internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp plr-105240-00 date date distributing sec_1 sec_2 sec_3 year year year business a business b we respond to your date request for rulings on certain federal_income_tax consequences of a series of proposed transactions the information submitted in that request and in later correspondence is summarized below distributing’s predecessors received rulings on prior transactions during year year and year the prior ruling letters the rulings in this letter are based on the facts and representations submitted under penalties of perjury in support of the request verification of that information may be required as part of the audit process summary of facts publicly traded distributing is a holding_company and the common parent of a consolidated_group distributing wholly owns sec_1 and sec_2 and sec_1 wholly owns sec_3 sec_1 conducts business a sec_2 conducts business b and sec_3 owns branches and subsidiaries engaged in business a and business b we have received financial information indicating that business a of sec_1 business b of sec_2 and business a of sec_3 each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years the operation of business a and business b within the same affiliated_group creates managerial systemic and other problems and produces no significant synergies distributing’s management has therefore decided based on the advice of consultants and on other information that the two businesses should be separated proposed transactions to accomplish this separation distributing proposes the following transactions i certain subsidiaries of sec_3 engaged in business b will be distributed from sec_3 to sec_1 and from sec_1 to distributing ii any intercompany accounts between the two groups of companies that will be members of different public groups following proposed distribution defined below in step viii will be eliminated through dividends capital contributions or payments as appropriate so that there will be no indebtedness between the two groups of companies following the proposed transactions iii distributing will incorporate controlled as a wholly owned domestic subsidiary iv controlled will incorporate a wholly owned domestic subsidiary transitory v transitory will merge with and into sec_1 with sec_1 surviving in the merger distributing will receive additional shares of controlled stock and sec_1 will become a wholly owned subsidiary of controlled the sec_1 stock will be transferred to controlled in this manner to avoid certain corporate law problems associated with a direct contribution of the sec_1 stock to controlled vi sec_1 will distribute the sec_3 stock to controlled distribution vii distributing will contribute cash together with any remaining non- business b assets to controlled and controlled will assume certain non- business b liabilities and contingent obligations of distributing steps iii through v and vii will be referred to collectively hereinafter as the contribution viii distributing will distribute the controlled stock pro_rata to the distributing shareholders distribution in lieu of fractional controlled shares the distribution agent will aggregate and sell the fractional interests and remit the proceeds to the shareholders entitled thereto ix distributing and controlled will change their names to reflect the new business configurations representations distribution the taxpayers have made the following representations concerning proposed distribution a no part of the sec_3 stock distributed by sec_1 will be received by controlled as a creditor employee or in any capacity other than that of a shareholder of sec_1 b the five years of financial information submitted for sec_1 and sec_3 represents the present business operations of sec_1 and sec_3 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted c following distribution sec_1 and sec_3 each will continue the active_conduct of its business independently and with its separate employees d distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons e there is no plan or intention by controlled to sell exchange transfer by gift or otherwise dispose_of any stock in either sec_1 or sec_3 after distribution f there is no plan or intention by sec_1 or sec_3 directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution g there is no plan or intention to liquidate sec_1 or sec_3 to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business h any indebtedness owed by sec_3 to sec_1 after distribution will not be stock_or_securities i immediately before distribution any items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 of the income_tax regulations as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d j payments made in any continuing transactions between sec_1 and sec_3 will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length k distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either sec_1 or sec_3 stock entitled to vote or stock possessing percent or more of the total value of all classes of stock of either sec_1 or sec_3 contribution and distribution distributing has made the following representations concerning proposed contribution and distribution l no part of the controlled stock distributed by distributing will be received by a shareholder of distributing as a creditor employee or in any capacity other than that of a shareholder of distributing m the five years of financial information submitted for sec_1 and sec_2 represents the present business operations of sec_1 and sec_2 and regarding each business there have been no substantial operational changes since the date of the last financial statements submitted n immediately after distribution at least percent of the fair_market_value of the gross assets of each of distributing and controlled will consist of the stock and securities of controlled corporations sec_2 for distributing sec_1 and sec_3 for controlled that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 each such controlled_corporation will continue the active_conduct of its business independently and with its separate employees o distribution is being undertaken to resolve managerial systemic and other problems that have arisen from operating business a and business b within a single affiliated_group distribution is motivated in whole or substantial part by this corporate business_purpose and for other business reasons p there is no plan or intention by any shareholder who owns five percent or more of the distributing stock and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in either distributing or controlled after distribution q there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of any of the assets of either corporation after distribution except in the ordinary course of business r the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing in the contribution will in each instance equal or exceed the liabilities assumed as determined under sec_357 by controlled s the liabilities assumed as determined under sec_357 in the contribution were incurred in the ordinary course of business and are associated with the assets being transferred t none of the transferred assets will include property that will be subject_to investment_tax_credit_recapture u any indebtedness owed by controlled to distributing after distribution will not be stock_or_securities v immediately before distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d and as currently in effect sec_1_1502-13 as published by t d any excess_loss_account distributing may have in the stock of controlled and any excess_loss_account of any corporation that will leave the distributing consolidated_group in the proposed transactions will be taken into account as required by applicable regulations see sec_1_1502-19 w payments made in connection with any continuing transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length x no two parties to the transactions are investment companies as defined in sec_368 and iv y there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 z distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled entitled to vote or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled aa for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution bb for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution cc distributing and controlled will each pay its own expenses if any incurred in connection with the transactions rulings distribution based solely on the information submitted and the representations set forth above we rule as follows on proposed distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of controlled on distribution sec_355 no gain_or_loss will be recognized by sec_1 on distribution sec_355 the holding_period of the sec_3 stock received by controlled in distribution will include the holding_period of the sec_1 stock on which distribution is made provided the sec_1 stock is held as a capital_asset on the date of distribution sec_1223 earnings_and_profits will be allocated between sec_1 and sec_3 in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 contribution and distribution based solely on the information submitted and the representations set forth above we rule as follows on proposed contribution and distribution for federal_income_tax purposes the proposed transaction described in steps iii through v and vii will be treated as if distributing had transferred assets including the stock of sec_1 to controlled in exchange for the stock of controlled and the assumption by controlled of related liabilities the contribution the contribution followed by distribution will be a reorganization under sec_368 distributing and controlled each will be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_357 and sec_361 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled in the contribution will equal the basis of that asset in the hands of distributing immediately before the contribution sec_362 the holding_period of each asset received by controlled from distributing in the contribution will include the period during which that asset was held by distributing sec_1223 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the distributing shareholders on distribution sec_355 no gain_or_loss will be recognized by distributing on distribution sec_361 the basis of the stock of distributing and controlled in the hands of each distributing shareholder after distribution including any fractional share interests to which the shareholder may be entitled will equal the aggregate basis of the distributing stock in the hands of the distributing shareholder immediately before distribution sec_358 and sec_1_358-1 this basis will be allocated between the distributing stock and the controlled stock in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 and sec_358 the holding_period of the controlled stock received by each distributing shareholder in distribution will include the holding_period of the distributing stock on which distribution is made provided the distributing stock is held as a capital_asset on the date of distribution sec_1223 if cash is received by a distributing shareholder in lieu of a fractional share of stock of controlled gain_or_loss will be recognized by the shareholder measured by the difference between the basis of the fractional share interest as determined in ruling above and the amount of cash received if the fractional share qualifies as a capital_asset in the hands of the shareholder the gain_or_loss will be a capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code sec_1221 and sec_1222 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 the proposed transactions will not adversely affect the prior ruling letters which will retain full force and effect caveats we express no opinion on the tax effects of the transactions under any other provisions of the code or regulations or the tax effects of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the rulings in particular no opinion was requested and we express no opinion on the tax effects of steps i the distribution of certain sec_3 subsidiaries ii the elimination of intercompany accounts and ix the name changes procedural statements this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the proposed transactions are completed in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely assistant chief_counsel corporate by wayne t murray senior technician reviewer branch


office of the chief_counsel department of the treasury internal_revenue_service washington d c date number release date uil 36a the honorable jim webb united_states senate washington dc attention dear senator webb cc ita b04 conex-128416-10 - am responding to your inquiry dated date on behalf of your constituent he asked why the dollar_figure economic recovery payment reduced the amount of his income_tax refund for as you requested responded directly to response lam enclosing a copy of my hope this information is helpful if you need further assistance please contact me or at sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting enclosure office of the chief_counsel department of the treasury internal_revenue_service washington d c date conex-128416-10 uil 36a dear am responding to your email to senator webb about the dollar_figure economic recovery payment you asked why the payment reduced the amount of your income_tax refund for senator webb wrote to us on your behalf and asked us to respond directly to you in congress authorized a one-time dollar_figure economic recovery payment for individuals receiving certain governmental benefits such as social_security_benefits or veterans disability compensation or pension benefits sec_2201 of the american_recovery_and_reinvestment_act_of_2009 the act taxpayers with earned_income in or may be eligible for the refundable making_work_pay_credit sec_36a of the internal_revenue_code the code in general a qualifying taxpayer’s making_work_pay_credit is equal to percent of earned_income not to exceed dollar_figure dollar_figure if married_filing_jointly taxpayers are required to reduce their making_work_pay_credit by the dollar_figure economic recovery payments they receive under sec_2201 of the act sec_36a of the code if you were eligible for the making_work_pay_credit for you were required to reduce the amount of your credit by your dollar_figure economic recovery payment conex-128416-10 hope this information is helpful if you have any questions please contact me or identification_number at sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting the honorable jim webb attention cc


internal_revenue_service number release date index number --------------------------- -------------------------------------- -------------------------- --------------------------------- in re ------------------------ ----------------------- ------------- ------------------------------------ department of the treasury washington dc person to contact ----------------- ---------------------- telephone number --------------------- refer reply to cc psi - plr-109776-04 date date legend taxpayer ----------------------- ------------------------------------ -------------------------- -------------------------------------------------- ------------------------------------- company b --------------------- --------------------------------------------- ----------------------------------- ----------------------------------------- ---------------------------- company c ------------------------- ---------------------------------------------- ------------------------------------ ----------------------------------------- ---------------------------- state d ------------- corporation e --------------------- corporation f ------------------------- ccf agreement g ----------------------------------- a ----------------- b ------- c ----------------------- dear ------------ this letter is in response to your letter dated date requesting a private_letter_ruling on behalf of taxpayer as common parent and agent for its affiliated_group_of_corporations filing a consolidated_return including company b and company c regarding the proposed transfer of certain funds held on deposit in a merchant marine capital_construction_fund accf in a transfer expected to qualify for nonrecognition treatment under ' of the internal_revenue_code taxpayer a state d corporation acting through subsidiaries taxpayer also is engaged in the container shipping business through subsidiaries taxpayer owns percent of the stock of company b and percent of the stock of company c taxpayer company b and company c are each state law corporations treated as domestic corporations for federal_income_tax purposes company b formerly owned all of the membership interests in corporation e an entity engaged in the container shipping business and which is now called corporation f a joint_venture in which company b and related and unrelated corporations hold membership interests taxpayer has entered into a ccf on behalf of its consolidated_group with the maritime administration of the department of transportation established pursuant to ccf agreement g company b owns investments totaling a in bank_deposits permitted under the ccf provisions of section c of the merchant marine act of as amended company c through disregarded entities owns various ccf related shipping assets including refrigerated shipping containers and related container refrigeration units ashipping containers and leasehold interests in b u s flag vessels avessels company b has incurred indebtedness to an unrelated_person in respect of which the shipping containers act as collateral the shipping containers and vessels are leased or subleased to corporation f or to an unrelated_person taxpayer intends to retain its interest in the ccf investments shipping containers and vessels however it is possible that at some time in the future taxpayer may wish to dispose_of the stock of company b taxpayer desires that all of the ccf related assets and associated liabilities be directly or indirectly owned by company c consequently taxpayer intends to cause company b to transfer its ccf investments to company c in exchange for newly issued company c stock and the assumption by company c of certain liabilities of company b this transfer is intended to be a transfer of property to a corporation in exchange for stock in which no gain_or_loss is recognized by reason of ' a of the code the necessary approval for the transfer of the ccf investments to company c has been obtained from the maritime administration of the department of transportation on c taxpayer requests a ruling that if the proposed exchange of the ccf investments by company b for the stock of company c and the assumption by company c of certain liabilities of company b qualifies under the provisions of ' of the code the transfer of company b s ccf investments to and the maintenance of such ccf investments by company c has been approved by the secretary of transportation and a closing_agreement is entered into then the provisions of such closing_agreement shall determine the ccf tax consequences resulting from the exchange specifically company b s basis in the stock received in the exchange from company c the tax_attributes of the ccf and property in the ccf in the hands of company c all other consequences of the proposed exchange including that the proposed exchange will not be treated as a nonqualified_withdrawal from the taxpayer s ccf under ' g of the code based on the information submitted and the foregoing representations the service will enter into a closing_agreement concerning the above-mentioned tax consequences of the transaction it is held that the closing_agreement shall determine the capital_construction_fund consequences resulting from the exchange no opinion is expressed as to whether the transfer of company b s ccf investments in exchange for company c stock qualifies under the provisions of ' a of the code the closing_agreement is enclosed the closing_agreement may not be cited or relied upon by any person or entity whatsoever as precedent in the disposition of any other case the closing_agreement may be reopened in the event of fraud malfeasance or misrepresentation of material fact it is subject_to internal_revenue_code sections that expressly provide that effect be given to their provisions including any stated exception for code ' notwithstanding any other law or rule_of law and if it relates to a tax period ending after the effective date of this closing_agreement it is subject_to any law enacted after the effective date of this closing_agreement that applies to that tax period the original duplicate triplicate and quadruplicate copies of the enclosed closing_agreement should be signed and dated by each authorized representative of each corporation please return the originals and all copies to this office to the attention of cc psi within days of the date of this letter if the signed original and copies of the closing_agreement are not received by this office within days we will assume you no longer desire to enter into the closing_agreement and we will close our files in regard to this matter all determinations and holdings contained in this letter are contingent on the mutual execution of the closing_agreement if either the taxpayer or the commissioner of the internal_revenue_service fails to execute the agreements such determinations and holdings will be null and void for federal_income_tax purposes this ruling does not cover the applicability of any section of the code or regulations to the facts submitted other than the sections discussed above this ruling is directed only to the taxpayer who requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely walter h woo senior technician reviewer branch cc copy for purposes closing_agreement closing_agreement on final_determination covering specific matters this closing_agreement made in quadruplicate under sec_7121 of the internal_revenue_code_of_1986 as amended the acode by and between --------------------------- ----------------------------------------------------------------------------------------------------------------- --- --------------------------------------------------------------------------------------- as common parent and agent for its affiliated_group_of_corporations filing a consolidated_return ------ --------- ----------------- hereinafter atransferor -------------------------- hereinafter atransferee and commissioner of internal revenue acommissioner whereas transferor proposes to transfer bank_deposits in the specific amount of -----------------held in a capital_construction_fund as described in sec_26 cfr ' a hereinafter afund to transferee for stock and the assumption of certain liabilities of the transferor by the transferee whereas the transfer of the fund to and maintenance of the fund by transferee was approved by the secretary of transportation on ------------------------ whereas ------ the transferor transferee and the commissioner desire to finally determine the effect of such proposed exchange under section of the merchant marine act of the treasury regulations thereunder cfr part and the internal_revenue_code_of_1986 as amended hereinafter acode private_letter_ruling in conjunction with this closing_agreement and has made certain representations with respect to the request and whereas ------ on behalf of the transferor and the transferee has requested a whereas if the proposed exchange qualifies under the provisions of sec_351 of the code and the representations made under penalties of perjury in the private_letter_ruling by --------n behalf of the transferor and transferee are correct then it has been determined for federal_income_tax purposes that the provisions of proposed sec_26 cfr ' as published on date in fed reg shall apply for purposes of determiningb the transferor s basis in the stock received in the exchange from the transferee except that proposed treasury regulation ' b iv b shall not apply and instead the transferor’s basis in such stock shall be reduced by the entire amount if any in the capital_gain account the tax_attributes of the fund and property in the fund in the hands of the transferee and all other consequences of the proposed exchange now this closing_agreement witnesseth that --------said transferor said transferee and said commissioner hereby mutually agree that this agreement is final and conclusive except that the matters to which it relates may be reopened in the event of fraud malfeasance or misrepresentation of material fact it is subject_to the internal_revenue_code sections that expressly provide that effect be given to their provisions including any stated exception for sec_7122 nothwithstanding any other rule_of law and if it relates to a tax period ending after the effective date of this agreement it is subject_to any law enacted after the effective date of this agreement that applies to that tax period this agreement shall be effective as of the date four fully executed original copies of this agreement are executed by the commissioner this agreement may not be cited or relied upon by any person or entity whatsoever as precedent in the disposition of any other case by signing the above parties certify that they have read and agreed to the terms of this agreement ----------------------- by date title --------------------- by date title ------------------------- by date title commissioner of internal revenue by date associate chief_counsel passthroughs and special industries


internal_revenue_service number info release date index number ----------------------------------------- ------------------------------------- ------------------------- -------------------------------------- in re - - department of the treasury washington dc person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 - genin-150291-03 date date dear --------------------- we are responding to your letter dated date requesting relief for late filing of form_2553 on behalf of the corporation the information forwarded to our office is insufficient for us to process a private_letter_ruling request although we are unable to respond to your request as submitted this letter provides information relating to your request announcement provides guidance on seeking relief for late s_corporation elections generally to request relief for a late s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revenue_procedure rev_proc copy enclosed requests for letter rulings must be accompanied by an appropriate amount of the user_fee the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their tax_return for the most recent 12-month taxable_year qualify for a reduced user_fee in the amount of dollar_figure if you qualify for the reduced fee you must include a statement certifying your gross_income for the last month taxable_year otherwise the higher fee will apply for details please refer to appendix a of revproc_2003_1 if you decide to submit a formal request for a private_letter_ruling please review appendix b of revproc_2003_1 and be certain to include all required procedural statements also include the proper user_fee and any documents that substantiate your intent to be an s_corporation from inception requests for letter rulings should be sent to the following address internal_revenue_service attn cc pa t p o box ben franklin station washington dc for general tax information concerning small businesses please go to www irs gov smallbiz which is dedicated to providing information to small_business taxpayers and educating small_business owners on their tax responsibilities please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely s dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures revproc_2003_1


number release date id office uilc cca_2012012508350537 --------- from -------------------- sent wednesday date am to -------------------- cc ------------ subject re partnership penalties since the partnership pays no tax there is typically no underpayment_of_tax by the partnership that could be subject_to the negligence_penalty sec_6662 instead in a tefra proceeding we are determining penalties against the partners based on partnership-level determinations eg the negligence of the partnership acting through its managers there is an underpayment_of_tax by the partnership however under sec_1446 and sec_1461 for certain withholding taxes that could be subject_to a negligence_penalty directly assessable against the partnership outside of this limited exception i am not aware of other circumstances for assessing the negligence_penalty against the partnership


internal_revenue_service number release date index number ------------------- ------------------------------------------------- ---------------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-147238-08 date date legend x y ----------------------------------------------------------------------------------------------------- ----------------------- ------------------------------------------------ state ------------- date -------------------------- dear ------------- we received your letter dated date submitted on behalf of x requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be treated as an association_taxable_as_a_corporation under sec_301_7701-3 this letter responds to your request facts x was formed on date as a state limited_liability_company x is wholly-owned by y y intended that x be treated as an association_taxable_as_a_corporation for federal tax purposes effective date however x inadvertently failed to timely file a form_8832 entity classification election law and analysis plr-147238-08 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion plr-147238-08 based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of sixty days from the date of this letter to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date the election should be made by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- ---------------------------------- ------------------- -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-108916-15 date june legend x --------------------------------------------------- ------------------------------------- country d -------------- ------------------ dear ---------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an entity classification election under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation for federal tax purposes facts according to the information submitted x was formed under the laws of country x intended to elect be treated as an association_taxable_as_a_corporation for federal tax purposes effective d however x inadvertently failed to timely file form_8832 entity classification election to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes x represents that it acted reasonably and in good_faith x also represents that granting the relief requested will not prejudice the interests of the government plr-108916-15 law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 provides that such an election must be signed by either a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organization documents to make the election and who represents to having such authorization under penalties of perjury sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated an association taxable as a plr-108916-15 corporation for federal tax purposes effective d a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on x and its owner filing within days of this letter all required information and tax returns for all open years consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely associate chief_counsel passthroughs special industries by laura c fields laura c fields senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


t c memo united_states tax_court robert henderson petitioner v commissioner of internal revenue respondent docket no filed date robert henderson pro_se linette b angelastro for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for after a unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure concession by respondent the issue for decision is whether a dollar_figure payment that robert henderson mr henderson received in in settlement of a claim against morgan stanley dean witter co morgan stanley is excludable from petitioner’s gross_income under sec_104 we hold that it is not findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by reference at the time he filed the petition mr henderson resided in ojai california a petitioner’s motel dispute for a period of time during mr henderson stayed at a motel in monterey california to pay for his accommodations mr henderson used a credit card called prime option issued by morgan stanley following a dispute with the motel owner mr henderson paid the credit card account balance and canceled the credit card approximately weeks later in date the motel charged mr henderson dollar_figure morgan stanley accepted and paid the dollar_figure charge to mr henderson’s account morgan stanley then attempted collection from mr henderson when mr henderson respondent concedes that petitioner is not liable for self-employment_tax of dollar_figure under sec_1402 reducing petitioner’s deficiency to dollar_figure refused to pay this charge morgan stanley reported to credit agencies that mr henderson had defaulted on the account b petitioner’s lawsuit against morgan stanley on date mr henderson filed suit against morgan stanley in the u s district_court for the northern district of california on date the parties reached a settlement wherein morgan stanley agreed to pay mr henderson dollar_figure c settlement agreement mr henderson and morgan stanley memorialized this settlement by executing a document entitled settlement and release agreement settlement agreement the settlement provides in part morgan stanley shall pay to mr henderson the total sum of dollar_figure effective upon receipt of the payment referred to above mr henderson hereby releases and fully discharges morgan stanley from any and all claims demands damages and causes of action mr henderson now has or in the future may have for detriment alleged in the pending action morgan stanley hereby agrees to make a written request to remove the prime option trade line from the credit reports of the three major credit agencies in regard to the matters raised in the pending action morgan stanley agrees to arrange to have the debt attributed to mr henderson forgiven the settlement agreement did not allocate the dollar_figure settlement payment among monetary emotional and physical damages d tax_return during mr henderson received dollar_figure from discover financial services inc in settlement of the lawsuit against morgan stanley on date mr henderson timely filed his federal_income_tax return on his federal tax_return mr henderson excluded from gross_income the dollar_figure settlement payment respondent issued a notice_of_deficiency to mr henderson regarding his tax_year in the notice_of_deficiency respondent determined inter alia that petitioner failed to report taxable compensation of dollar_figure for opinion petitioner does not dispute receiving the dollar_figure settlement payment in to settle petitioner’s claim against morgan stanley petitioner contends however that the dollar_figure settlement payment is not taxable because it comes under the exclusion of sec_104 respondent argues that the dollar_figure settlement payment is includable in petitioner’s gross_income for for the reasons stated below we agree with respondent sec_61 provides that gross_income means all income from whatever source derived except as otherwise provided the definition of gross_income is broad in scope 348_us_426 and exclusions from gross_income are narrowly construed 504_us_229 499_us_573 respondent’s determinations in the notice_of_deficiency are presumed correct and petitioner must prove those determinations wrong in order to prevail rule a 290_us_111 as relevant to the present case sec_104 excludes from gross_income the amount of any damages other than punitive_damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal physical injuries or physical sickness the term damages received means an amount received through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution sec_1_104-1 income_tax regs sec_104 further provides that emotional distress shall petitioner does not contend that sec_7491 is applicable to this case the small_business job protection act of publaw_104_188 sec 110_stat_1838 amendment amended sec_104 to narrow the exclusion for personal injury damages received pursuant to a judgment or settlement effective for amounts received after date under the amendment personal_injury_or_sickness must be physical in nature moreover the amendment explicitly excepts punitive_damages from the exclusion provided by sec_104 not be treated as a physical injury or physical sickness for purposes of sec_104 except for damages not in excess of the amount_paid for medical_care attributable to emotional distress prasil v commissioner tcmemo_2003_100 according to the legislative_history of sec_104 the term emotional distress includes symptoms eg insomnia headaches stomach disorders which may result from such emotional distress h conf rept pincite ndollar_figure 1996_3_cb_741 n generally damages are excludable from gross_income if they satisfy two requirements the supreme court in 515_us_323 established those requirements as first the taxpayer must demonstrate that the underlying cause of action giving rise to the recovery is ‘based upon tort or tort type rights’ and second the taxpayer must show that the damages were received ‘on account of personal injuries or sickness ’ the u s court_of_appeals for the ninth circuit the court to which this case is appealable held prior to the amendment of sec_104 that defamation may be considered a personal injury for purposes of sec_104 716_f2d_693 9th cir revg 79_tc_398 however the amendment to sec_104 which does not otherwise change the sec_104 analysis set forth in schleier now requires that the payments be on account of personal physical injuries or physical sickness for payments made after date in the instant case petitioner received the dollar_figure settlement payment pursuant to a settlement agreement with morgan stanley when damages are received pursuant to a settlement agreement the nature of the claim that was the actual basis for settlement controls whether such amounts are excludable under sec_104 united_states v burke supra pincite the determination of the nature of the claim is a factual inquiry and is generally made by reference to the settlement agreement 102_tc_116 affd in part and revd in part on another issue 70_f3d_34 5th cir and cases cited therein if the settlement agreement lacks express language stating what the settlement amount was paid to settle we look to the intent of the payor based on all the facts and circumstances of the case including the complaint filed and details surrounding the litigation 349_f2d_610 10th cir affg tcmemo_1964_33 robinson v commissioner supra pincite if a settlement is attributable to claims based on tort or tort type rights as well as other rights it may be necessary to determine which portion of the settlement is attributable to damages received based on tort or tort type rights similarly it may be necessary to determine which portion if any of the settlement may be attributable to damages received for personal physical injuries or physical sickness in the present case we find petitioner meets the first part of the schleier test having brought a tort type action against morgan stanley alleging harm to his credit reputation we now turn to the question of whether the dollar_figure settlement payment was received on account of a personal physical injury or physical sickness petitioner asserts that morgan stanley paid the dollar_figure settlement payment to petitioner as a result of damage he suffered to his credit reputation the record however is devoid of specific information indicating that morgan stanley issued the settlement payment on account of damage to petitioner’s credit reputation we are not required to and do not accept petitioner’s self-serving testimony without corroborating evidence 877_f2d_624 7th cir affg tcmemo_1987_295 440_f2d_688 9th cir affg per curiam tcmemo_1969_159 87_tc_74 further the record does not support a conclusion that petitioner’s harm constitutes a physical injury or a physical sickness caused by the conduct of morgan stanley on brief petitioner alleged that he suffers from a life- threatening pre-existing physical illness exacerbated by the harm to his personal reputation assertions on briefs are not evidence rule b davis v commissioner tcmemo_1997_80 even assuming arguendo that petitioner suffered from a personal physical injury or physical sickness the record does not support the conclusion that petitioner received the dollar_figure settlement payment on account of such physical injury or physical sickness according to the settlement agreement petitioner released any and all claims against morgan stanley in exchange for dollar_figure the settlement agreement however did not specifically carve out any portion of the settlement payment as a settlement on account of personal physical injury or physical sickness let alone make reference to a physical injury or a physical sickness resulting from any reputation damage by morgan stanley the settlement agreement did not allocate any part of the settlement payment on account of a personal physical injury or physical sickness furthermore the evidence in the record does not support such an allocation accordingly we conclude that no portion of the dollar_figure settlement payment was compensation_for a personal physical injury or physical sickness therefore we sustain respondent’s determination in this regard we have considered all of the other arguments made by the parties and to the extent that we have not specifically addressed them we conclude they are without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number 45c ---------------- -------------------- ------------------- ------------------------------------------------ --------------------------- -------------------------------------- in re ruling under sec_45c of the internal_revenue_code department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ----------- telephone number -------------------- refer reply to cc psi b06 plr-136200-14 date date legend taxpayer state a state b drug --------------------- ---------------------- ------------- ----------------- -------------------------------------------- disease a ---------------------------------------- disease b ---------------------------------------------------- year year year year date ------ ------ ------ ------ ------------------ plr-136200-14 dear ------------ this letter is in response to your ruling_request submitted by your authorized representatives concerning the application of sec_45c of the internal_revenue_code to the facts described below the facts and representations submitted are summarized as follows taxpayer is a state a corporation with its principal office located in state b taxpayer uses a calendar taxable_year accounting_period and the accrual_method of accounting for maintaining its accounting books_and_records and filing its federal_income_tax return taxpayer is engaged in the business of developing and marketing pharmaceutical products for many years taxpayer has conducted clinical studies of drug for use in the treatment of two different types of rare cancer disease a and disease b taxpayer has conducted these clinical studies under sec_505 of the federal food drug and cosmetic act pub_l_no 52_stat_1040 codified as amended pincite u s c 301-399f fdca taxpayer conducted these clinical studies to generate the data necessary to request marketing approvals for drug under sec_505 of the fdca sec_505 in year taxpayer requested and received an orphan-drug designation for use of drug in the treatment of disease a by the food and drug administration the fda pursuant to sec_526 of the fdca sec_526 in year the fda pursuant to sec_505 approved taxpayer’s application to market drug for use in the treatment of disease a taxpayer claimed a credit under sec_45c for qualified expenses associated with the clinical_testing of drug for use in the treatment of disease a additionally in year taxpayer requested a separate sec_526 orphan-drug designation for use of drug in the treatment of disease b and further requested approval to market drug for second-line use ie use in the treatment of patients who have failed to respond to other therapies in the treatment of disease b in year taxpayer received an approval to market drug for second-line use in the treatment of disease b pursuant to sec_505 but did not receive an orphan-drug designation for use of drug in the treatment of disease b until date year starting in or after year and continuing through year and year taxpayer conducted clinical_testing of drug for first-line use in the treatment of disease b ie patients are treated right away with drug rather than after failing other therapies in year prior to receiving a sec_526 orphan-drug designation for use of drug in the treatment of disease b taxpayer submitted an application under sec_505 seeking fda approval to market drug for first-line use in the treatment of disease b plr-136200-14 taxpayer represents that the fda’s regulations require a supplemental application and approval under sec_505 before taxpayer can expand its marketing of drug from second-line use to first-line use in the treatment of disease b the sec_505 application_for first-line use in the treatment of disease b remains open as of the date of this ruling_request throughout year taxpayer continued to incur expenses for human_clinical_testing of drug for first-line use in the treatment of disease b taxpayer represents that the expenses related to human_clinical_testing of drug after the fda designated it as an orphan drug for use in the treatment of disease b would be described as qualified_research_expenses under sec_41 if sec_41 applied to clinical_testing rather than qualified_research taking into account the modifications to sec_41 described in sec_45c taxpayer represents that the clinical_testing of drug for first-line treatment of disease b meets all other requirements under sec_45c and sec_1 to be characterized as human_clinical_testing accordingly taxpayer requests a ruling that the human_clinical_testing of drug after date year relating to obtaining the fda’s approval under sec_505 for drug’s use as a first-line treatment for disease b satisfies the requirement in sec_45c that such testing occur after the date drug is designated as an orphan drug under sec_526 and before the date on which an application with respect to drug is approved for marketing under sec_505 sec_45c provides an orphan_drug_credit in an amount equal to percent of a taxpayer’s qualified_clinical_testing_expenses for the taxable_year in general sec_45c defines qualified_clinical_testing_expenses as the amounts which are paid_or_incurred by the taxpayer during the taxable_year which would be described in sec_41 qualified_research_expenses upon the modifications set forth in sec_45c sec_45c applies sec_41 by i substituting clinical_testing for qualified_research each place it appears in paragraphs relating to in-house_research_expenses and relating to contract_research_expenses of sec_41 and ii substituting percent for percent in paragraph a of sec_41 sec_45c defines the term clinical_testing as any human_clinical_testing i which is carried_out_under an exemption for a drug being tested for a rare_disease_or_condition under sec_505 of the fdca or regulations issued under such section the regulations governing sec_45c were issued under former sec_28 the predecessor to sec_45c plr-136200-14 ii which occurs i after the date such drug is designated under sec_526 and ii before the date on which an application with respect to such drug is approved under sec_505 and iii which is conducted by or on behalf of the taxpayer to whom the designation under such sec_526 applies sec_45c provides that human_clinical_testing shall be taken into account under subparagraph a only to the extent such testing is related to the use of a drug for the rare_disease_or_condition for which it was designated under sec_526 sec_45c provides that in general no credit is allowed for clinical_testing conducted outside the united_states sec_1_28-1 provides in relevant part that testing is considered to be human_clinical_testing only to the extent that it uses human subjects to determine the effect of the designated drug on humans and is necessary for the designated drug to be approved under sec_505 and the regulations thereunder for purposes of this paragraph c a human subject is an individual who is a participant in research either as a recipient of the drug or as a control a subject may be either a healthy individual or a patient sec_1_28-1 provides in relevant part that human_clinical_testing is not carried_out_under sec_505 and the regulations thereunder unless the primary purpose of the human_clinical_testing is to ascertain the data necessary to qualify the designated drug for sale in the united_states and not to ascertain data unrelated or only incidentally related to that needed to qualify the designated drug sec_45c provides a credit for qualified_clinical_testing_expenses for clinical_testing which as defined by sec_45c is limited to human_clinical_testing which occurs after the date a drug is designated as an orphan drug under sec_526 and before the date on which an application with respect to such drug is approved for marketing under sec_505 emphasis added taxpayer represents that the fda may approve a drug for use in the treatment of a rare_disease_or_condition or only for select indication s or use s within the rare_disease_or_condition for which the drug was orphan-designated if the fda approves an initial application to market the drug for only select indications or uses within a rare_disease_or_condition a supplemental application and approval is necessary to market the drug for additional indications or uses within the rare_disease_or_condition moreover an additional application and approval would be necessary to market the drug for another disease thus taxpayer represents that it is not uncommon in the fda approval process for multiple sec_505 applications to be submitted and approved with respect to the same drug plr-136200-14 prior to date year the date the fda designated drug as an orphan drug for use in the treatment of disease b taxpayer had previously obtained approval under sec_505 to market drug for use in the treatment of disease a and for use as a second- line therapy in the treatment of disease b taxpayer represents that a supplemental application was necessary to obtain approval under sec_505 to market drug as a first-line treatment for disease b thereby expanding the portion of the orphan population that can be treated with drug accordingly based solely upon the facts submitted and representations made we conclude that taxpayer’s human_clinical_testing of drug after date year relating to obtaining the fda’s approval under sec_505 for drug’s use as a first-line treatment for disease b satisfies the requirement in sec_45c that such testing occur after the date drug is designated as an orphan drug under sec_526 and before the date on which an application with respect to such drug is approved for marketing under sec_505 except as specifically set forth above we express or imply no opinion regarding the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion as to whether taxpayer satisfies any other requirement of sec_45c or sec_1_28-1 we also express or imply no opinion as to whether any sales of drug qualify for an exclusion from the branded_prescription_drug_fee under sec_9008 of the patient protection and affordable_care_act pub_l_no 124_stat_119 as amended by section of the health care education reconciliation act of pub_l_no 124_stat_1029 or the regulations thereunder this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-136200-14 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 jaime c park chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court william a swann and judith a swann petitioners v commissioner of internal revenue respondent docket no 8803-02l filed date william a swann and judith a swann pro sese wendy s harris for respondent memorandum opinion chiechi judge this case is before the court on respon- dent’s motion for summary_judgment and to impose a penalty under sec_6673' respondent’s motion we shall grant respondent’s ‘a11 section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure motion background the record establishes and or the parties do not dispute the following petitioners resided in las vegas nevada at the time they filed the petition in this case on date petitioners filed jointly a federal_income_tax tax_return for their taxable_year joint_return in their joint_return petitioners reported total income of dollar_figure total_tax of dollar_figure and claimed a refund of dollar_figure of tax withheld petitioners attached to their joint_return form_w-2 wage tax statement reporting wages tips and other compensation of dollar_figure petitioners also attached a document to their joint_return petitioners’ attachment to their joint_return that contained statements contentions and argu- ments that the court finds to be frivolous and or groundless ’ on date respondent issued to petitioners a notice_of_deficiency notice with respect to their taxable_year which they received in that notice respondent determined a deficiency in and an accuracy-related_penalty under sec_6662 on petitioners’ tax for their taxable_year in the petitioners’ attachment to their joint_return is very similar to the documents that certain other taxpayers with cases in the court attached to their tax returns see eg copeland v commissioner tcmemo_2003_46 smith v commissioner tcmemo_2003_45 respective amounts of dollar_figure and dollar_figure petitioners did not file a petition in the court with respect to the notice relating to their taxable_year instead on date in response to the notice petitioners sent a letter petitioners’ date letter to the internal_revenue_service that contained statements contentions argu- ments and reguests that the court finds to be frivolous and or groundless on date respondent assessed petitioners’ tax as well as any penalties and interest as provided by law for their taxable_year we shall refer to those assessed amounts as well as interest as provided by law accrued after date as petitioners’ unpaid liability for respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability for on date respondent issued to petitioners a final notice_of_intent_to_levy and notice of your right to a hearing notice_of_intent_to_levy with respect to their taxable_year on or about date in response to the notice_of_intent_to_levy petitioners filed form request for a petitioners’ date letter is very similar to the letters that certain other taxpayers with cases in the court sent to the internal_revenue_service in response to the notices issued to them see eg copeland v commissioner supra smith v commissioner supra q4e- collection_due_process_hearing form and requested a hearing with respondent’s appeals_office appeals_office petitioners attached a document to their form petitioners’ attachment to form that contained statements contentions arguments and requests that the court finds to be frivolous and or groundless on date a settlement officer with the appeals_office settlement officer held an appeals_office hearing with petitioners with respect to the notice_of_intent_to_levy at the appeals_office hearing the settlement officer gave petitioners a literal transcript of account so-called mftrax with respect to their taxable_year on date the appeals_office issued to petitioners a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination an attach- ment to the notice_of_determination stated in pertinent part verification of legal and procedural requirements the secretary has provided sufficient verification that all legal and procedural requirements have been met computer transcripts have been reviewed by appeals verifying the assessments ‘petitioners’ attachment to form contained statements contentions arguments and requests that are very similar to the statements contentions arguments and requests contained in the attachments to forms filed with the internal_revenue_service by certain other taxpayers with cases in the court see eg copeland v commissioner supra smith v commissioner supra --- - the assessment was made and notice_and_demand was issued by regular mail to the taxpayers’ last_known_address as required under sec_6303 the notices required under sec_6331 and sec_6330 were combined in letter dated which was mailed certified to the taxpayers’ last_known_address the taxpayers responded with form request for a collection_due_process_hearing which was timely re- ceived and was postmarked the taxpayers are entitled to judicial review this is a levy issue only a mftrax transcript was reviewed and a copy was pro- vided to the taxpayers at the face-to-face collection_due_process_hearing held on in attendance were the taxpayer a taxpayer witness settlement officer donna fisher and settlement officer renee swall the hearing was audio-recorded by the taxpayer and settlement officer donna fisher settlement officer donna fisher has had no prior in- volvement with respect to this tax_liability issues raised by the taxpayer the taxpayers disagree with the assessment they filed a zero income zero tax due return attaching several pages of non-filer arguments and a form_w-2 showing taxable wages of dollar_figure they also had additional taxable_income bringing their total income to dollar_figure for tax_year their return was examined and they were issued a statutory_notice_of_deficiency dated for additional tax of dollar_figure plus penalty and interest they responded to the notice of defi- ciency with a letter dated this letter raised no relevant arguments and they did not petition the tax_court since they had a previous opportunity to dispute the assessment they were precluded under the collection_due_process procedures from raising as an issue the amount or existence of the underlying assessment the taxpayers raised no non-filer arguments collection alternatives were raised with the taxpayers they indicated they would full sic pay the tax if it could be proven to them that they are liable for it however the non-filer arguments attached to their return include in part their statement we know that no section of the internal_revenue_code establishes an income_tax ‘liability’ in es- sence this argument is repeated again in their attach- ment to their form therefore further discus- sion was considered non-productive in addition since the taxpayers are not in filing compliance for tax_year they are not now eligible for an offer or an installment_agreement balancing the need for efficient collection with tax- payer concerns the requirements of all applicable laws and administra- tive procedures have been met the assessment is valid given the taxpayers sic continued lack of compliance with the tax laws a levy or levies on their property and or rights to property would not be consid- ered more intrusive than necessary when balancing the taxpayers’ concerns with the government’s need for efficient collection of the taxes discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there are no genuine issues of material fact regarding the questions raised in respondent’s motion where as is the case here the validity of the underlying tax_liability is not properly placed at issue the court will review the determination of the commissioner of internal revenue for abuse_of_discretion 114_tc_604 114_tc_176 as was true of petitioners’ attachment to their joint - return petitioners’ date letter and petitioners’ attachment to form petitioners’ response contains conten- tions arguments and requests that the court finds to be frivo- lous and or groundless based upon our examination of the entire record before us we find that respondent did not abuse respondent’s discretion in determining to proceed with the collection action as determined in the notice_of_determination with respect to petitioners’ taxable_year in respondent’s motion respondent requests that the court require petitioners to pay a penalty to the united_states pursu- ant to sec_6673 sec_6673 authorizes the court to require a taxpayer to pay to the united_states a penalty in an amount not to exceed dollar_figure whenever it appears to the court inter alia that a proceeding before it was instituted or maintained primarily for delay sec_6673 a or that the taxpayer’s position in such a proceeding is frivolous or ground- less sec_6673 b in 115_tc_576 we issued an unequivocal warning to taxpayers concerning the imposi- the contentions arguments and requests set forth in petitioners’ response are very similar to the contentions arguments and requests set forth in responses by certain other taxpayers with cases in the court to motions for summary_judgment and to impose a penalty under sec_6673 filed by the commissioner of internal revenue in such other cases see eg smith v commissioner tcmemo_2003_45 --- - tion of a penalty under sec_6673 on those taxpayers who abuse the protections afforded by sec_6320 and sec_6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions in the instant case petitioners advance we believe primar- ily for delay frivolous and or groundless contentions argu- ments and requests thereby causing the court to waste its limited resources we shall impose a penalty on petitioners pursuant to sec_6673 in the amount of dollar_figure we have considered all of petitioners’ contentions argu- ments and requests that are not discussed herein and we find them to be without merit and or irrelevant on the record before us we shall grant respondent’s motion to reflect the foregoing an appropriate order granting respondent’s motion and decision will be entered for respondent


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 tege eoeg eo1 plr-126678-17 date february state -------------- city -------------- trust ---------------------------------------------------------------------------------------------------- date ----------------- dear ------------- this letter responds to a letter from trust’s authorized representatives dated date and subsequent correspondence requesting a ruling that trust’s one-time contribution to a voluntary employee beneficiary association veba described in sec_501 of the sec_1 is consistent with the requirements of sec_115 trust represents the facts as follows facts city is a political_subdivision of state city currently provides retiree health and welfare benefits through trust to eligible employees of city except for investment_income trust’s income consists solely of contributions from the city and city employees on date the internal_revenue_service issued a ruling that trust’s income is excludable from gross_income under sec_115 pursuant to settlement of a lawsuit seeking to invalidate certain changes to city employee retirement benefits a veba was created that will be used to fund health reimbursement arrangements trust represents that the veba is described in sec_1 all section references are to the internal_revenue_code code as amended plr-126678-17 c and will receive a determination_letter recognizing that the organization is exempt under sec_501 as an organization described in sec_501 the settlement provides that certain employees will be able to make an election between remaining in the current retiree health structure funded through trust or converting to the new retiree health structure funded through the veba other employees will be required to convert to the new veba retiree health structure city proposes to make a one-time contribution from trust to the veba in an amount equal to the mandatory_contributions that participating employees previously made under the current health structure without added interest trust would continue to exist and would continue to fund post-employment health benefits for employees that remain under the current health care structure law and analysis sec_115 provides that gross_income does not include income derived from any public_utility or the exercise of any essential_governmental_function and accruing to a state or any political_subdivision thereof revrul_77_261 1977_2_cb_45 holds that income generated by an investment fund that is established by a state to hold revenues in excess of the amounts needed to meet current expenses is excludable from gross_income under sec_115 because such investment constitutes an essential_governmental_function the ruling explains that the statutory exclusion is intended to extend not to the income of a state or municipality resulting from its own participation in activities but rather to the income of an entity engaged in the operation of a public_utility or the performance of some governmental function that accrues to either a state or political_subdivision of a state the ruling points out that it may be assumed that congress did not desire in any way to restrict a state’s participation in enterprises that might be useful in carrying out projects that are desirable from the standpoint of a state government and that are within the ambit of a sovereign to conduct revrul_90_74 1990_2_cb_34 holds that the income of an organization formed funded and operated by political subdivisions to pool various risks casualty public liability workers’ compensation and employees’ health is excludable from gross_income under sec_115 the revenue_ruling states that pooling casualty risks through the organization instead of purchasing commercial insurance fulfills the obligations of the political subdivisions to protect their financial integrity the benefit to the employees of the participating political subdivisions was deemed incidental to the public benefit accordingly the organization is performing an essential_governmental_function and the organization’s income accrues to a state or political_subdivision the revenue_ruling states that the income of an organization formed operated and funded by one or more political subdivisions or by a state and one or more political plr-126678-17 subdivisions to pool their risks in lieu of purchasing insurance to cover their public liability workers’ compensation or employees’ health obligations is excluded from gross_income if private interests do not except for incidental_benefits to employees of the participating state and political subdivisions participate in the organization or benefit from the organization providing health and welfare benefits to retired city employees is an essential government function within the meaning of sec_115 see revrul_77_261 and revrul_90_74 trust is providing health and welfare benefits to retired city employees through its one-time payment to the veba because the veba will be used to fund health reimbursement arrangements for retired city employees furthermore the one- time payment to the veba does not change that trust’s income accrues to city because it satisfies its obligation to provide health benefits to its employees and private interests do not except for incidental_benefits to the employees participate in trust or benefit from trust see revrul_90_74 ruling based solely on the facts and representations submitted trust’s one-time contribution to a veba described in sec_501 is consistent with the requirements of sec_115 see revrul_77_261 and revrul_90_74 the rulings contained in this letter are based upon information and representations submitted by or on behalf of trust and accompanied by a penalty of perjury statement executed by an individual with authority to bind trust and upon the understanding that there will be no material changes in the facts while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination the associate office will revoke or modify a letter_ruling and apply the revocation retroactively if there has been a misstatement or omission of controlling facts the facts at the time of the transaction are materially different from the controlling facts on which the ruling was based or in the case of a transaction involving a continuing action or series of actions the controlling facts change during the course of the transaction see revproc_2018_1 sec_11 this letter does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections specifically described and except as expressly provided in this letter no opinion is expressed or implied concerning the tax consequences of any aspects of any transaction or item_of_income discussed or referenced in this letter specifically this letter does not address whether the veba is exempt under sec_501 as an organization described in sec_501 because it could help resolve questions concerning federal_income_tax status this letter should be kept in trust’s permanent records plr-126678-17 a copy of this letter must be attached to any_tax return to which it is relevant alternatively if trust files a return electronically this requirement may be satisfied by attaching a statement to the return that provides the date and control number of this letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to trust’s authorized representatives this ruling letter is directed only to trust sec_6110 provides that it may not be used or cited as precedent sincerely theodore r lieber senior tax law specialist office of the chief_counsel tax exempt government entities


t c memo united_states tax_court ronald craig fish petitioner v commissioner of internal revenue respondent docket no filed date ronald craig fish pro_se joseph e nagy for respondent memorandum findings_of_fact and opinion haines judge respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax and a dollar_figure accuracy-related_penalty under sec_6662 for the issues for our decision are whether petitioner unless otherwise indicated all section references are to the internal continued is entitled to a deduction claimed on his individual federal_income_tax return for portfolio losses realized inside his individual_retirement_account ira during that year and whether petitioner is liable for the accuracy-related_penalty findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts together with the attached exhibits is incorporated herein by this reference petitioner is a semiretired patent attorney he resided in california at the time the petition was filed petitioner maintained a traditional_ira during and used it to buy and sell various securities including shares of two master limited_partnerships that were involved in the oil_and_gas pipeline and storage industry--atlas pipeline partners l p atlas and crosstex energy l p crosstex petitioner received a schedule_k-1 partner’s share of income deductions credits etc from atlas reporting a dollar_figure ordinary business loss for the schedule_k-1 indicated trad ira vftc as custodian and stated that the partner was an ira sep keogh petitioner reported this loss on the schedule e continued revenue code as amended and in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure supplemental income and loss attached to his form_1040 u s individual_income_tax_return petitioner received a schedule_k-1 from crosstex reporting a dollar_figure ordinary business loss for and stating that the partner was an ira sep keogh petitioner also reported this loss on the schedule e attached to his form_1040 petitioner received a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc for a partial_distribution that he received from his ira the form 1099-r reported that dollar_figure had been distributed from the ira to petitioner in all of which was reported on line 15b taxable_amount of ira_distributions on petitioner’s form_1040 respondent mailed petitioner a notice_of_deficiency dated date respondent disallowed the deduction for the losses for atlas and crosstex that petitioner claimed on his form_1040 and imposed the sec_6662 accuracy-related_penalty petitioner timely filed a petition with this court challenging respondent’s disallowance of the claimed deduction for the atlas and crosstex losses petitioner agreed with all other adjustments in the notice_of_deficiency opinion i petitioner may not deduct ira portfolio losses the commissioner’s determination regarding a taxpayer’s tax_liability is presumed correct and the taxpayer bears the burden of proving otherwise rule a 290_us_111 amounts held in traditional iras are not subject_to income_tax until they are distributed or deemed to have been distributed sec_408 sec_408 governs the tax treatment of distributions petitioner takes issue with respondent’s position that a taxpayer may recognize a loss from ira investments only when all amounts from all ira accounts have been distributed and the total distributions are less than any unrecovered bases in the accounts sec_72 sec_408 sec_7701 petitioner asserts that the law and regulations do not support respondent’s position petitioner argues in part that an ira has all of the attributes of a grantor_trust and is therefore a pass through entity which makes all items of income deduction and credit treated as belonging to him and reportable on his individual tax_return petitioner advances various tax policy arguments which he believes support this position for example he contends that restricting an ira holder’s ability to deduct a loss that occurs when an investment held by the ira is sold thwarts congressional intent to encourage individuals to save for retirement he also claims that requiring retirees to completely liquidate their iras in order to recognize a deductible loss is unreasonable arbitrary capricious and completely unworkable for savers dependent upon ira sep income for their retirement while petitioner may not agree with the way the law is written and may have reasons that he believes support changing the law we cannot do that for him tax policy is within congress’ purview not within this court’s we decide cases on the basis of the law enacted by congress rather than a taxpayer’s policy arguments as to how the law should have been written transactions occurring within the ira do not result in taxable events which are reported on the holder’s individual_income_tax_return an ira is a tax-exempt_entity not a passthrough_entity sec_408 the law is clear that distributions from and payments out of an ira trigger income_tax consequences for the payee or distributee sec_408 in petitioner received distributions totaling dollar_figure that he properly reported on his return he may not use losses realized within the ira during that year to offset his income we hold that respondent correctly disallowed the deduction for the losses for atlas and crosstex that petitioner claimed on his form_1040 ii petitioner is liable for the sec_6662 penalty a accuracy-related_penalty is imposed on any portion of an underpayment_of_tax attributable to negligence or disregard of rules and regulations or a substantial_understatement_of_income_tax sec_6662 and b and negligence is defined to include any failure to make a reasonable attempt to comply with the internal_revenue_code sec_6662 the statute defines disregard to include any careless reckless or intentional disregard id an understatement of income_tax is substantial if it exceeds the greater of of the tax required to be shown on the return or dollar_figure sec_6662 the commissioner bears the burden of production with respect to the taxpayer’s liability for the sec_6662 penalty and must produce sufficient evidence indicating that it is appropriate to impose the penalty sec_7491 116_tc_438 once the commissioner has met this burden the taxpayer must come forward with sufficient evidence to persuade this court that his determination was incorrect petitioner claimed a deduction for nearly dollar_figure in losses on his return petitioner as discussed above advances tax policy arguments to justify the deduction positions taken on a return must be supported by the law and or regulations not tax policy arguments petitioner also claims that the positions taken on his return were supported by internal_revenue_service guidance as to how partners should report items reported on a schedule_k-1 a seasoned attorney would not have taken the position petitioner took on his return petitioner’s return should have shown that dollar_figure in tax was due petitioner’s understatement of income_tax for is equal to the deficiency of dollar_figure which exceeds the greater of dollar_figure or dollar_figure which is of the amount that should have been shown on the return accordingly petitioner’s understatement of income_tax was substantial respondent has met his burden of production and shown that it is appropriate to impose the sec_6662 and b penalty and petitioner has failed to persuade us otherwise we hold that the accuracy-related_penalty applies to petitioner’s underpayment_of_tax we have considered the parties’ remaining arguments and to the extent not discussed above conclude those arguments are irrelevant moot or without merit decision will be entered for respondent