’s death id pincite thereafter the payor husband passed away and the payee wife sought a declaratory_judgment against the former husband’s estate id pincite the estate sought to modify the payment obligation under equitable principles id pincite if the support was in the nature of a property settlement then the agreement could not be modified because it would be governed by contract law id the continued resolved in prime was not as respondent suggests whether the right to alimony terminates upon the payor’s death that principle was already established under oregon law the court ultimately held that the equitable component of a decree could be modified and did terminate the obligation under the relevant equitable considerations id pincite the court in reaching that conclusion stated the rule under oregon law a complete reading of prime reveals that the court considered the termination issue to be already resolved with respect to the death of both the payor and the payee we conclude that the oregon supreme court has stated oregon law oregon courts have also interpreted prime as a statement of oregon law on the issue see in re marriage of quenzer p 2d or ct app in re marriage of carrier p 2d or ct app kemp v dep’t of revenue wl or t c date and there is no indication that any oregon court has adopted a different rule continued agreement’s support provision however was in the nature of alimony the court modified the agreement under equitable principles to relieve the estate of the obligation id pincite the court in reaching that conclusion noted the obligation to pay would have ended with the husband’s passing if the agreement had been silent this was significant as the agreement called for alimony to survive the payor’s death in contrast to the default rule see id pincite in other words the obligation to pay and the corresponding right to receive alimony terminated upon the death of either spouse under oregon law id respondent emphasizes that the court_of_appeals for the ninth circuit has indicated that oregon law is ambiguous on this point see 45_fedappx_700 9th cir in fithian the court_of_appeals concluded that oregon common_law did not directly establish the termination requirement id the court_of_appeals however did not select fithian for publication thus it is an unpublished disposition predating date and not to be cited as precedent see 9th cir r a c thus we conclude that fithian is not controlling and the issue remains unresolved in the ninth circuit we therefore hold that the obligation to pay support terminates upon the payee’s death under oregon common_law thus petitioner met the termination requirement under sec_71 petitioner is entitled to deduct the support payments for as alimony and did not understate his tax we note that the oregon tax_court noted the tension regarding the termination requirement between decisions by oregon courts and a decision by the court_of_appeals for the ninth circuit see linder v dep’t of rev or tax n comparing kemp with fithian the court in linder did not analyze the issue however and we disagree that the law is ambiguous for the reasons stated further we are unaware of any other cases published or unpublished that conclude the termination requirement is ambiguous under oregon law because we reject respondent’s disallowance of the alimony deduction for the support payments there is no underpayment for and petitioner is therefore not liable for the accuracy-related_penalty we have considered all the arguments of the parties and to the extent we have not addressed them we find them to be irrelevant moot or meritless to reflect the foregoing decision will be entered for petitioner


internal_revenue_service number release date index number ---------------------------------- ---------------------------------------- ----------------------------- -------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no -------------- telephone number ---------------------- refer reply to cc psi plr-139478-12 date november legend x --------------------------------------------------- ----------------------------------------- a date date date date ---------------------------------- ------- -------------------------- -------------------- -------------------- trust a --------------------------------------------------- --------------------------------------------------------------- trust b ---------------------------------------------------- ------------------------------------- trust -------------------------------------------------- ----------------------------------------- trust --------------------------------------------------- ----------------------------------- trust ------------------------------------ --------------------------------------------------- trust ---------------------------------------- ------------------------ state -------------- dear ---------------- this letter responds to your letter submitted on behalf of x by x’s representative dated date requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was established under the law of state on date x elected to be an s_corporation for federal tax purposes effective date on date a transferred shares of x to trust a and trust b both trusts were eligible s_corporation shareholders on date trust a terminated and distributed the shares of x to trust trust trust and trust with the intent that esbt elections be filed to for each trust however the trustees of trust trust trust and trust failed to make the esbt elections x represents that trust trust trust and trust are eligible to be esbts as of date x represents that the failure_to_file the esbt elections resulting in the termination of x’s election to be an s_corporation was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x and its shareholders agree to make any adjustments and amended returns required by the secretary consistent with the treatment of x as an s_corporation law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for purposes of sec_1362 an esbt may be an s_corporation shareholder sec_1361 defines an esbt sec_1361 provides that except as provided in sec_1362 the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate or iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 of the income_tax regulations provides that the trustee of an esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 sec_1_1361-1 provides that the trustee of an esbt must file the esbt election within the time requirements prescribed in sec_1_1361-1 for filing a qsst election generally within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s election terminated on date because of the failure to timely file esbt elections for trust trust trust and trust we further conclude that the termination of x’s s election was inadvertent within the meaning of sec_1362 therefore x will be treated as an s_corporation effective date and thereafter provided x’s s_corporation_election is otherwise valid and not otherwise terminated under sec_1362 this ruling is contingent upon the filing of elections within days of the date of this letter to treat trust trust trust and trust as esbts effective date with the appropriate service_center a copy of this letter should be attached to each esbt election x and its shareholders must also file any necessary original or amended returns consistent with the relief granted within days of the date of this letter except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the above-described facts under any other provision of the code including whether x was otherwise a valid s_corporation or whether trust trust trust and trust are otherwise valid esbts this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your taxpayer_representative sincerely david r haglund david r haglund branch chief branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


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 b03 plr-106567-11 date august x --------------------------------------------------------------------------------------------------- ----------------------- legend country ---------- date ------------------ dear -------------- this letter responds to a letter dated date submitted on behalf of x by its authorized representative requesting that x be granted 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 plr-106567-11 either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 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 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 plr-106567-11 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 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 this ruling is contingent on the owner of x filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief being effective date to the extent appropriate these returns must include but are not limited to forms information_return of u s persons with respect to foreign disregarded entities such that these forms reflect the consequences of the relief granted in this letter 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 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 plr-106567-11 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 associate chief_counsel passthroughs special industries by _____ s _________________ mary beth carchia senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court william h johnston and nancy s johnston petitioners v commissioner of internal revenue respondent docket no filed date william h johnston and nancy s johnston pro sese david b mora for respondent memorandum findings_of_fact and opinion colvin judge by separate notices of deficiency respondent determined deficiencies in each petitioner’s federal income taxes in the amounts of dollar_figure for dollar_figure for and dollar_figure for respondent also determined that each respondent determined that under texas community continued petitioner is liable for additions to tax for failure_to_file under sec_6651 of dollar_figure for and dollar_figure for and for failure to pay estimated_tax under sec_6654 of dollar_figure for for the addition_to_tax for failure_to_file under sec_6651 for respondent determined that nancy s johnston is liable for dollar_figure and that william h johnston is liable for dollar_figure the issues for decision are whether petitioners each have deficiencies in income_tax in the amounts respondent determined for and we hold that they do whether petitioners are each liable for additions to tax for failure_to_file under sec_6651 for and and for failure to pay estimated_tax under sec_6654 for we hold that they are whether petitioners are liable for a penalty under sec_6673 for instituting proceedings primarily for delay and continued property law each petitioner received one-half of the total income received by petitioners in and tex fam code ann sec_3 vernon respondent also determined that petitioners are liable for additions to tax for failure_to_pay_tax under sec_6651 for and respondent concedes that petitioners are not liable for additions to tax under sec_6651 for respondent determined a larger addition_to_tax under sec_6651 for for nancy s johnston because less tax was withheld from her than from william h johnston for maintaining frivolous or groundless positions we hold that they are in the amount stated below section references are to the internal_revenue_code as amended references to petitioner are to william h johnston findings_of_fact some of the facts have been stipulated and are so found petitioners were married and lived in texas during the years in issue and when the petition was filed petitioners received the following amounts of income description amount source wages wages interest social_security pension pension total dollar_figure big_number big_number big_number dollar_figure description amount wages wages wages wages interest unemployment_compensation social_security pension pension total dollar_figure big_number big_number big_number big_number big_number big_number dollar_figure flour daniel inc aeroteck all american u s treasury international brotherhood of electrical workers dixie national life_insurance co source lebarge associates inc apollo industrial services inc austin industries inc cleveland inspection service inc all american state of texas u s treasury international brotherhood of electrical workers dixie national life_insurance co description amount wages wages wages wages interest unemployment_compensation social_security pension pension total dollar_figure big_number big_number big_number big_number big_number dollar_figure source mustang engineering inc national inspection consultants selectek inc apollo industrial services inc all american state of texas u s treasury international brotherhood of electrical workers dixie national life_insurance co petitioners did not file income_tax returns for and petitioners did not pay any estimated_tax in a income_tax deficiencies opinion petitioners contend that they are not liable for tax for the years at issue because the notices of deficiency are invalid petitioners contend that the commissioner may not determine a deficiency for a year for which a taxpayer did not file a return petitioners’ income is not taxable because they did not file returns and respondent did not prepare a return for each of the years in issue that qualified as a substitute return under sec_6020 we disagree the commissioner may prepare substitute returns for taxpayers who fail to file returns sec_6020 a form continued petitioners’ contention that the commissioner cannot determine a deficiency for a year for which a taxpayer did not file a return is frivolous scruggs v commissioner tcmemo_1995_355 affd without published opinion 117_f3d_1433 11th cir roman v commissioner tcmemo_1995_175 zyglis v commissioner tcmemo_1993_341 affd without published opinion 29_f3d_620 2d cir petitioners’ contention that failure_to_file a return shields the nonfiler from income_tax_liability is also frivolous where a taxpayer files no return the deficiency is determined as if a return had been filed on which the taxpayer reported that the amount of tax due was zero thus the deficiency is the amount of tax due 423_us_161 919_f2d_830 2d cir 847_f2d_1379 9th cir finally petitioners’ contention that the commissioner must file a substitute for return under sec_6020 before determining a deficiency is also frivolous schiff v united_states supra roat v commissioner supra continued u s individual_income_tax_return qualifies as a sec_6020 return if it contains a taxpayer’s name address social_security_number filing_status and information sufficient to compute the taxpayer’s tax_liability and if it is signed by an authorized employee of the irs 120_tc_163 91_tc_926 petitioners received income in the amounts respondent determined and did not file income_tax returns for the years in issue petitioners point out that respondent determined that petitioners are not entitled to deductions for business_expenses to which petitioners claim they are entitled however petitioners offered no evidence contrary to respondent’s determination we conclude that petitioners are each liable for deficiencies in the amounts that respondent determined for and b additions to tax petitioners admit that they did not file income_tax returns for and and that they received income in those years in the amounts respondent determined the parties stipulated to transcripts of account which show that taxes were underwithheld from petitioners’ income for and petitioners did not pay estimated_tax for respondent has met the burden of production under sec_7491 as to the additions to tax under sec_6651 for failure_to_file for and and under sec_6654 for failure to pay petitioners do not contend and have offered no evidence showing that sec_7491 applies in this case taxpayers bear the burden of proving that they have met the requirements of sec_7491 h conf rept pincite 1998_3_cb_747 s rept pincite 1998_3_cb_537 estimated_tax for petitioners do not contend that they had reasonable_cause for failure_to_file their and returns or failure to pay estimated_tax for they offered no evidence showing that they are not liable for those additions to tax we conclude that petitioners are liable for the additions to tax under sec_6651 for failure_to_file for and and under sec_6654 for failure to pay estimated_tax for c sec_6673 penalty respondent moved that the court impose a penalty on petitioners under sec_6673 on the grounds that petitioners instituted and maintained this case primarily for delay and that their position is frivolous the court may impose on a taxpayer a penalty of up to dollar_figure if the taxpayer instituted or maintained proceedings primarily for delay if the taxpayer’s position is frivolous or groundless or if the taxpayer unreasonably failed to pursue administrative remedies sec_6673 a taxpayer's position is frivolous or groundless if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir petitioners contend that their arguments are not frivolous and that they are not using this case for delay we disagree all of petitioners’ arguments at trial and in documents filed with the court are frivolous petitioners did not offer any evidence to support their claim that they had business_expenses in the years in issue the court told petitioners that their arguments before and during trial were frivolous and that we would consider imposing a penalty under sec_6673 if petitioners continued to maintain frivolous positions despite this admonition petitioners continued to make frivolous arguments in this case in a prior case the u s court_of_appeals for the fifth circuit affirmed the dismissal of petitioners’ bankruptcy claims and admonished petitioners for making allegations that bordered on frivolous relying on tax-protester rhetoric and engaging in meritless and time-consuming dealings with the internal_revenue_service to delay those proceedings johnston v irs aftr 2d ustc par big_number 5th cir we conclude that petitioners maintained these proceedings primarily for delay and that their positions are frivolous we conclude that petitioners are liable for a penalty of dollar_figure under sec_6673 accordingly an appropriate order and decision will be entered for respondent in amounts consistent with the foregoing


internal_revenue_service number release date index nos cc dom p si - plr-109440-00 date x y date state dear this is in reply to your letter dated date submitted on behalf of x requesting a ruling that x be given an extension of time to elect to be classifi ed as an association for federal tax purposes the information submitted states that on date y a domestic_corporation converted to x a state limited_partnership x intended to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes however x failed to file the election timely 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 a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-2 an eligible_entity with a single owner can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides in part that unless a domestic eligible_entity elects otherwise the entity is a partnership if it has two or more members sec_301_7701-3 provides that an entity may elect to be classified other than as provided under sec_301 b by filing form_8832 entity classification election with the applicable service_center an election will be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 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 sec_301_9100-1 defines a 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 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 a based solely on the facts submitted and representations made we conclude that the requirements of 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 form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code in particular we express no opinion as to the timeliness or validity of any other elections made by x this ruling is directed only to the taxpayers who requested 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 we are forwarding a copy of this letter to x paul f kugler assistant chief_counsel passthroughs and special industries sincerely enclosures copy of this letter copy for sec_6110 purposes