department of the treasury internal_revenue_service washington d c dec exempt and prison so uniform issue list ot er r a ’ t xxxxxkxxkxkkxkxkkkkkkk xxxxxxxxkxxxkkxkkxkkx xxxxxxxxkkxkxxkxxkkk legend taxpayer a taxpayer b ira x ira y xxxxxxxxxkxxxxkxkxkkk xxxxxxxxxkxkxxxkxxkxk xxxxxxxxxxxxxxkkkk xxxxkxxxkkkkkxkxkxkkkk xxxxxxxxkkxxkxxkxkkk xxxxxxxxxxxkxxxxxxx xxxxxxxxxxxkxxkxkkm xxxxxxkxxkxkxkxkxkxkxkkkk amount d xxxxxxxxxxxxxxkxkx financial_institution xxxxxxxxxxxxxxxxxx financial_institution t xxxxxxxxxxxxxkxkxkxk date date xxxxxxxxxxxxxxxkxxxk xxxxxxxxxxxxxxxkxxk xxxxxxxxxxxxxxxkxx xxxxxxxxxxxxxkxxxkk date year m year n xxxxxkxxkxxxkxkkkxkxkk page dear xxxxxxxx this is in response to your letter dated date as supplemented by correspondence dated date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age __ represents that he received a distribution from ira x totaling amount d taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to the medical_condition of taxpayer b his spouse and his duties as her caregiver which impaired his ability to accomplish a timely rollover taxpayer a further represents that amount d has not been used for any other purpose taxpayer a represents that on date he transferred amount d from ira x to a non-ira account taxpayer a represents further that when ira x which was maintained at financial_institution t matured he decided to change investment vehicles to obtain a higher rate of return and that it was his intention to rollover amount d to another rollover ira taxpayer a asserts further that prior to and during the rollover period taxpayer b his wife experienced numerous medical problems requiring hospitalization and his full-time service as primary caregiver taxpayer b was diagnosed with an aggressive disease and underwent several operations and therapy during year m and year n taxpayer b’s mental and physical condition deteriorated significantly in year n requiring around the clock care by taxpayer a until her demise on date taxpayer a asserts that his primary caregiver duties increased during the 60-day rollover period resulting in his inability to properly attend to his financial affairs on date approximately days after the 60-day period expired taxpayer a transferred amount d to ira y a qualified ira account documentation provided indicates that at the time of the distribution taxpayer a’s mental and emotional condition was seriously affected by his spouse's terminal condition and having to provide around the clock care for her the documentation submitted shows that taxpayer b had been treated for physical and mental health conditions since year m and that these health conditions increased in severity just before and during the 60-day period following date documentation also shows that the effects of taxpayer b’s long standing physical and mental health conditions restricted taxpayer a’s ability to handle his financial affairs revenue service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount d based on the facts and representations you request a ruling that the internal xxxxaxaxakkkxank age sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date4 are eligible for the waiver under sec_408 of the code determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances revproc_2003_16 2003_4_irb_359 date provides that in xxxxxxkkkxxxxkxxkxkxk page including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover was due to the medical_condition of taxpayer b his spouse and his duties as her caregiver which impaired his ability to accomplish a timely rollover therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the service will treat taxpayer a's date contribution of amount d to ira y as a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact xxxxxxxxxx id xx- xxxxx at xxx -xxxxx please address all correspondence to se t ep ra t3 laura b warshawsky manager employee_plans technical group deleted copy of ruling letter notice of intention to disclose sincerely yours enclosures


id office uilc cca_2009061810243641 ----------------------------- number release date from --------------- sent thursday date am to ---------------------- cc --------------------------------------------------------------- subject re csp and no 1099s in one year --------------- -- is --- a gov't contractor subject_to new z the reason i'm asking is b c -------- has been active in other examinations involving prior years and the same issue i'm copying her on this email to get her reaction to the scenario below if she was not already aware of it this may be the same way the others are being handled is only relevant if this is a worker classification dispute legislative_history makes that clear so the tps treatment of the workers as nonemployees ics is crucial to that issue and the application of csp is relevant here at all then the question is whether they satisfies the requirements the field response to that seems to be focusing on the reporting consistency_requirement and the failure_to_file 1099s if


internal_revenue_service department of the treasu index number dollar_figure washington dc person to contact telephone number refer reply to cc dom it a plr-101652-98 ate aus i i999 taxpayer taxpayer's ein taxpayer's address legenda x r a o o o m m m m m m o l state city state act state statute agreement q r proposal m n year year year year a o n n k o n n a h t a h a t w o h year year year year year year year year year dear this responds to taxpayer's request for a private_letter_ruling dated date specifically taxpayer has requested a ruling that the termination of taxpayer's power purchase agreement ppa pursuant to the agreement constitutes a compulsory or involuntary_conversion of its ppa within the meaning of sec_1033 and sec_1231 of the internal_revenue_code code taxpayer has also requested rulings that the amount of any gain_or_loss required to be recognized by taxpayer in connection with the conversion of its ppa is a sec_1231 gain or sec_1231 loss and that the amounts paid to terminate certain agreements necessary for the operation of its facility are deductible under sec_162 in the year paid conclusions the termination of the ppa pursuant to the agreement constitutes a compulsory or involuntary_conversion of the ppa within the meaning of sec_1033 and sec_1231 the amount of any gain_or_loss required to be recognized by taxpayer in connection with the conversion of its ppa will be treated as a sec_1231 gain or sec_1231 loss in accordance with the provisions of sec_1231 the amounts paid_by taxpayer to terminate certain agreements discussed below that were necessary for the operation of its facility are deductible under sec_162 taxpayer's payments to terminate certain agreements discussed below that were necessary for the operation of its facility are deductible in the taxable_year in the termination_payments were paid facts x is a regulated_public_utility furnishing electricity to various parts of state taxpayer is an independent power producer ipp that was organized in year for purposes of developing financing constructing and operating a q megawatt natural_gas fired cogeneration_facility facility at city in state the facility was placed_in_service in november year and is certified as a qualifying_facility qf under the ade jf public_utility regulatory policies act of u s c 824a as amended purpa and the implementing ferc regulations c f_r purpa requires electric utilities to purchase electricity from and enter into legally enforceable obligations with qfs in addition state enacted parallel provisions to purpa that obligated regulated public_utilities such as x to enter into jong-term contracts to purchase electricity from and granted additional rights to entities such as taxpayer that qualified under the state act as co-generation facilities or alternate energy production facilities the prices paid for electricity under these statutorily-mandated contracts were based upon projections of the costs that the regulated_public_utility otherwise would incur to meet its service requirements avoided costs these avoided costs were composed of in all cases variable costs associated with producing electricity and in some cases fixed costs associated with developing and constructing a facility if the regulated_public_utility did not have the generation capacity to meet the demand for electricity in june year x entered into a ppa with a who subsequently assigned the ppa to taxpayer that was priced to reflect both the fixed and variable costs of producing electricity required to be purchased under the agreement for the output of taxpayer's facility x was obligated to pay an amount determined by reference to the higher of a r per kilowatt hour or b x's avoided costs as calculated at the time electricity is delivered taxpayer projected that the payments to be made to it under the ppa would cover both the fixed costs associated with the development construction maintenance and operation of the facility as well as certain other costs such as fuel and fuel transportation costs and variable operation and maintenance_costs associated with the production of electricity in january year taxpayer entered into an amended and restated ppa as amended the ppa has a term of years and requires x to take and pay for the electricity produced by taxpayer's facility during the periods that the facility is scheduled to operate the facility is scheduled to operate for a minimum number of hours annually the ppa can be assigned to a third party by taxpayer with x’s consent which cannot be unreasonably delayed or conditioned at the time that the ppa was executed the price x was to pay for electricity was agreed to by taxpayer and x and was believed to be a fair price based on x’s projections of the costs it would otherwise have incurred over the term of the ppa however by mid-year x had projected that it had excess electric production capability and thus its new avoided costs rates and accordingly the prices it was required to pay new projects for electricity were substantially less than its year rates thus the price paid_by x pursuant to taxpayer’s ppa has for some time exceeded the state public service commission’s psc current approved rates initially x was able to recover its costs for electricity produced by and due to the disparity between actual market purchased from taxpayer and other ipps under its state psc-approved tariffs which included a fuel adjustment clause however x’s electricity rates are much higher than in other areas of the united_states electricity prices and the price paid for electricity under taxpayer's ppa and other ppas the state psc and consumers pressured x to reduce its rates and move toward a competitive market as early as march year the state psc began to investigate methods to create competitive opportunities for state electricity consumers including x's customers and requested that the utilities do the same pursuant to the state psc’s request x commenced negotiations with taxpayer and other ipps to reduce its cost for electricity purchased under those ppas as of april year x had renegotiated ppa agreements with of ipps that had ppas in an attempt to reduce its costs x sought to have rules adopted by the state psc which would permit x to curtail purchases of electricity from the ipps in april year x petitioned the state psc suggesting that such rules were necessary and stating that the currently available settlement opportunities with the ipps had been exhausted although the state psc did not adopt a formal curtailment plan in year it continued its efforts to encourage regulated public_utilities including x competitive electric market for state to develop a in response in october year x submitted a proposal entitled proposal to the state psc for reducing its electric rates to its customers stating that the differences with the ipps had not been resolved the proposal set forth several alternative ways to restructure the ppas including the taking by eminent_domain of the ipps’ electricity generating facilities and the curtailment of x's obligations to purchase electricity generated by the ipps emphasizing that it was essential to the creation of a competitive market that ppas with a significant number of the unregulated ipps be restructured such that those generating units become independent suppliers competing in the wholesale spot market or become suppliers to customers directly in the proposal x stated that if negotiations with the ipps failed to produce the necessary cost savings it proposed to utilize its power of eminent_domain to acquire the generating units owned by the ipps with which it has ppas and subsequently resell them at auction in order to increase competition in the wholesale power market it also stated that it would soon initiate the process necessary to exercise its power of eminent_domain by filing a petition with the state psc ' the power of eminent_domain was delegated to x pursuant to state statute which provides that a n electric corporation shall have the power and authority to acquire such real_estate as may be necessary for its corporate purposes in the manner prescribed by the eminent_domain procedure law ana taxpayer believed that x would institute an eminent_domain proceeding against the facility unless x was otherwise able to reduce its payments to a significant number of ipps with which it had ppas after the proposal was made public x and certain of the ipps entered into negotiations x took no further action towards exercising its eminent_domain powers because of progress with the negotiations with the ipps during these negotiations x ‘s counsel stated to one of the ipps that if the negotiations were not successful x would have no way to restructure its markets and reduce its costs other than by commencing eminent_domain proceedings in may year the state psc issued an order describing its goals and strategies for restructuring state's electric utility industry and stated that all possible efforts to reduce electric rates should be continued including efforts to reduce utility commitments under ipps contracts that include obligations for payments well above current wholesale prices these contracts voluntarily it would pursue policies to mitigate the impact of such contracts on rates subsequently in july year the state psc stated publicly that the ppas with the ipps were a major hurdle to lowering electric rates in state and achieving a competitive electric market two weeks after this public statement x made an offer to ipps to buy out their ppas those ipps retained an investment banking firm to evaluate x’s offer it further stated that if the parties were unwilling to restructure active negotiations between x and the ipps continued until december year in december year the administrative law judge when the negotiations stalled considering x's request for curtailment of purchases from the ipps recommended that state utilities be allowed to curtail purchases although taxpayer's ppa prohibits x's curtailment of purchases taxpayer was still concerned that some action by x or government authorities could result in curtailment of electricity purchases to some degree in march year taxpayer and other ipps made a counterproposal to the x’s offer which became the basis for further negotiations in may year the state psc approved but did not issue a curtailment order which allowed x to reduce the quantity of electricity that it was required to purchase from certain ipps the ipps believed that the approval of the curtailment order was intended to place additional pressure on the negotiations with x _ in july year taxpayer and the other ipps signed the agreement which was subsequently amended four times in june year the transaction was consummated in accordance with the terms of the amended agreement pursuant to the amended agreement consideration in the aggregate of dollar_figure m cash and n shares of x common_stock would be available for ipps to elect from taxpayer received cash and stock in consideration for terminating its ppa taxpayer's ppa will be terminated but it will have the right to maintain its status as a state qf the right to wheel its output to third parties and the right to have x act as an agent for sales of its electricity to the state electric power pool taxpayer represents that x had threatened during negotiations to pursue eminent_domain actions against the ipps’ facilities including taxpayer's facility if the restructuring negotiations were not successful in november year x informed the state psc that it had not pursued the exercise of its power of eminent_domain due to the progress in negotiations with the ipps but that it would take necessary measures including exercise of its power of eminent_domain if the restructuring pursuant to the agreement was not effected based on x's actions taxpayer states that it had a reasonable belief that a threat_or_imminence_of_condemnation existed against its facility taxpayer further represents that if x had condemned its facility the ppa would - have been unenforceable and wholly worthless and that it could not have sold electricity to x pursuant to the terms of the ppa taxpayer represents that the ppa was site-specific because that the ppa is limited to the purchase and sale of electricity produced and delivered by the facility referenced in the ppa thus if taxpayer's facility were taken by x pursuant to its eminent_domain powers taxpayer could not sell electricity to x pursuant to the terms of the ppa nor could it assign its ppa to a third party for value because the third party could not sell electricity to x pursuant to the terms of the ppa taxpayer further represents that one of the requirements for qf status is that the facility must be owned by a person not primarily engaged in the generation or sale of electric power other than electric power solely from cogeneration facilities or small power production facilities thus once x an electric utility acquired the facility the facility would lose its qf status which is required by the ppa to be maintained if the qf status is not maintained x has the option of terminating the ppa and it would have terminated the ppa it is also represented that if x had acquired taxpayer’s facility it would have auctioned the facility and the new owner of the facility could not have sold power to x pursuant to the ppa but would have to abide by new pricing protocols in the competitive market taxpayer has not treated the ppa as a separate and distinct asset on its books_and_records costs associated with acquiring the ppa such as attorney's_fees and other related costs have been capitalized into a general asset category and amortized accordingly taxpayer entered into a participation_agreement a lease agreement and certain ancillary agreements collectively the facility lease agreements with c and with b in its individual capacity and as owner trustee pursuant to the facility lease agreements taxpayer sold the facility assigned the ground lease and certain other operative agreements and leased the facility back for years subject_to renewals in a transaction that qualified as a true lease for federal_income_tax purposes in year as a result of the restructuring taxpayer terminated the facility lease agreements and made a cash termination_payment to c the facility was sold to a third party in december year taxpayer entered into a fuel supply and transportation management services agreement dated as of june year and expiring in december year and certain ancillary agreements with d collectively the fuel management agreement under the fuel management agreement d manages the fuel transportation and delivery contracts applicable to the facility terminated the fuel management agreement and made a cash termination_payment to d taxpayer does not intend to enter into a new fuel management agreement with d or another party in year as a result of the restructuring taxpayer taxpayer entered into a fuel transportation agreement dated as of october year and expiring in november year with e the fuel transportation agreement under this agreement taxpayer is obligated to pay for transporting gas through the transporter's pipeline in year as a result of the restructuring taxpayer terminated the fuel transportation agreement and made a cash termination_payment to e taxpayer does not intend to enter into a new fuel transportation agreement with e or another party taxpayer also entered into a firm service_contract dated september year and expiring october year with f the firm service_contract under this contract taxpayer is obligated to pay for transporting gas through the transporter’ pipeline year as a result of the restructuring taxpayer terminated the firm service_contract and made a cash termination_payment to f taxpayer does not intend to enter into a new fuel transportation agreement with f or another party in taxpayer's facility is operated by g pursuant to an operation and maintenance agreement dated january year and expiring in october year and ancillary agreements collectively the operation and maintenance agreement a result of the restructuring taxpayer terminated the operation and maintenance agreement and made a cash termination_payment to h as assignee of g taxpayer entered into a lay up services agreement with h effective july year for a term of days with three day extensions to provide for the protection preservation and maintenance of the facility pending its sale upon expiration of the lay up services agreement taxpayer does not intend to enter into a new operation and maintenance agreement with h or another party in year as - law and analysis whether the termination of taxpayer's ppa pursuant to the agreement constitutes a compulsory or involuntary_conversion of its ppa within the meaning of sec_1033 and sec_1231 sec_1033 provides in part that if property as a result of its destruction in whole or in part theft seizure or requisition or condemnation or threat or imminence thereof is compulsorily or involuntarily converted into money the gain if any shall be recognized except to the extent hereinafter provided in this paragraph sec_1033 provides that if a taxpayer during the period specified in sec_1033 for the purpose of replacing the property so converted purchases other_property similar_or_related_in_service_or_use to the property so converted then at the taxpayer's election the gain shall be recognized only to the extent that the amount_realized upon such conversion regardless of whether such amount is received in one or more taxable years exceeds the cost of such other_property sec_1 a of the income_tax regulations provides in part that an involuntary_conversion may be the result of the destruction of property in whole or in part the theft of property the seizure of property the requisition or condemnation of property or the threat or imminence of requisition or condemnation of property revrul_63_221 1963_2_cb_332 establishes the criteria necessary for the existence of a threat_or_imminence_of_condemnation based on the taxpayer’s reasonable belief generally the threat_or_imminence_of_condemnation exists when a property owner is informed either orally or in writing by a representative of a governmental body or public official authorized to acquire property for public use that such body or official has decided to acquire the owner's property and the owner has reasonable grounds to believe from the information conveyed to him by such representative that the necessary steps to condemn the property will be instituted if a voluntary sale is not arranged revrul_74_8 1974_1_cb_200 modifying revrul_63_221 provides that a threat_or_imminence_of_condemnation may exist where the purchaser a public_utility lacked actual condemnation authority prior to or at the time of the sale but it generally could readily obtain the power to condemn by application to the appropriate state official authority in the event that a voluntary sale was not arranged and there was no reason to believe that such power to condemn the land purchased would be denied revrul_59_361 1959_2_cb_183 recognized the economic unit theory of 30_tc_741 acq 1959_2_cb_5 the taxpayer in masser owned a freight terminal and the parking lots across the street from the terminal that were necessary for its operation the parking lots were condemned and the taxpayer being unable to secure adequate replacement lots in the same vicinity sold the freight terminal the proceeds of the sale of the freight terminal together with the proceeds from the condemnation of the parking lots were reinvested in a similar terminal and parking facilities suitable for the taxpayer's business the court allowed involuntary_conversion treatment for the terminal proceeds and the parking lot proceeds on the theory that the two properties were used as an economic unit accordingly the service stated that where all the facts and circumstances show a substantial economic relationship between the condemned property and the other_property sold by the taxpayer so that together they constituted one economic property unit such as existed in the masser case involuntary_conversion treatment for the proceeds of the voluntary sale will be permitted revrul_82_147 1982_2_cb_190 held that the sale of the taxpayer's fishing resort due to an act of congress declaring the area in which it is located a boundary waters canoe area wilderness constituted an involuntary_conversion prohibited the use of motorboats with motors of greater than horsepower on the lake the restriction on horsepower of motorboats effectively denied the taxpayer the former economic use of its resort the act gave an affected resort owner the option to require the government to purchase the resort at its fair_market_value without regard to the restriction the restriction together with the provision authorizing purchase effectively constituted a taking of the property upon payment of fair compensation the act the actions of the state psc and x with regard to the establishment of a competitive electricity market for state provide notice to taxpayer as well as a reasonable basis for taxpayer to conclude that x would pursue its threat to condemn taxpayer's facility if taxpayer did not renegotiate its ppa further it is clear that x had the authority under state statute to commence eminent_domain proceedings against taxpayer's facility taxpayer's representations regarding the relationship between its ppa and its facility establish that the property converted the ppa bears a substantial economic relationship to the threatened property the facility against which x has taken actions that constitute a threat_or_imminence_of_condemnation further if x were to condemn the facility this action would damage completely the value of the ppa to taxpayer thus although x's threat of condemnation was made to taxpayer's facility because the facility and the ppa form an economic unit the termination of taxpayer’s ppa pursuant to the agreement constitutes an involuntary_conversion made under a threat_or_imminence_of_condemnation by x of the ppa whether the amount of any gain_or_loss required to be recognized by taxpayer in connection with the conversion of its ppa is a sec_1231 gain or sec_1234 loss sec_1231 prescribes in part the treatment of certain gains from mvoluntary conversions sec_1231 a a ii provides that the term sec_1231 gain means any recognized gain from the compulsory or involuntary_conversion as a result of destruction in whole or in part theft or seizure or an exercise of the power of requisition or condemnation or the threat or imminence thereof into other_property or money of property used in a trade_or_business or any capital_asset which is held for more than year and is held in connection with a trade_or_business or a transaction entered into for profit see also sec_1231 losses under sec_1231 if sec_1231 gains for the year exceed sec_1231 losses they are treated as long-term_capital_gains and losses if sec_1231 losses exceed sec_1231 gains they are treated as ordinary gains and losses v7 the provisions in sec_1231 that deal with involuntary_conversions provide a statutory_sale or exchange for such transactions so that they may qualify for potential capital_gain treatment depending on the netting of gains and losses under sec_1231 these provisions were added by congress in part to supplement what is now sec_1033 and are generally interpreted in a similar manner see h_rep_no cong 2d sess 1942_2_cb_372 conf_rep no cong 2d sess 1942_2_cb_701 cf rev_rul 1953_2_cb_36 treatment of severance_damages under sec_1231 accordingly any gain_or_loss recognized by taxpayer in connection with the conversion of its ppa will be treated as a sec_1231 gain or sec_1231 loss whether taxpayer may deduct under sec_162 the amounts paid to terminate the facility lease agreements fuel management agreement fue transportation agreement firm service_contract and operation and maintenance agreement sec_162 provides in part that taxpayers may deduct all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business further sec_1_162-1 provides in part that deductible business_expenses include the ordinary and necessary expenditures directly connected with or pertaining to the taxpayer’s trade_or_business sec_263 and a provide that taxpayers may not deduct amounts paid for new buildings or for permanent improvements or betterments made to increase the value of any property or estate or any amount expended in restoring property or making good the exhaustion thereof for which an allowance is or has been made in certain instances the courts have allowed taxpayers to currently deduct amounts paid_by taxpayers to terminate burdensome and uneconomic contracts see eg 237_f2d_901 7th cir amounts incurred by taxpayer to free itself from an unprofitable agency contract were deductible 171_fsupp_943 ct_cl cash paid and the fair_market_value of stock surrendered to relieve the taxpayer of its obligation under supply contract was deductible business_expense stuart co v commissioner t c _memo big_number aff'd 195_f2d_176 9th cir an amount allocable to the cancellation of an onerous supply contract was deductible as an ordinary and necessary business_expense 30_bta_114 affid 79_f2d_394 9th cir amount_paid to terminate an unsatisfactory waste disposal contract was a currently deductible business_expense in addition both the courts and the internal_revenue_service have maintained that amounts paid solely to reduce or eliminate future costs are also deductible see eg 101_tc_581 amounts paid to majority shareholder to compensate her for refraining from causing an royalty rate increase were currently deductible revrul_95_32 1995_1_cb_8 expenditures incurred by a public_utility for the implementation and operation of energy load management programs are currently deductible under sec_162 revrul_94_77 c b supreme court's decision in 503_us_79 does not affect the treatment of severance payments made by a taxpayer to its employees as business_expenses that are generally deductible taxpayer paid the termination_payments to terminate certain of its long-term contractual obligations with respect to operation of its facility and therefore reduce its future costs accordingly the amounts paid_by taxpayer to terminate the facility lease agreements fuel management agreement fuel transportation agreement firm service_contract and operation and maintenance agreement are deductible expenses under sec_162 in which taxable_year may taxpayer deduct the termination_payments for the facility lease agreements fue management agreement fuel transportation agreement firm service_contract and operation and maintenance agreement sec_461 provides generally that the amount of any deduction shall be taken for the taxable_year which is the proper year under the method_of_accounting used in computing taxable_income sec_461 provides that in determining whether an amount has been incurred with respect to any item during any taxable_year the all_events_test shall not be treated as met any earlier than when economic_performance with respect to suchitem occurs sec_461 provides generally that in the case of liabilities other than those described in sec_461 b and c economic_performance occurs at the time determined under the regulations prescribed by the secretary sec_1_461-1 provides generally that under the accrual_method of accaunting a liability is incurred and generally taken into account for federal_income_tax purposes in the taxable_year in which all the events have occurred that establish the fact of the liability the amount of the liability can be determined with reasonable accuracy and economic_performance has occurred with respect to the liability sec_1_461-4 provides that in the case of liabilities described in paragraphs g through of this section economic_performance occurs when and to the extent that payment is made to the person to which the liability is owed sec_1_461-4 provides that payment to a particular person is accomplished if sec_1_461-4 is satisfied and a cash_basis taxpayer in the position of that person would be treated as having actually or constructively received the amount of the payment as gross_income under the principles of sec_451 sec_1_461-4 through g set out specific liabilities for which payment is economic_performance in general these liabilities include those arising under a workers compensation act or out of any tort breach of contract or violation of law liabilities to pay rebates or refunds liabilities to provide awards prizes or jackpots liabilities arising out of the provision to the taxpayer of insurance warranty or service contracts and liabilities of a taxpayer to pay taxes sec_1_461-4 provides that in the case of a taxpayer's liability for which economic_performance rules are not provided elsewhere in this section or in any other regulation revenue_ruling or revenue_procedure economic_performance occurs as the taxpayer makes payment in satisfaction of the liability to the person to whom the liability is owed on the date that each of the terminated agreements was terminated taxpayer's liability became fixed and the amount of that liability could be determined with reasonable accuracy under sec_1 a further taxpayer's liability to compensate the other party to each of the terminated agreements constitutes a liability for which economic_performance rules are not provided elsewhere in sec_1_461-4 of the regulations in any other regulation revenue_ruling or revenue_procedure thus pursuant to sec_1_461-4 economic_performance occurred when taxpayer made the termination_payment to the other party to each of the terminated agreements based on the forgoing analysis taxpayer may deduct termination_payments for the facility lease agreements fuel management agreement fuel transportation agreement firm service_contract and operation and maintenance agreement in the taxable_year in which the termination_payment was paid with respect to each agreement ct based on taxpayer's representations and the above analysis we rule as follows the termination of the ppa pursuant to the agreement constitutes a compulsory or involuntary_conversion of the ppa within the meaning of sec_1033 and sec_1231 the amount of any gain_or_loss required to be recognized by taxpayer in connection with the conversion of its ppa will be treated as a sec_1231 gain or sec_1234 loss in accordance with the provisions of sec_1231 the amounts paid_by taxpayer to terminate the facility lease agreements fuel management agreement fuel transportation agreement firm service_contract and operation and maintenance agreement are deductible under sec_162 taxpayer's payments to terminate the facility lease agreements fuel management agreement fuel transportation agreement firm service_contract and operation and maintenance agreement are deductible in the taxable_year in which the payments were paid 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 ruting is directed only to the taxpayer s requesting it sec_61 j of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely assistant chief_counsel income_tax accounting senior technician reviewer branch


id office uilc cca-511438-09 ---------------- number release date from ------------------ sent friday date pm to -------------------- cc -------------- subject charitable_contribution - -------- field_office question i am attaching two cases that will be relevant to our phone call bruzewicz and addis in bruzewicz on a motion for summary_judgment the court disallowed a deduction for a charitable bruzwisc pdf addis doc kb kb contribution because meet the regulatory requirements for a qualified_appraisal in fact the court stated that failure to obtain the cwa is alone fatal to their claimed deduction there are also a number of tax_court cases denying a deduction for lack of a cwa taxpayers failed to obtain a cwa and also failed to in addis the tax_court denied a deduction for an alleged charitable_contribution because the charity provided receipts to the taxpayers that incorrectly stated that the taxpayers received no consideration for their payments to the charity the court found that in fact the taxpayers did receive consideration


department of the treasury internal_revenue_service washington d c apr onng uniform issue list eelt’ ep ’ ka legend companya companyb ira u ira v ira w dear amount f amount e amount g this is in response to your request received in the internal_revenue_service on date for a ruling to waive the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code you requested that company a liquidate your ira funds prior to their transfer to a new ira at company b amount e was to be transferred to ira u at company b you used a standard account transfer form issued by company b your have submitted the or date transferred to ira u with company b following facts and representations you requested that funds in iras v and w be page to effectuate the transfer however company a processed the transfer as a taxable_distribution and erroneously withheld amount f in federal_income_tax thus only amount g was transferred to company b to be contributed to ira u on date your representative notified company a of the error and requested that it be corrected however when you received your form 1099-rs for each ira for you noticed that the error was not corrected the form 1099-rs indicated that no amount was taxable yet company a withheld tax from all the distributions documentation submitted as part of this request confirms your intent to complete a direct trustee-to-trustee transfer of amount e into an ira with company b based on the facts and representations you request that the internal_revenue_service waive the day rollover requirement with respect to your contribution of amount f into an ira because the failure to waive such requirement would be against equity or good conscience with respect to your ruling_request sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers page sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the issue presented in this case is whether you may properly roll over amount f into an ira u we note that you had the intent to transfer by direct trustee-to- trustee transfer all amounts standing in iras v and w totaling amount e into ira u withheld amount f for federal income taxes and only amount g was transferred however because of an error on the part of company a company a the facts indicate that you had the intent to transfer amount e to an ira furthermore amount g had been placed into ira u and the difference between amount g and amount e amount f would also have been placed in ira u but for an error on the part of company a which was beyond your control accordingly pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount f provided all other requirements of sec_408 of the code except the 60-day requirement were met with respect to such distribution the amount to be deposited into ira u will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent page if you wish to inquire about this ruling please contact jd at please address all correspondence to se t ep ra t3 sincerely yours s frances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date cc pa apjp b3 uilc internal_revenue_service national_office field_service_advice memorandum for ronald d pinsky associate area_counsel small_business and self-employed cc sb was b1 from curt g wilson assistant chief_counsel administrative provisions and judicial practice cc pa apjp subject application of mitigation provisions this field_service_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend year year x y b issue in year x y reported gain from the conversion of certain stock in b the period of limitations for filing a claim_for_refund for year has now expired if there is a determination that the conversion occurred in year rather than year can an adjustment be made for year conclusion yes once the determination is made the mitigation provisions of sec_1311 - will authorize an adjustment facts x owned stock in b the stock was convertible into a different class of securities upon occurrence of certain events in year b was sold x y treated the sale as converting their stock in b and reported taxable_income on the conversion the internal_revenue_service maintains that the b stock actually converted in year x y which have litigated the year of conversion now agree that the stock converted in year they wonder however whether an adjustment is possible for year for which the period of limitations on filing a refund claim has expired law and analysis the mitigation provisions of sec_1311 - of the internal_revenue_code were designed to palliate the effect of the period of limitations in certain meticulously and narrowly drawn situations see 34_tc_1051 for an adjustment to be authorized under these provisions four conditions must be met first an error must have occurred in a closed tax_year that cannot otherwise be corrected by operation of law see sec_1311 second there must be a determination for an open tax_year as defined in sec_1313 a determination is a final_decision by a court a closing_agreement a final disposition of a claim_for_refund or an agreement under sec_1_1313_a_-4 third the determination must result in a circumstance under which an adjustment is authorized by sec_1312 there are seven circumstances under which an adjustment is authorized these circumstances involve double inclusion of an item_of_gross_income sec_1312 double allowance of a deduction or credit sec_1312 double exclusion of an item_of_gross_income sec_1312 double disallowance of a deduction or credit sec_1312 correlative deductions and inclusions for trusts or estates and legatees beneficiaries or heirs sec_1312 correlative_deductions_and_credits for certain related corporations sec_1312 and basis_of_property after erroneous treatment of a prior transaction sec_1312 cid cid cid fourth except for determinations described in sec_1312 and in sec_1312 the determination must adopt a position maintained by a party that is inconsistent with the error that has occurred see sec_1311 in this case the four conditions necessary for mitigation have occurred or are likely to occur shortly first x y erred by reporting income from the conversion in year and this error cannot otherwise be corrected because the period of limitations on filing a claim_for_refund for year has passed second x y and the government have agreed to resolve pending litigation regarding the year of conversion x y and the government anticipate that their settlement will result in a determination under sec_1313 third the anticipated determination will result in the double inclusion of income from the conversion a circumstance of adjustment described in sec_1312 finally the anticipated determination will adopt a position maintain by the service that is inconsistent with taxing the conversion in year once all four of the conditions for mitigation have been met an adjustment will be authorized for year in the amount and by the method described in sec_1314 case development hazards and other considerations please call if you have any further questions this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney-client_privilege if disclosure becomes necessary please contact this office for our views by susan t mosley senior technician reviewer cc pa apjp b3 cid


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 fip b01 plr-106027-18 date august legend taxpayer ----------------------------------------------------------- -------------------------------------------------------------------------------- trust advisor manager accounting firm state date date date date date date date -------------- ---------------- ------------------------------------------ --------------- ------------ -------------------------- ---------------------- --------------------------- --------------------------- ----------------------- ----------------------- ----------------------- plr-106027-18 date year a b dear -------------- ------------------ ------ -- -- this responds to a letter dated date submitted on behalf of taxpayer taxpayer requests an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_853 of the internal_revenue_code code and sec_1_853-1 of the income_tax regulations regulations for the taxable_year ended on june year facts taxpayer is registered as a diversified open-end management investment_company under the investment_company act of as amended and has elected to be taxed as a regulated_investment_company ric under part i of subchapter_m of the code taxpayer uses an accrual_method of accounting for u s federal_income_tax purposes and its taxable_year is a fiscal_year ending on june taxpayer is one of a series of investment portfolios comprising trust a state trust that was established on date taxpayer commenced operations on date advisor serves as the investment_advisor to a of the b investment funds comprising trust including taxpayer in its role as investment_advisor advisor manages the investment and reinvestment of taxpayer’s assets and is accountable for the administration of taxpayer’s affairs taxpayer has one type of investment that requires an election as part of its form 1120-ric u s federal_income_tax return for regulated_investment_companies taxpayer has direct and indirect investments in foreign countries for which foreign taxes must be paid on income derived from such investments as such taxpayer may make an election under sec_853 to pass through any foreign tax_credits earned by taxpayer on to its shareholders since it was established taxpayer has been taxed as a corporation for u s federal_income_tax purposes for many years advisor has engaged manager to manage a number of investment funds including taxpayer manager’s management responsibilities include managing taxpayer’s tax matters including all tax_return preparation work on date manager engaged accounting firm to assist with the tax preparation work formerly plr-106027-18 performed by manager including the preparation of taxpayer’s form 1120-ric for the taxable_year ended on june year year form 1120-ric and all relevant forms statements and elections in all taxable years prior to the taxable_year ended on june year taxpayer has consistently and timely made the election that is the subject of the ruling_request as part of taxpayer’s year form 1120-ric taxpayer intended to make an election under sec_853 the election under sec_853 would allow taxpayer to pass through any foreign tax_credits earned by taxpayer on to its shareholders under sec_1_853-4 the election must be made in a statement with supporting information included on or with form_1118 foreign tax credit-corporations and must be made not later than the time prescribed for filing the return including extensions thereof accounting firm was required to prepare and submit form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns on behalf of taxpayer for the taxable_year ended on june year year form section a of the surface transportation and veterans health care choice improvement act of p l the act made certain amendments to the code that modified tax_return due dates for certain taxpayers section a a of the act provides in general that except as provided in section a b of the act the amendments made by section a of the act apply to returns for taxable years beginning after date section a b of the act provides a special rule for c corporations with fiscal years ending on june under this special rule the amendments made by section a of the act to tax_return due dates apply to returns for taxable years beginning after december accordingly the amendments made by section a of the act did not modify the due_date for taxpayer’s year form 1120-ric see section a b of the act during the tax_return planning and preparation phases related to taxpayer’s year form 1120-ric neither manager nor accounting firm identified that taxpayer’s taxable_year end fell under the special rule provided by section a b of the act and that the tax_return due_date for taxpayer’s year form 1120-ric had not changed two main factors contributed to this oversight first because this was the first year that accounting firm was engaged by manager accounting firm and manager were still working out an effective communication system to ensure that all filing obligations were being met on previous projects with filing deadlines manager and accounting firm worked together to prepare a production calendar to ensure filing deadlines were met no production calendar was prepared that involved taxpayer’s year form_7004 due on date because both manager and accounting firm believed that taxpayer’s year form_7004 was due on date second accounting firm’s manager who was responsible for taxpayer’s year form 1120-ric was in the process of transitioning away from accounting firm in order to pursue other opportunities accounting firm’s manager's last day at accounting firm was shortly after the date due_date for plr-106027-18 taxpayer’s year form_7004 as such accounting firm’s manager’s attention was not focused on the impact of the amendments made to the code by section a of the act and the impact of these amendments if any on the tax_return due_date for taxpayer’s year form 1120-ric on date during manager’s review of forms for its managed entities manager discovered that the correct due_date for filing taxpayer’s year form_7004 was date also on date manager advised accounting firm and taxpayer that taxpayer’s year form_7004 was due on date accounting firm subsequently filed taxpayer’s year form_7004 on date the difficulties described above surrounding the communication between both manager and accounting firm resulted in the late filing of taxpayer’s year form_7004 because taxpayer’s year form_7004 was not timely filed taxpayer cannot make a timely election under sec_853 absent the requested relief taxpayer represents that it submitted its request for relief promptly and as soon as practicable after learning of the untimely filing of the year form_7004 to be timely taxpayer should have filed the election under sec_853 by date or if taxpayer had timely filed the year form_7004 taxpayer should have filed the election by date the extended due_date for taxpayer’s year form 1120-ric taxpayer represents that taxpayer’s year form 1120-ric was filed on or about date and contained an election under sec_853 and that taxpayer’s year form ric was not timely because of the failure_to_file taxpayer’s year form_7004 timely taxpayer makes the following additional representations in connection with its request for an extension of time the request for relief was filed before the failure to make the regulatory election was discovered by the service granting the relief requested will not result in taxpayer having a lower u s federal tax_liability in the aggregate for all years to which the election applies than taxpayer would have had if the election had been timely made taking into account the time_value_of_money taxpayer does not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 of the code at the time taxpayer requested relief and the new position requires or permits the regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences taxpayer did not choose to not file the election plr-106027-18 taxpayer is not using hindsight in making the decision to seek the relief requested no specific facts have changed since the due_date for making the election that make the election advantageous to taxpayer the period of limitations on assessment under sec_6501 has not expired for taxpayer for the taxable_year in which the election should have been filed nor for any taxable_year s that would have been affected by the election had the election been timely filed in addition affidavits on behalf of taxpayer manager and accounting firm have been provided as required by sec_301_9100-3 and law and analysis sec_853 provides that a ric more than percent of the value as defined in sec_851 of whose total assets at the close of the taxable_year consist of stock_or_securities in foreign_corporations and which meets the requirements of sec_852 for the taxable_year may elect the application of sec_853 for the taxable_year with respect to certain taxes paid_by the ric during the taxable_year to foreign countries and possessions of the united_states sec_853 provides that the effect of the election is to deny an electing ric any deduction under sec_164 or any credit under sec_901 for these taxes the electing ric is allowed an addition to its dividends_paid deduction for the taxable_year for the amount of these taxes sec_853 further describes the effect of the election by providing that each shareholder of the ric shall include in gross_income and treat as paid_by him his proportionate share of these taxes each shareholder shall treat as gross_income from sources within the respective foreign countries and possessions of the united_states the sum of his proportionate share of these taxes and the portion of any dividend paid_by the ric which represents income derived from sources within foreign countries and possessions of the united_states sec_853 provides that the amount to be treated by the shareholder as his proportionate share of taxes paid to any foreign_country or possession_of_the_united_states and gross_income derived from sources within any foreign_country or possession_of_the_united_states shall not exceed the amounts so reported by the ric in a written_statement furnished to the shareholder sec_1_853-4 and b provide that an election under sec_853 must be made not later than the time prescribed for filing the return including extensions thereof and is irrevocable with respect to the dividend or portion thereof and the foreign taxes paid with respect thereto to which the election applies sec_1_853-4 requires that certain information pertinent to the election including among other things the date form and contents of its notice to its shareholders shall accompany the ric’ s timely filed federal_income_tax return for the taxable_year on or with a modified form_1118 foreign tax credit-corporations plr-106027-18 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin sec_301_9100-3 through c sets forth rules that the service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to this section 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 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election a taxpayer will be deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section plr-106027-18 conclusion based upon the information submitted and representations made we conclude that taxpayer has shown good cause for granting a reasonable extension of time to make the election under sec_853 for the taxable_year ended on june year accordingly taxpayer’s year form 1120-ric which was filed on or about date and contained an election under sec_853 is treated as timely filed for purposes of making that election this ruling is limited to the timeliness of the filing of the election in sec_853 of the code this ruling's application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether taxpayer otherwise qualifies as a ric under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of taxpayer is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director's office will determine such tax_liability for the years involved if the director's office determines that such tax_liability is lower that office will determine the federal_income_tax effect except as specifically provided otherwise no opinion is expressed on the federal_income_tax consequences of the transactions described above this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely ___________________________ robert a martin senior technician reviewer office of associate chief_counsel financial institutions products enclosure a copy of this letter cc


t c memo united_states tax_court james e diamond jr petitioner v commissioner of internal revenue respondent docket no 29178-10l filed date james e diamond jr pro_se alicia e elliott for respondent memorandum opinion vasquez judge pursuant to sec_6320 and sec_6330 petitioner seeks review of respondent’s determinations to sustain the filing of a federal tax unless otherwise indicated all sections references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure lien and proposed levy action to collect petitioner’s unpaid federal_income_tax liability for the matter is before the court on respondent’s motion for summary_judgment filed pursuant to rule to which petitioner objects we conclude that there is no genuine issue as to any material fact and respondent is entitled to summary_judgment as a matter of law background petitioner did not file a federal_income_tax return for consequently the internal_revenue_service irs prepared a substitute for return for on the basis of information returns filed by third-party payors with the irs on date respondent mailed to petitioner a notice_of_deficiency for which was addressed to petitioner’s last known and current address petitioner does not have a copy of the notice_of_deficiency and does not recall signing for the notice petitioner was away from his home in date because of a family illness and he had family members or friends picking up his mail petitioner did not file a petition with the court contesting the deficiency determination and on date the irs assessed his tax for as proof that the irs mailed the notice_of_deficiency respondent attached to his motion for summary_judgment a substitute usps form_3877 form form_3877 is a mailing list form of the postal service that is prepared and used by the irs to identify items mailed by certified or registered mail petitioner failed to pay the assessed tax and on date the irs sent him letter final notice_of_intent_to_levy and notice of your right to a hearing on date the irs sent petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 on date respondent received petitioner’s form request for a collection_due_process or equivalent_hearing cdp hearing request in which he requested a face-to-face collection_due_process cdp hearing to address whether the irs followed proper procedures to dispute the underlying tax_liability and to discuss available collection alternatives on date settlement officer karen morrison of the irs office of appeals appeals sent petitioner a letter informing him that respondent’s collection_division had placed his tax_liability for in currently not collectible cnc statu sec_3 and that if he no longer wanted a cdp hearing he could withdraw his request by date petitioner did not respond to this letter by the requested date on date officer morrison sent a letter to petitioner scheduling a telephone conference for date the letter advised petitioner that he this course of action was presumably taken because petitioner also had outstanding tax_liabilities for tax years and all of which had previously been determined to be currently not collectible could not contest the underlying tax_liability because he had previously received a notice_of_deficiency the letter also instructed petitioner to provide form 433-a collection information statement for wage earners and self-employed individuals file all required tax returns make estimated_tax payments for and provide a form withdrawal of request for collection_due_process or equivalent_hearing if he wished to withdraw his cdp hearing request finally the letter advised petitioner to contact officer morrison within days if he preferred a face- to-face hearing petitioner did not contact officer morrison to request a face-to- face hearing or provide any of the information requested and he failed to call officer morrison at the scheduled time for the telephone cdp hearing on date officer morrison sent a letter to petitioner providing him with an additional days to provide the previously requested information on date petitioner faxed a letter to officer morrison stating that he did not wish to withdraw his cdp hearing request because he had never received a notice_of_deficiency and therefore was never afforded an opportunity to challenge the underlying tax_liability petitioner’s and federal_income_tax returns had not been filed at the time of the cdp hearing on date officer morrison mailed petitioner a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination sustaining the filing of the notice_of_federal_tax_lien and the proposed levy petitioner’s account remains in cnc status on date petitioner filed an amended petition5 disputing the notice_of_determination because he was not granted a face-to-face hearing and was denied the opportunity to dispute the underlying tax_liability discussion i summary_judgment rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy summary_judgment may be granted if it is demonstrated that no genuine issue exists as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir we conclude that there is no issue as to any material fact and that a decision may be rendered as a matter of law petitioner resided in arkansas at the time he filed his petition ii determination to sustain the proposed levy action and the notice_of_federal_tax_lien if a taxpayer requests a hearing in response to a notice_of_federal_tax_lien or a notice_of_levy pursuant to sec_6320 or sec_6330 a hearing shall be held before an impartial officer_or_employee of the irs office of appeals sec_6330 at the hearing the taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives sec_6330 a taxpayer is precluded from contesting the existence or amount of the underlying tax_liability unless the taxpayer did not receive a notice_of_deficiency for the liability in question or did not otherwise have an earlier opportunity to dispute the liability sec_6330 see also 114_tc_604 the phrase underlying tax_liability includes the tax_deficiency additions to tax and statutory interest 115_tc_329 following a hearing appeals must determine whether to sustain the filing of the lien and whether proceeding with the proposed levy action is appropriate in making that determination appeals is required to take into consideration verification presented by the secretary during the hearing process that the requirements of applicable law and administrative procedure have been met relevant issues raised by the taxpayer and whether the proposed lien or levy action appropriately balances the need for efficient collection_of_taxes with the taxpayer’s concerns regarding the intrusiveness of the proposed collection action sec_6330 sec_6330 grants this court jurisdiction to review the determination made by the appeals_office in connection with the sec_6330 hearing where the underlying tax_liability is properly at issue we review the taxpayer’s liability de novo see 114_tc_176 we review all other determinations for abuse_of_discretion 117_tc_183 sego v commissioner t c pincite goza v commissioner t c pincite an abuse_of_discretion occurs if the appeals_office exercises its discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 a petitioner’s challenge to the underlying tax_liability sec_6330 precludes a taxpayer from challenging the existence or amount of the underlying liability unless the taxpayer did not receive a notice_of_deficiency for that liability or did not otherwise have an opportunity to dispute the liability petitioner contends that he is entitled to challenge the existence of his underlying tax_liability because respondent has not introduced evidence sufficient to show that respondent properly mailed the notice_of_deficiency and petitioner actually received the notice respondent contends that a properly mailed notice_of_deficiency was sent to petitioner at his last_known_address and that he is deemed to have received the notice therefore he was precluded from challenging his underlying liability during the sec_6330 hearing under sec_6330 the receipt of a notice_of_deficiency not its mailing is the relevant event a properly completed form_3877 reflecting the timely mailing of a notice_of_deficiency to a taxpayer at the taxpayer’s correct address by certified mail absent evidence to the contrary establishes that the notice was properly mailed to the taxpayer 530_f2d_781 8th cir the form is considered highly probative evidence that the notice_of_deficiency was sent to the address specified 94_tc_82 furthermore compliance with form_3877 mailing procedure raises a presumption of official regularity in favor of the commissioner see coleman v commissioner t c pincite if the presumption is raised and the for the purpose of asserting a deficiency in tax the commissioner is authorized to send a notice_of_deficiency to the taxpayer sec_6212 for that purpose mailing a notice_of_deficiency to the taxpayer’s last_known_address is sufficient regardless of receipt or nonreceipt sec_6212 92_tc_729 aff’d without published opinion 935_f2d_1282 3d cir taxpayer does not rebut the presumption the court may find that the taxpayer received the notice_of_deficiency thus precluding challenges to the underlying liability under sec_6330 see eg sego v commissioner t c pincite clark v commissioner tcmemo_2008_155 respondent attached to his motion for summary_judgment a properly completed form_3877 the record contains no credible_evidence to rebut the presumption that the notice was properly mailed to petitioner at the hearing petitioner did not unequivocally deny that he received the notice_of_deficiency and his testimony that he does not have a copy of the notice or remember signing for it is not enough to rebut the presumption afforded respondent thus we find that petitioner received the notice_of_deficiency and appeals correctly determined that petitioner was precluded from challenging the underlying tax_liability at the sec_6330 hearing see sego v commissioner t c pincite clark v commissioner tcmemo_2008_155 b face-to-face hearing petitioner also contends that officer morrison abused her discretion in refusing to conduct a face-to-face hearing because this is not a challenge to the underlying tax_liability we review this issue for abuse_of_discretion sego v commissioner t c pincite goza v commissioner t c pincite the regulations interpreting sec_6330 provide that a cdp hearing may but is not required to consist of a face-to-face meeting sec_301_6330-1 q a-d6 proced admin regs emphasis added see also katz v commissioner t c pincite a taxpayer will ordinarily be offered a face-to-face hearing if the taxpayer presents in the cdp request relevant and nonfrivolous issues relating to the proposed collection activity sec_301_6330-1 q a-d7 proced admin regs see also golditch v commissioner tcmemo_2010_ the regulations further provide that if a face-to-face hearing is not held a hearing conducted by telephone by correspondence or by review of documents will suffice for purposes of sec_6330 see sec_301_6330-1 q a-d7 proced admin regs officer morrison informed petitioner that if he preferred a face-to-face hearing he would need to respond within days petitioner did not contact officer morrison to request a face-to-face hearing petitioner’s only communication with officer morrison was a fax sent a few days after the scheduled telephone conference stating that he did not want to withdraw his cdp hearing request and he had not been afforded the opportunity to contest the underlying tax_liability because he did not receive his statutory_notice_of_deficiency further petitioner did not provide any of the documentation that officer morrison had requested as the settlement officer complied with the procedure promulgated in the regulations we find that she did not abuse her discretion in issuing the notice_of_determination without holding a face-to-face hearing in reaching our holdings we have considered all arguments made and to the extent not mentioned we consider them irrelevant moot or without merit to reflect the foregoing an appropriate order and decision will be entered


number release date internal_revenue_service index number ------------------------- ------------------------------- ----------------------------------------- --------------------------------------- ---------------------------- - department of the treasury washington dc third party communication date of communication month dd yyyy person to contact -------------- id no ------------- telephone number --------------------- refer reply to cc ita plr-121979-06 date date ------- - legend taxpayer ------------------------------------------------------------------- year dear ------------ this letter_ruling is in reference to taxpayer’s request that its form_1128 application to adopt change or retain a tax_year be considered timely filed under the authority in sec_301_9100-3 of the regulations on procedure and administration taxpayer filed a late form_1128 to change its accounting_period for federal_income_tax purposes from a taxable_year ending may to a taxable_year ending march effective march year revproc_2002_37 2002_1_cb_1030 provides procedures for certain corporations to obtain automatic approval to change their annual_accounting_period under sec_442 of the internal_revenue_code a corporation complying with all the applicable provisions of this revenue_procedure has obtained the consent of the commissioner of the internal_revenue_service to change its annual_accounting_period section of revproc_2002_37 provides that a form_1128 filed pursuant to the revenue_procedure will be considered timely filed for purposes of sec_1_442-1 of the income_tax regulations only if it is filed on or before the time including extensions for filing the return for the short_period required to effect the change the information furnished indicates that taxpayer did not file its form_1128 by the due_date of the return for the short_period required to effect the change however taxpayer requested an extension of time to file its form_1128 under sec_301_9100-3 shortly the after the required time sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to plr-121979-06 establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made we conclude that taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly taxpayer has satisfied the requirements of the regulations for the granting of relief and taxpayer's late filed form_1128 requesting to change to march effective march year is considered timely filed because a change in accounting_period under revproc_2002_37 is under the jurisdiction of the director internal_revenue_service center where the taxpayer’s returns are filed we have forwarded the application to the director --------------------------- --------- any further communication regarding this matter should be directed to the service_center this ruling is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling however as part of an examination process the service may verify the factual information representations and other data submitted this ruling addresses the granting of sec_301_9100-3 relief only we express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically we express no opinion as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the form_1128 or whether the change may be effected under revproc_2002_37 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 enclosed is a copy of the letter_ruling showing the deletions proposed to be made when it is disclosed under sec_6110 the taxpayer’s application_for a change in accounting_period will be processed under revproc_2002_37 plr-121979-06 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely donna welch senior technician reviewer income_tax accounting office_of_chief_counsel


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b03-plr-162224-01 date date legend purchaser purchasing entity target country date a date b date c date d sellers company official tax professional plr-162224-01 this letter responds to a letter dated date submitted on behalf of purchaser requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election purchaser is requesting an extension to file a sec_338 election under sec_338 with respect to purchaser’s acquisition of the stock of target sometimes hereinafter referred to as the election on date a all citations in this letter to regulations under sec_338 are to regulations in effect on date a additional information was received in a letter dated date the material information is summarized below purchaser is a subchapter_c_corporation and files a federal consolidated_income_tax_return as the common parent the acquisition referred to below was actually made by purchasing entity a wholly-owned subsidiary of purchaser organized under the laws of country the purchasing entity is a disregarded_entity for federal_income_tax purposes pursuant to an entity classification election made on form_8832 dated date b and effective date c before date a target is a foreign_corporation organized under the laws of country on date a purchaser acquired all of the stock of target from sellers for cash it is represented that purchaser’s acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 prior to the acquisition target did not file a united_states income_tax return was not subject_to united_states income_taxation nor was required under sec_1_6012-2 to file a united_states income_tax return in addition target was not a controlled_foreign_corporation within the meaning of sec_957 a passive_foreign_investment_company for which an election under sec_1295 was in effect or a foreign_investment_company or a foreign_corporation the stock ownership of which is described in sec_552 purchaser intended to file the election the election was due on date d but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for purchaser’s taxable_year in which the acquisition occurred the taxable_year in which the election should have been filed or any taxable_year that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase plr-162224-01 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338-2t d therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser to file the election provided purchaser acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that purchaser reasonably relied on a qualified_tax professional who failed to make or advise purchaser to make the election the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that purchaser has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for purchaser to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers’ purchaser’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 purchaser must file the election in accordance with sec_1_338-2t d this is a new plr-162224-01 election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter must be attached to the election form purchaser must file or amend as applicable its returns to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year and to attach to the returns a copy of this letter and a copy of the election we express no opinion as to whether the acquisition of the target stock qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office copies of this letter are being sent to your authorized representatives sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate