t c no united_states tax_court beech trucking company inc arthur beech tax_matters_person petitioner v commissioner of internal revenue respondent docket no filed date p a trucking company leases its drivers from an affiliated company p compensates the drivers at a rate of to cents per mile dispatched of which amount cents is designated as a per_diem_allowance r does not dispute that p’s per_diem payments are ordinary and necessary business travel_expenses that are deemed substantiated pursuant to revproc_94_77 1994_2_cb_825 and revproc_96_28 1996_1_cb_686 held on the facts involved herein p is the common_law employer of the drivers and therefore is subject_to the 50-percent limitation of sec_274 i r c to the extent the per_diem payments are for the drivers’ meal expenses held further pursuant to revproc_94_77 supra and revproc_96_28 supra the per_diem payments are treated as being for the drivers’ meal expenses and thus are subject_to the sec_274 i r c limitation james allen brown for petitioner edith f moates and john s repsis for respondent thornton judge by notice of final s_corporation administrative adjustment fsaa respondent determined adjustments of dollar_figure and dollar_figure to the ordinary_income of beech trucking co inc beech trucking for and respectively at issue is the amount that beech trucking may deduct with respect to per_diem allowances it provided drivers that it leased from an affiliated company and more particularly whether the 50-percent limitation of sec_274 n applies to the total amount of the per_diem payments subsumed in these issues is the question of whether the sec_274 n limitation applies to beech trucking as the recipient of the services of the leased drivers unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure findings_of_fact the parties have stipulated some of the facts which we incorporate herein by this reference beech trucking during the years at issue beech trucking was an s_corporation within the meaning of sec_1361 arthur beech petitioner was the tax_matters_person when the petition_for_readjustment was filed beech trucking had its principal office in north little rock arkansas during the years at issue beech trucking had six shareholders as of yearend their ownership percentages were as follows ownership shareholder percentage arthur beech kd harvey ralph bradbury diane miller james willbanks warren garrison petitioner was president of beech trucking ed harvey harvey was vice president and ralph bradbury was secretary-treasurer beech trucking operated as an irregular-route common carrier transporting general commodities within the midwestern and southern united_states during and it had one terminal in little rock arkansas and another in nashville tennessee during and beech trucking owned and ' the record suggests that there may have been minor fluctuations in the ownership percentages of these six shareholders during the course of the years at issue any such fluctuations are immaterial to the results reached herein - operated between and trucks all of which were purchased used and with high mileage beech trucking drivers were dispatched on both long and short hauls on a long haul typically over miles the driver would typically leave the beech trucking terminal on sunday afternoon and be gone for about five nights before returning to the terminal on a short haul the driver might return the same day almost every beech trucking truck had a sleeper cab a small area behind the driver’s compartment with a bunk for sleeping when a trip required an overnight stay the driver might either sleep in the sleeper cab or arrange other lodging which might or might not be in amotel parking overnight at a truck stop typically would cost dollar_figure to dollar_figure showering at a truck stop typically would cost dollar_figure to dollar_figure arkansas trucking service beech trucking leased its drivers from a company known as arkansas trucking service ats harvey owned ats and petitioner arthur beech who was an employee of ats acted as its sales and operations manager the record does not contain the leasing agreement between beech trucking and ats or otherwise reveal its precise terms testimony elicited at trial suggests vaguely that ats also provided drivers to companies other than beech trucking but the record does not reveal the identities or ownership of any such other companies - ats employees hired the drivers and provided them orientation drivers who were hired to drive for beech trucking signed employment agreements wherein they agreed they would drive equipment owned by beech trucking but would be the employees of ats and would be paid_by ats petitioner had final authority to fire drivers who were hired to drive for beech trucking ats maintained all payroll records for the beech trucking drivers and issued their payroll checks as well as their forms w-2 wage and tax statement ats paid workers’ compensation insurance for the drivers who were also eligible to participate in a sec_401 plan maintained by ats bach week ats would bill beech trucking for all the drivers’ expenses that ats paid out and beech trucking would write a check to ats for the total payroll including expense reimbursements in addition to a service fee of undisclosed amount drivers’ compensation and per_diem payments on long hauls beech trucking drivers were paid at a specified rate for each mile dispatched as determined by ats employees using the rand mcnally mileage maker a guide indicating mileage between selected points during the years at issue the drivers were paid between and cents per mile of this amount cents was designated as a per_diem travel -- - allowance the per_diem_allowance short-haul drivers were paid a flat weekly salary in addition to the cents per mile per_diem_allowance the total per_diem allowances so calculated were included in the drivers’ paychecks issued by ats and were listed on the corresponding check stubs under the category of current deductions and reimbursements separate from amounts listed as earnings the drivers were not required to turn in receipts to receive the per_diem allowances or otherwise to account for the manner in which they spent the allowances per_diem payments to the beech trucking drivers totaled dollar_figure and dollar_figure for and respectively expense reimbursements the drivers’ paychecks included in addition to the amounts previously described expense reimbursements the beech trucking drivers were reimbursed dollar_figure per day for layovers when they were detained for at least hours waiting for a load or waiting for a truck to be repaired otherwise they were not separately reimbursed for lodging_expenses overnight parking or showers the drivers were reimbursed for such items as tolls lumpers charges for loading and unloading trucks scales expenses truck repairs and similar items the drivers turned in their the record is silent as to how this per_diem rate of cents per mile was derived beech trucking maintained no written plan to govern per_diem allowances or other reimbursements the record does not indicate whether ats maintained any such written plan logs receipts bills of lading and such to ats which used these materials to determine expense reimbursements beech trucking’s and tax returns on its forms 1120s u s income_tax return for an s_corporation for the years at issue beech trucking deducted as part of other deductions driver-related expenses including wages per_diem allowances group_insurance workers’ compensation tolls scales motels and layovers and hiring cost---drivers the amounts deducted as per_diem payments were dollar_figure and dollar_figure for and respectively these claimed per_diem_amounts represent percent of the actual per_diem payments made to the drivers respondent’s determination respondent commenced the examination of beech trucking’s and forms on may and date respectively in the fsaa issued date respondent determined that under sec_274 beech trucking was entitled to deduct only percent of the total per_diem payments respondent determined that beech trucking had overstated its deductions with respect to the per_diem payments by dollar_figure and dollar_figure for and respectively to arrive at the 80-percent claimed deduction beech trucking applied the sec_274 50-percent limitation to percent of the total per_diem_amounts paid during and and deducted the remaining percent in full - - opinion sec_274 generally allows a taxpayer to deduct only percent of the amount that otherwise would qualify as an allowable deduction for meals or business entertainment the issue is whether this 50-percent limitation applies to the full amount of per_diem allowances paid with respect to the beech trucking drivers as respondent contends for the reasons discussed below we agree with respondent a statutory framework sec_162 allows a deduction for all ordinary and necessary expenses_incurred during the taxable_year in carrying_on_a_trade_or_business sec_162 enumerates certain types of deductible expenses including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 and traveling expenses including amounts expended for meals_and_lodging while away from home in the pursuit of a trade_or_business sec_162 sec_274 generally disallows any deduction under sec_162 for among other things any traveling expense including meals_and_lodging while away from home unless the taxpayer complies with stringent substantiation requirements as to the amount time and place and business_purpose of the expense sec_274 sec_274 authorizes the secretary to provide by regulations that some or all of these - substantiation requirements shall not apply in the case of an expense which does not exceed an amount prescribed pursuant to such regulations under sec_274 the amount allowable as a deduction for any expense for food or beverages is generally limited to percent of the amount of the expense that would otherwise be allowable sec_274 a b the revenue procedures under the applicable sec_274 regulations the commissioner is authorized to prescribe rules in pronouncements of general applicability under which certain types of expense allowances including per_diem allowances for ordinary and necessary expenses of traveling away from home will be regarded as satisfying the substantiation requirements of sec_274 sec_1 d -1 income_tax regs see also sec_1_274-5t temporary income_tax regs fed reg date for purposes of these regulations revproc_94_77 1994_2_cb_825 and revproc_96_28 1996_1_cb_686 hereinafter referred to collectively as the revenue procedures authorize various nonmandatory methods that taxpayers may elect to use in lieu of substantiating actual expenses for deemed substantiation of employee lodging meal and incidental_expenses incurred while - traveling away from home ’ under one of the methods authorized by the revenue procedures an employee’s expenses for lodging meal and incidental_expenses while traveling away from home will be deemed substantiated when a payor the employer its agent or a third party provides a per_diem allowance' under a revproc_94_77 1994_2_cb_825 is effective for per_diem allowances paid on or after date revproc_96_28 c b superseded revproc_94_77 supra for per_diem allowances paid on or after date revproc_96_28 supra restates verbatim the relevant sections of revproc_94_ supra subsequent citations to provisions of prev proc supra will also refer to identical provisions of superseded revproc_94_77 supra revproc_96_28 sec_3 c b pincite defines a per_diem_allowance as a payment under a reimbursement or other expense allowance arrangement that meets the requirements specified in sec_1_62-2 and that is paid with respect to ordinary and necessary business_expenses incurred or which the payor reasonably anticipates will be incurred by an employee for lodging meal and or incidental_expenses for travel away from home in_connection_with_the_performance_of_services as an employee of the employer reasonably calculated not to exceed the amount of the expenses or the anticipated expenses and paid at the applicable federal per_diem rate a flat rate or stated schedule or in accordance with any other service- specified rate or schedule reimbursement or other expense allowance arrangement to pay for such expenses ’ revproc_96_28 sec_1 c b pincite under the revenue procedures if a per_diem_allowance includes reimbursement for lodging in addition to meal and incidental_expenses m ie the amount of expenses deemed substantiated each day is the lesser_of the per_diem_allowance for the day or the federal per_diem rate for the locality of travel for the day revproc_96_28 sec_4 c b pincite if the per_diem_allowance includes reimbursement only for m ie and not for lodging the amount of expenses deemed substantiated each day is the lesser_of the per_diem_allowance for the day or the federal m ie rate revproc_96_28 sec ’ neither sec_274 nor the regulations thereunder nor the applicable revenue procedures explicitly refer to the substantiation requirements that apply to the employer or payor that seeks to deduct payments of travel-expense reimbursements under sec_274 however the taxpayer must meet the stringent substantiation requirements to be entitled toa deduction under sec_162 for any travel expense the parties do not disagree that the substantiation methods authorized under revproc_94_77 supra and revproc_96_28 supra apply to petitioner as payor of the per_diem allowances in determining beech trucking’s compliance with the sec_274 substantiation requirements for this purpose the federal per_diem rate is the sum of the federal lodging expense rate and the federal meal and incidental expense m ie rate revproc_96_28 sec_3 c b pincite the federal m ie rate represents the daily amount that the government pays to its traveling employees to reimburse them for breakfast lunch dinner and incidental_expenses 115_tc_210 citing c f_r sec a -- c b pincite for this purpose a per_diem_allowance is treated as paid only for m ie in various specified circumstances including where the allowance is computed on a basis similar to that used in computing the employee’s wages or other compensation eg the number of hours worked miles traveled or pieces produced revproc_96_28 sec_4 c b pincite the revenue procedures contain special rules for applying the sec_274 50-percent limitation to per_diem allowances specifically under the revenue procedures if a per_diem is paid only for m ie an amount equal to the lesser_of the per_diem_allowance for each calendar day or the federal m ie rate is under special rules for the transportation industry including the trucking industry a taxpayer is permitted to treat dollar_figure as the federal m ie rate for all localities of travel in the continental_united_states revproc_96_28 sec_4 c b pincite sec dollar_figure of the revenue procedures provides that a per_diem_allowance is treated as paid only for m ie if the payor pays the employee for actual expenses for lodging the payor provides the lodging in_kind the payor pays the actual expenses for lodging directly to the provider of the lodging the payor does not have a reasonable belief that lodging_expenses were or will be incurred by the employee or the allowance is computed on a basis similar to that used in computing the employee’s wages or other compensation eg the number of hours worked miles traveled or pieces produced - - treated as an expense for food and beverages and thus subject_to the sec_274 50-percent limitation revproc_96_28 sec c b pincite if the per_diem_allowance is paid for lodging as well as m ie the payor must treat an amount equal to the federal m ie rate as an expense for food and beverages for this purpose when a per_diem for lodging and m ie is paid at a rate that is less that the federal per_diem rate the payor may treat an amount equal to percent of the per_diem_allowance as the federal m ie rate id c application of the revenue procedures on its tax returns for the years at issue beech trucking claimed deductions for the per_diem payments on the basis of the last-described rule_of the revenue procedures ie it treated percent of the per_diem payments as being for food and beverages and thus subject_to the sec_274 50-percent limitation and deducted the remaining percent in full resulting in a claimed deduction of percent of the total per_diem payments see supra note respondent does not dispute that the revenue procedures apply to this case that the per_diem payments at issue here constitute per_diem allowances within the meaning of the revenue procedures that the per_diem payments are ordinary and necessary business_expenses of beech trucking within the meaning of sec_162 that these expenses are deemed to be substantiated under the revenue procedures or that they are deductible to the extent that they are not limited by the percent limitation of sec_274 ‘ respondent contends however that beech trucking is not entitled to the claimed treatment because under the revenue procedures the per_diem payments are treated as being made only for m ie and not for lodging accordingly respondent contends under section dollar_figure of the revenue procedures the per_diem payments are treated as being solely for food and beverages and thus fully subject_to the 50-percent limitation of sec_274 we agree it is undisputed that the per_diem allowances are computed on the same basis as the drivers’ wages ie on the basis of miles dispatched according to the rand mcnally mileage maker hence section dollar_figure of the revenue procedures treats the per_diem allowances as being paid only for m ie under section dollar_figure of ‘ t it appears that some of the per_diem payments were made with respect to trips that involved no overnight travel respondent does not dispute however that the revenue procedures which by their terms apply with respect to expenses_incurred by an employee while traveling away from home revproc_96_28 sec_1 c b pincite apply to all the per_diem payments at issue here consequently we give no further consideration to this issue moreover the parties have not raised and we do not reach any issue as to whether in these circumstances the deductibility of the per_diem allowances is constrained by sec_162 cf 117_tc_7 respondent also contends that three other factors enumerated in sec dollar_figure of the revenue procedures require that the per_diem allowances be treated as solely for m ie in particular respondent contends that beech trucking paid its drivers actual lodging costs furnished its drivers lodging in_kind and had no reasonable belief that its drivers incurred continued -- - the revenue procedures the expenses covered by the per_diem payments are deemed substantiated in an amount equal to the lesser_of the per_diem_allowance for the day or the federal m ie rate see revproc_96_28 sec_4 c b pincite respondent does not dispute that under the revenue procedures petitioner is deemed to have substantiated the subject expenses in an amount equal to the full amount of the per_diem payments thus respondent has effectively conceded that the subject per_diem allowances are less than the federal m ie rate under section dollar_figure of the revenue procedures because the per_diem allowances are deemed paid only for m ie an amount equal to the lesser_of the per_diem_allowance or the federal mé ie rate is treated as an expense for food and beverages and thus subject_to the limitations of sec_274 as just discussed respondent has effectively conceded that the per_diem allowances at issue here are less than the federal m ie rate--a concession to which petitioner must accede if the subject expenses are to be deemed fully substantiated under the revenue procedures continued lodging_expenses petitioner disputes respondent’s factual premises because the test in sec dollar_figure of the revenue procedures is disjunctive failure to meet any one of the five enumerated requirements causes the per_diem allowances to be considered as paid only for m ie because it is undisputed that the requirement described in the text above has been met we need not decide whether any of the additional requirements have been met -- - otherwise as discussed more fully infra petitioner has not independently substantiated and thus is entitled to no deduction for any of the subject expenses in excess of those deemed to be substantiated under the revenue procedures accordingly under section dollar_figure of the revenue procedures the full amount of the per_diem payments is treated as being for food and beverages and thus subject_to the 50-percent limitation of sec_274 d petitioner’s contentions petitioner argues that because beech trucking leased its drivers from ats the sec_274 limitation is inapplicable to beech trucking petitioner also argues that the revenue procedures are invalid insofar as they operate to characterize the beech trucking per_diem payments as being solely for m ie expenses and not for lodging and to apply the sec_274 n limitation to nonmeal expenses that were covered by the per_diem moreover as discussed infra the evidence indicates that beech trucking’s per_diem payments were in fact less than the federal m ie rate payments ’ for the reasons described below we disagree with each of these arguments employment status of the beech trucking drivers petitioner argues that the beech trucking drivers were employed by ats and not by beech trucking consequently petitioner argues the sec_274 limitation should apply only to ats and not to beech trucking ’ in support of thi sec_4 petitioner who has consistently maintained throughout these proceedings that the truck drivers were not beech trucking’s employees has not raised and we do not reach any issue as to whether the per_diem payments should be deductible under sec_162 as personal service compensation paid_by beech trucking to the drivers in 117_tc_7 the taxpayer pursuant to a collective bargaining agreement with its employees paid its pilots and flight attendants per_diem allowances at a specified rate for each hour the employees were on duty or on flight assignment this court held that the taxpayer was entitled to deduct the per_diem allowances as personal service compensation under sec_162 finding that the taxpayer would not have paid the per_diem allowances to its employees but for the existence of a bona_fide employer employee relationship and the need to pay the allowances in order to secure the employees’ services id pincite noting among other things the taxpayer’s negotiation of the per_diem allowances as part of its employees’ compensation package this court found as a fact that in making the per_diem payments the taxpayer intended to compensate the employees for their personal services id pincite in the instant case the record does not establish beech trucking’s intent in making the per_diem payments or the manner in which the per_diem allowances were determined or by whom moreover unlike the per_diem allowances at issue in ual corp v commissioner supra the per_diem allowances at issue here were computed by reference to miles dispatched rather than according to hours on duty or on travel assignment 's petitioner’s argument is inconsistent with beech trucking’s treatment of the per_diem payments on its tax returns continued -- - argument petitioner cites sec_274 and the regulations thereunder we construe petitioner’s argument as being predicated upon sec_274 a which provides that the sec_274 n limitation does not apply with respect to any expense described in among other sections sec_274 sec_274 provides that certain reimbursed expenses are not subject_to sec_274 which generally disallows deductions for expenses with respect to entertainment activities and facilities specifically sec_274 provides that sec_274 shall not apply to expenses paid_or_incurred by the taxpayer in connection with the performance by him of services for another person whether or not such other person is his employer under a reimbursement or other expense allowance arrangement with such other person but this paragraph shall apply-- a where the services are performed for an employer only if the employer has not treated such expenses in the manner provided in paragraph or b where the services are performed for a person other than an employer only if the taxpayer accounts to the extent provided by subsection d to such person continued wherein it treated percent of the per_diem payments as being subject_to the sec_274 limitation moreover petitioner’s argument is inconsistent with the premise of the prayer for relief in this litigation wherein petitioner has not contended that beech trucking is entitled to greater deductions than it claimed on its tax returns on the basis of its application of the sec_274 limitation the purpose of this exception in sec_274 is prevent the double disallowance of a single expenditure on ‘to ce to the employee or practitioner etc and a second time to the employer or client etc h rept 87th cong 2d se ss 1962_3_cb_405 the regulations under sec_274 provide as follows iv reimbursed entertainment expenses-- - a introductory in the case of any expenditure for entertainment paid_or_incurred by one person in connection with the performance by him of services for another person whether or not such other person is an employer under a reimbursement or other expense allowance arrangement the limitations on allowability of deductions provided for in paragraphs a through e of this section shall be applied only once either to the person who makes the expenditure or to the person who actually bears the expense but not to both ob reimbursement arrangements between employee and employer in the case of an expenditure for entertainment paid_or_incurred by an employee under a reimbursement or other expense allowance arrangement with his employer the limitations on deductions provided for in paragraphs a through e of this section shall not apply-- employees to the employee except to the extent his employer has treated the expenditure on the employer’s income_tax return as originally filed a compensation paid to the employee and as wages to such employee for purposes of withholding under chapter relating to collection of income_tax at source on wages employers to the employer to the extent he has treated the expenditure as compensation ss and wages paid to an employee in the manner provided in bo of this subdivision sec_1_274-2 f iv a and b income_tax regs - - as previously noted the principles reflected in sec_274 and the above-quoted regulations apply for purposes of sec_274 by virtue of the cross-reference to sec_274 contained in sec_274 a accordingly with respect to meal and entertainment_expenses that an employee pays or incurs and that are reimbursed by the employer the sec_274 limitation applies either to the employee as the person who makes the expenditure or to the employer as the person who actually bears the expense sec_1_274-2 iv a income_tax regs in the instant case with respect to the per_diem payments the parties agree that the sec_274 limitation does not apply to the employees e the beech trucking drivers since the per_diem payments were excluded from their wages the parties agree that the sec_274 limitation instead applies to the drivers’ employer petitioner argues however that ats not beech trucking was the drivers’ employer and that sec_274 thus does not apply to beech trucking neither sec_274 nor the regulations thereunder nor sec_274 defines employer or employee consequently we look to common_law concepts to determine the existence of an employer-employee relationship 503_us_318 159_f3d_388 9th cir 116_f3d_334 8th cir 116_tc_308 89_tc_225 affd 862_f2d_751 9th cir among the factors to which the courts have looked to determine the existence of a common_law employment relationship are the following control exercised over the details of the work discretion exercised over the time and duration of the work the source of the instrumentalities and tools of the work the permanency of the relationship the right to assign additional projects to the hired party the right to discharge the method of payment the provision of employee_benefits the opportunity for profit and loss and whether the type of work is part of the hiring party’s regular business alford v united_states supra pincite weber v commissioner 103_tc_378 affd 60_f3d_1104 4th cir profl exec leasing inc v commissioner supra pincite see also sec_31_3401_c_-1 employment_tax regs normally control is the most significant factor in determining the nature of a working relationship weber v commissioner supra pincite although the courts normally employ these common_law factors to determine whether a person in a two-party relationship is an employee or an independent_contractor these factors are equally applicable in determining the identity of the common_law employer -- - in three-party employment situations 173_f3d_713 9th cir profl exec leasing inc v commissioner supra pincite applying the common_law factors to determine that the taxpayer who leased management and professional personnel to commercial businesses and professional practices was not the common_law employer of the personnel for purposes of the exclusive benefit rule_of sec_401 citing 332_us_126 the analysis of common_law employment status is extraordinarily fact intensive alford v united_states supra pincite in the instant case the evidentiary basis for analyzing the relevant common_law factors is relatively sparse owing largely to petitioner’s failure to introduce in evidence or otherwise establish the precise terms of any lease agreement employment agreement or contract between beech trucking and ats nor does the record contain the drivers’ employment contracts moreover the record does not always clearly distinguish the roles of beech trucking and ats with respect to the drivers’ activities we infer that their roles were to some degree blurred especially taking into consideration that harvey who owned ats also owned percent of beech trucking and that petitioner who was president and 55-percent owner of beech trucking was an employee of ats - - as far as we can discern from the record beech trucking controlled the drivers’ activities exercising discretion over when and how long they worked petitioner testified that beech trucking drivers were dispatched out of beech trucking’s little rock terminal that beech trucking tried to keep all its to trucks manned so as to get our drivers home most weekends and that on a typical week a beech trucking driver would leave on a sunday afternoon and we would try to get him out as far as we could in the early part of the week and then start working him back toward the house the record is silent as to any control that ats might have exercised over the beech trucking drivers’ activities ats hired the drivers and provided them some orientation on its income_tax returns for the years at issue however beech trucking deducted as part of other deductions a separate item identified as hiring cost---drivers from which we infer that beech trucking reimbursed ats for the cost of hiring the beech trucking drivers when ats hired the beech trucking drivers they signed employment agreements wherein they agreed to be at sec_1e most of the pertinent testimony regarding the beech trucking drivers’ activities came from petitioner as previously noted petitioner was both president of beech trucking and an employee of ats as reflected in the quotations in the text above his testimony often employed ambiguously first-person plural pronouns on the basis of our careful review of petitioner’s testimony in the context of the entire record we conclude that the testimony described in the text is most reasonably understood to refer to petitioner’s activities as president of beech trucking -- - employees but to operate beech trucking equipment a contract purporting to create an employer-employee relationship is not controlling where application of the common_law factors to the facts and circumstances indicates the absence of such a relationship profl exec leasing inc v commissioner supra pincite here the employment agreements reflect at least three factors that point to beech trucking as the common_law employer beech trucking provided the tools and instrumentalities of the drivers’ work ats apparently had no right to assign additional projects to the drivers the drivers being effectively assigned to beech trucking and the relationship between the drivers and beech trucking was apparently of indefinite duration petitioner had final authority to terminate the beech trucking drivers he testified that if they the beech trucking drivers were late on loads i would turn them back to arkansas trucking services and tell them we couldn’t use them although ats issued the drivers’ weekly paychecks paid workers’ compensation and maintained a sec_401 plan for the drivers beech trucking reimbursed ats weekly for its expenditures plus a service charge as petitioner states on brief ats actually made the expenditures while beech trucking actually would bear the cost we infer that ats’s opportunity for profit related primarily to its bookkeeping and payroll - - function and that it had little exposure to losses associated with the beech trucking drivers’ work activities by contrast it appears that beech trucking bore the risks associated with operating the trucking business on which it relied to generate revenues with which to make weekly payroll reimbursements to ats beech trucking had an investment in work facilities it operated two terminals and owned all the trucks that the drivers operated clearly the drivers’ work was part of the regular business of beech trucking the record is silent as to whether ats had any separate work facilities and is unclear as to the extent of any business ats might have had apart from the services it provided beech trucking in sum on the basis of all the evidence in the record we conclude that beech trucking was the drivers’ common_law employer with respect to which ats performed principally a driver procurement and payroll service cf profl exec leasing inc v commissioner t c pincite accordingly we conclude that the sec_274 limitation applies to beech trucking as the common_law employer of its drivers and as the party that as petitioner states on brief actually bore the expense of the expenditures_for which the per_diem payments were made see sec_1_274-2 iv income_tax - - regs ’ this conclusion is consistent with the position taken by beech trucking on its tax returns for the years at issue and with the implicit premise of petitioner’s prayer for relief ’ validity of the revenue procedures petitioner argues that the revenue procedures are invalid insofar as they operate in sec_4 to characterize the beech trucking per_diem payments as being solely for m ie and in section to apply the sec_274 limitations to the full amount of the per_diem payments petitioner does not argue that the revenue procedures are otherwise invalid to the contrary petitioner relies on section dollar_figure of the revenue procedures for deemed substantiation of the drivers’ travel_expenses and on that part of section dollar_figure of the revenue procedures that would permit beech trucking absent the provision in section dollar_figure which deems the per_diem payments to be solely for m ie to treat percent of the per_diem payments as being reimbursements of the drivers’ lodging_expenses in effect then petitioner seeks to rely selectively on certain aspects of the revenue procedures that ‘7 this case does not present and we do not reach any issue as to the proper tax treatment to ats of the amounts that ats paid to the beech trucking drivers the record is silent as to how ats might have treated the payments to the beech trucking drivers for tax purposes ‘8 as previously indicated in this litigation petitioner has not argued that beech trucking is entitled to deduct a greater amount of the per_diem payments than the percent it claimed on its tax returns on the basis of its application of the sec_274 limitations -- p7 - work to beech trucking’s benefit while seeking to avoid the associated conditions that the revenue procedures impose the substantiation methods described in the revenue procedures and relied upon by petitioner are not mandatory see revproc_96_28 sec_1 c b pincite beech trucking could have used actual allowable expenses if they were properly substantiated with adequate_records or other_sufficient_evidence see id see also 115_tc_210 in that event properly substantiated nonmeal travel_expenses might have been deductible without limitation by sec_274 instead beech trucking elected to use the deemed substantiation method provided by the revenue procedures having made this election beech trucking cannot avail itself of the benefits of the revenue procedures without adhering to the conditions the commissioner has imposed see 268_f3d_1156 9th cir taxpayers who elected pursuant to a revenue_procedure to moreover beech trucking could have avoided the sec_274 substantiation requirements as well as the sec_274 50-percent limitation by treating the per_diem payments as compensation to the drivers see sec_274 and n a sec_1_274-2 f and iv b income_tax regs the tradeoff would be that the per_diem payments would then be includable in the drivers’ gross incomes and would be subject_to_withholding and payment of employment_taxes when paid see sec_1_62-2 h income_tax regs under this scenario the drivers would be eligible to claim as itemized_deductions expenses attributable to the payments included in their gross incomes subject_to the sec_274 substantiation requirements and the sec_274 50-percent limitation see sec_1 c income_tax regs - - defer prepaid_service_income on warranty contracts were required to adhere to the revenue procedure’s condition regarding the manner of accounting for insurance expenses associated with the warranty contracts affg toyota town inc v commissioner tcmemo_2000_40 28_fedclaims_320 taxpayers’ failure to adhere to conditions of a revenue_procedure rendered them ineligible for its benefits affd 22_f3d_1105 fed cir petitioner argues that the complained-of conditions contained in section dollar_figure of the revenue procedures are invalid because they conflict with certain regulations under sec_62 petitioner also suggests that sections dollar_figure and dollar_figure of the revenue procedures as applied to the instant case reflect an arbitrary or unlawful exercise of respondent’s authority for the reasons discussed below we disagree with each of these arguments a does section dollar_figure of the revenue procedures conflict with the sec_62 regulations as previously discussed in certain specified circumstances section dollar_figure of the revenue procedures limits the amount of the employees’ reimbursed travel_expenses that is deemed to be substantiated to the lesser_of the actual per_diem_allowance for the day or the amount computed at the federal m ie rate for the locality of travel--which rate the taxpayer may treat for travel in the continental_united_states as being dollar_figure - - hereinafter referred to as the specified federal m ie rate ’ among the five factors enumerated in section dollar_figure of the revenue procedures that may trigger this consequence the fifth factor is the focus of the dispute here it requires a per_diem_allowance to be treated as paid only for m ie if the allowance is computed on a basis similar to that used in computing the employee’s wages or other compensation eg the number of hours worked miles traveled or pieces produced revproc_96_28 sec_4 c b pincite hereinafter this provision is sometimes referred to simply as the fifth factor on brief petitioner suggests that the fifth factor is invalid because it conflicts with certain regulations under sec_62 regarding the treatment to employees of reimbursed expenses under so-called accountable plans under the revenue procedures the federal per_diem rate for the locality of travel is the amount set forth in the federal travel regulations as contained in c f_r ch app a as amended see revproc_96_28 sec_3 c b pincite the federal travel regulations as in effect for the years at issue provide various m ie rates ranging from dollar_figure to dollar_figure for over specified localities in the continental_united_states all other locations in the continental_united_states are subject_to the lowest m ie rate of dollar_figure see c f_r ch app a as previously noted under the simplifying convention of sec_4 of the revenue procedures a qualifying taxpayer in the transportation industry may treat dollar_figure as the federal méie rate for all localities of travel in the continental_united_states sec_62 a permits favorable tax treatment eg exclusion from the employee’s gross_income and exemption from withholding requirements and the payment of employment_tax with respect to reimbursements of business_expenses that payors make continued -- - petitioner observes correctly that mileage-based reimbursement arrangements like those described in the fifth factor and at issue here are expressly recognized in sec_1_62-2 income_tax regs as satisfying in certain circumstances the so-called business connection requirement as necessary for a reimbursement arrangement to qualify as an accountable_plan therefore petitioner elliptically concludes the fifth factor of section dollar_figure of the revenue procedures conflicts with sec_1_62-2 income_tax regs and is therefore invalid insofar as we are able to understand petitioner’s argument we disagree with it we perceive no conflict between sec_1_62-2 income_tax regs and section dollar_figure of the revenue procedures continued to employees under so-called accountable plans see sec_1 c h income_tax regs by contrast reimbursement payments under nonaccountable plans must be reported as wages to the employees and are subject_to_withholding and employment_taxes see sec_1_62-2 income_tax regs for qualification as an accountable_plan one requirement the so-called business connection requirement is that the reimbursement arrangement must provide reimbursements only for business_expenses that are allowable as deductions under i r c pt vi secs and that are paid_or_incurred by the employee in_connection_with_the_performance_of_services as an employee of the employer sec_1_62-2 and d income_tax regs a per_diem_allowance arrangement that is computed on a basis similar to that used in computing the employee’s wages or other compensation eg the number of hours worked miles traveled or pieces produced will meet the business connection requirement only in certain circumstances one of which is that a per_diem_allowance computed on that basis was commonly used in the industry in which the employee is employed sec_1 d income_tax regs --- - respondent does not dispute that beech trucking’s mileage-based reimbursement arrangement satisfies the business connection test under the sec_62 regulations cf 269_f3d_969 9th cir 234_f3d_1340 11th cir nor does respondent dispute that this per_diem arrangement satisfies the substantiation requirements described in sec_1_62-2 income_tax regs which permits travel_expenses governed by sec_274 as are those at issue here to be deemed to be substantiated in accordance with rules prescribed pursuant to the authority granted by sec_1 d -1 income_tax regs or sec_1_274-5t temporary income_tax regs fed reg date e in accordance with the revenue procedures to the contrary respondent implicitly acknowledges that the reimbursed travel_expenses at issue here are deemed to be substantiated under the revenue procedures the only issue is how the travel_expenses are to be characterized---an issue that the sec_62 regulations do not explicitly address other than by cross-referencing the regulations pursuant to which the revenue procedures were promulgated b are the revenue procedures as applied otherwise invalid petitioner also suggests more generally that respondent acted arbitrarily or unlawfully by applying in this case the - - complained-of conditions contained in sections dollar_figure and dollar_figure of the revenue procedures as previously discussed the application of section dollar_figure of the revenue procedures has two essential consequences with regard to a mileage-based reimbursement arrangement like the one at issue here it imposes an upper limit on the amount of reimbursed travel_expenses that are deemed to be substantiated an amount that a qualifying transportation-industry taxpayer may treat under sec_4 of the revenue procedures as being equal to the dollar_figure specified federal m ie rate and it characterizes those reimbursed expenses as being m ie and not lodging_expenses petitioner does not take issue with the reasonableness of the upper limit imposed by section dollar_figure of the revenue procedures to the contrary according to petitioner’s representations on brief the amount of the upper limit so imposed as referenced by the specified federal m ie rate of dollar_figure corresponds closely to the maximum per_diem payment dollar_figure that petitioner alleges would obtain under beech trucking’s mileage- based reimbursement formula furthermore the evidence in the petitioner testified that federal_law prohibits drivers from driving more than hours a day and that in setting the amount of the per_diem_allowance beech trucking relied on a rule_of thumb that its drivers would drive an average of to miles per hour apparently on the basis of this testimony petitioner states on reply brief that beech trucking’s per_diem arrangement provided a maximum per_diem base of miles pincite continued - - record indicates that beech trucking’s mileage-based reimbursement formula on average yielded reimbursements significantly less than the specified federal m ie rate and also less than any actual federal m ie rate that might otherwise be applicable as previously discussed we have deemed the parties to have conceded that the actual per_diem payments at issue here were less than the upper limit determined by reference to the federal m ie rate accordingly petitioner is not continued cents a mile which would provide a maximum per_diem_allowance of dollar_figure petitioner represents that beech trucking’s mileage- based method of reimbursing drivers’ travel_expenses reflects common industry practice petitioner testified that the average length of a long haul for a beech trucking driver was about miles on the outbound leg of the trip petitioner also testified that beech trucking would try to get each trucker out as far as we could in the early part of the week and then start working him back toward the house the evidence indicates that the drivers would be gone for about five nights on a typical long haul taken together this evidence indicates that the average per_diem_allowance that beech trucking actually provided its drivers was much less than the dollar_figure maximum per_diem_allowance that petitioner represents would obtain under the reimbursement formula based on an assumed maximum miles of driving per day specifically the average outbound trip of miles would yield a per_diem payment of no more than dollar_figure assuming as seems likely that the return leg of the average 5-day-long haul would entail less mileage each day than the average miles driven on the outbound trip it seems likely that the average per_diem payments for each of the other days of such a trip would be less than dollar_figure consequently the evidence indicates that the average per_diem payment was not only less than the dollar_figure specified federal m ie rate under the revenue procedures but also less than the lowest actual federal m ie rate dollar_figure and much less than the highest actual federal m ie rate dollar_figure applicable to any locality of travel under the federal travel regulations see c f_r ch app a - -- adversely affected by the amount of the upper limit per se but only by the characterization of the reimbursed travel_expenses as being for mé ie in this latter regard we do not believe that section dollar_figure of the revenue procedures reflects an arbitrary or unlawful exercise of the commissioner’s authority in treating a maximum per_diem_allowance that is approximately equal to the federal m ie rate as reimbursing no more than m ie expenses particularly where as here actual per_diem reimbursements are less than the amount computed at the federal m ie rate ’ similarly we do not believe that the complained-of conditions contained in section dollar_figure of the revenue procedures as applied to this case are arbitrary or unlawful the effect of section dollar_figure of the revenue procedures as applied here is effectively to treat the subject per_diem payments as covering solely meal expenses in circumstances where as just discussed the reimbursements were less than the amount computed at the federal m ie rates and in all likelihood less than the amount computed by reference to the portion of the federal m ie rate this case does not present and we do not consider any issue as to whether the complained-of conditions of sec dollar_figure of the revenue procedures are valid as applied to per_diem payments that exceed the federal m ie rate this case does not present and we do not consider any issue as to whether this aspect of sec dollar_figure of the revenue procedures is valid as applied to per_diem payments that approximate or exceed the federal m ie rate -- - that is for meals only ’ in such circumstances it is not unreasonable for the revenue procedures to treat the per_diem payments as covering only meal expenses petitioner contends that the beech trucking per_diem payments covered not only the drivers’ meals but also their lodging_expenses and incidental_expenses such as the cost of showers laundry overnight parking and local transportation assuming that the drivers might have incurred such travel_expenses from time to time it does not follow that the per_diem payments necessarily reimbursed them for such travel_expenses to the contrary it appears that the subject per_diem allowances were insufficient to reimburse the drivers for all such expenses because the revenue procedures permit deemed substantiation in lieu of actual substantiation of the employees’ travel_expenses the actual amounts and character of each employee’s travel_expenses are unknown and probably unknowable in these circumstances it is reasonable and probably necessary for the commissioner to adopt conventions such as those contained in the portion of the federal m ie rate that is attributable to incidental_expenses incurred in all continental_united_states locations is dollar_figure c f_r sec a i indeed it is conceivable that some drivers might subsist so spartanly on the road as to spend very little of their per_diem payments pocketing the unspent payments as untaxed extra compensation after all there is no requirement that employees spend per_diem allowances such as those at issue here for any particular purpose or that they remit to the employer any unspent per_diem_allowance - - sections dollar_figure and dollar_figure of the revenue procedures governing the nature of the deemed-substantiated expenses where that issue has independent significance under the tax laws as pronouncements of general applicability the revenue procedures cannot be expected to mirror perfectly the manifold circumstances of all taxpayers and their traveling employees or of any particular taxpayer’s traveling employees as elective procedures meant to mitigate what might otherwise be onerous substantiation burdens for payors of per_diem allowances the revenue procedures accomplish we believe at least rough justice giving due regard to the highly detailed nature of the statutory and regulatory scheme involved here to the specialized experience and information presumably available to the commissioner and to the value of uniformity in administering the national tax laws we are unpersuaded that the complained-of conditions imposed by section dollar_figure or section dollar_figure of the revenue procedures as applied in the instant case are arbitrary or unlawful see 533_us_218 in any event even if we were to agree with petitioner that the complained-of conditions imposed by the revenue procedures are invalid which we do not we would not reach a different result in this case the burden_of_proof is on petitioner rule -- - a having relied exclusively upon the deemed substantiation methods provided in the revenue procedures petitioner has offered no independent substantiation of the amounts of lodging or incidental_expenses that the beech trucking drivers might have incurred or otherwise established any reasonable basis for allocating the per_diem payments to meals incidentals and lodging_expenses incurred by the drivers accordingly petitioner has failed to show that respondent’s determination was in error cf united_states v st louis--s f ry 937_f2d_312 8th cir taxpayer failed to rebut commissioner’s valuation of reusable rail as determined on the basis of an elective method provided by a revenue_procedure 54_tc_1642 although an automobile allowance of cents per mile under an elective in certain circumstances if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the proper tax_liability sec_7491 places the burden_of_proof on the commissioner see sec_7491 rule a sec_7491 is effective with respect to court proceedings arising in connection with examinations commencing after date see internal_revenue_service restructuring and reform act of publaw_105_206 sec c 112_stat_685 here respondent’s examinations of beech trucking’s and federal_income_tax returns commenced before date accordingly sec_7491 has no application to this case in particular the record does not establish the number of days per trip that the drivers would normally pay for separate lodging or for incidentals such as showers laundry local transportation or overnight parking as previously noted it appears that at least some of the trips for which beech trucking paid per_diem allowances involved no overnight travel - - revenue_procedure might have been arbitrary the taxpayer failed to substantiate any higher amount of actual automobile expenses and so was properly granted a deduction based on the revenue_procedure affd 457_f2d_369 9th cir petitioner cites 115_tc_210 to support his contention that sec_274 is inapplicable to the extent the per_diem allowances represent reimbursements for incidental_expenses ' petitioner’s reliance on johnson is misplaced in johnson the taxpayer a merchant marine incurred and paid incidental travel_expenses that were not reimbursed by his employer the issue was whether pursuant to revproc_96_28 1996_1_cb_686 the taxpayer could deduct these incidental_expenses using the full federal per_diem rates resolution of this issue in johnson turned upon the proper interpretation of section dollar_figure of revproc_96_28 c b pincite which provides an optional method whereby employees and self-employed individuals may deduct meal and incidental_expenses incurred for travel away from home by using an amount computed at neither in the petition nor elsewhere in this litigation has petitioner expressly sought any relief with respect to beech trucking’s claimed deduction for its reimbursements of any incidental travel_expenses of its drivers as previously discussed on its federal_income_tax return beech trucking deducted the per_diem payments under the rule_of sec dollar_figure of the revenue procedures which effectively treats percent of certain per_diem payments as being for lodging and thus not subject_to the sec_274 limitation and the other percent which would include any incidental travel_expenses as being subject_to the sec_274 limitation - - the federal m ie rate for the locality of travel this court held that under section dollar_figure of revproc_96_28 supra the taxpayer was entitled to a portion of the claimed deductions as limited by applying the incidental expense portions of the applicable federal m ie rates johnson v commissioner supra pincite unlike the case at hand johnson did not address the payment of a per_diem_allowance the tax treatment of the payment to the payor the deemed substantiation of such a per_diem payment under the applicable revenue procedures the validity or application of section dollar_figure or dollar_figure of the revenue procedures or the application of sec_274 to such a per_diem payment in johnson the taxpayer-employee incurred no meals or lodging_expenses consequently the sec_274 limitation was inapplicable in the instant case by contrast petitioner seeks to deduct per_diem payments intended to cover without differentiation all otherwise unreimbursed travel_expenses including meals to the extent that the per_diem allowances represent reimbursements of in johnson v commissioner t c pincite the taxpayer deducted incidental_expenses as determined using the full federal per_diem rate after applying the 50-percent limitation of sec_274 in a footnote the court indicated that the sec_274 50-percent disallowance did not apply to the taxpayer’s deduction at this rate id pincite n the court did not expressly address the application of those portions of the applicable revenue_procedure that pertain to the application of sec_274 -- - meal expenses the sec_274 limitations are applicable absent some statutory exception petitioner has not attempted however to substantiate the drivers’ travel_expenses in any manner that would provide an evidentiary basis for allocating the per_diem payments between meal expenses and other reimbursed travel_expenses instead petitioner has elected to rely upon the deemed substantiation methods made available in the revenue procedures which provide for no such allocation accordingly we sustain respondent’s determination arguments raised by the parties and not discussed herein are without merit or irrelevant to reflect the foregoing decision will be entered for respondent as previously discussed we disagree with petitioner’s argument that the exception contained in sec_274 a affords petitioner any relief petitioner does not contend that any other exceptions contained in sec_274 apply


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc ita - plr-123697-02 date date tin dear this is in response to your date letter requesting permission under sec_453 and sec_15a_453-1 to revoke the election out of the installment_method for a certain sale during the tax_year during you taxpayer sold your professional practice to an unrelated corporation for cash and stock in that corporation the cash portion was received upon execution of the agreement the stock portion was to be received in a subsequent year or in an earlier year if certain conditions occurred i e a public offering of the stock of the corporation those conditions were not met and the stock portion payment was as yet still outstanding at the time of this ruling_request taxpayer consulted with a certified_public_accountant during the sale negotiations and the sale was purportedly purposefully structured as an installment_sale the sale agreement is labeled installment_sale agreement as stated in the ruling_request the taxpayer desired understood and expected that the transaction would be treated as an installment_sale and relied upon the accountant to report it as such the accountant however prepared the return reporting the entire sale proceeds-including the future stock payment-on the tax_return the taxpayer relying upon the accountant signed and filed the return without realizing this fact when the taxpayer subsequently switched accountants the new accountants reviewed prior returns and found the error the taxpayer subsequently submitted this ruling_request sec_453 requires that income from an installment_sale except as otherwise provided shall be taken into account under the installment_method sec_453 provides that an installment_sale is a disposition of property where at least one payment thereon is received after the close of the taxable_year in which the disposition occurred sec_453 provides that if the taxpayer elects not to have the installment_method apply the installment_method shall not apply pursuant to sec_453 of the code and sec_15a_453-1 d of the temporary income_tax regulations a taxpayer may elect out of the installment_method in accordance with the manner prescribed by regulations under sec_15a d of the income_tax regulations a taxpayer who reports an amount_realized equal to the selling_price including the full face_amount of any installment_obligation on a timely tax_return filed for the taxable_year in which the installment_sale occurs is considered to have elected out of using the installment_method except as otherwise provided in regulations sec_453 requires a taxpayer who desires to elect out of the installment_method for a qualifying_sale to do so on or before the due_date including extensions for the taxpayer’s federal_income_tax return for the taxable_year of the sale pursuant to sec_15a_453-1 of the temporary regulations generally an election under paragraph d is irrevocable and such an election is revocable only with the consent of the internal_revenue_service a revocation of an election out of the installment_method is retroactive a revocation of an election out will not be permitted when one of its purposes is the avoidance of federal income taxes or when the taxable_year in which any payment was received has closed in the present case the taxpayer’s representations indicate it was always taxpayer’s intent to use the installment_method for reporting the gain from the sale further the facts indicate the election out of the installment_method here was inadvertent and unintended and the result of the original accountant’s erroneous preparation of the taxpayer’s income_tax return accordingly based upon the facts presented and the representations made the taxpayer is permitted to revoke the election out of the installment_method for the sale of taxpayer’s professional practice for the year in issue permission to revoke the election out of installment_method reporting for the sale at issue is granted for the period that end sec_75 days after the date of this letter to revoke the election out of the installment_method for the sale at issue taxpayer must file an amended federal_income_tax return for the taxable_year of the sale and any previously filed return on which a portion of the gain from the sale is reportable under the installment_method a copy of this letter must be attached to the amended returns no opinion is expressed as to the tax treatment of the transaction under the provisions of any other sections of the internal_revenue_code or regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from the transaction which are not specifically covered the above ruling in accordance with the provisions of a power_of_attorney currently on file we are also sending a copy of this letter_ruling to the taxpayer's authorized representative this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely ___________________________ senior technician reviewer office of associate chief_counsel j charles strickland income_tax and accounting cc


internal_revenue_service number release date index numbers ------------------------------- --------------------------------- ------------------------- ------------------------------------- --------------------------- department of the treasury washington dc person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-112001-08 date date legend x a ------------------------------- ------ ---------------- -------------------------------------------- ------ ---------------- country d1 ----------- ------------------- dear ----- -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as a disregarded_entity under sec_301_7701-3 facts x was formed on d1 as a private limited_company under the laws of country x is wholly owned by a x intended to elect to be treated as a disregarded_entity for federal tax purposes effective d1 however a form_8832 entity classification election electing to be treated as a disregarded_entity was not timely filed law and analysis plr-112001-08 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 as provided in ' under 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 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 unless an entity elects otherwise a foreign eligible_entity is an association if all members have limited_liability sec_301_7701-3 provides that 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 that 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 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 provides that the commissioner may 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 or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides extensions 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 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 plr-112001-08 conclusion based on the facts 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 form_8832 with the appropriate service_center and elect to be classified as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed or implied as to whether x is otherwise eligible to make the election 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 x s authorized representative sincerely s curtis g wilson deputy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes