department of the treasury internal_revenue_service washington d c date cc dom fs corp tl-n-2039-98 uilc number release date internal_revenue_service national_office field_service_advice memorandum for special litigation assistant cc from steven j hankin chief corporate branch field service division cc dom fs corp subject this field_service_advice responds to your memorandum dated field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend corp a corp b corp c corp d taxable_year a taxable_year b taxable_year c taxable_year d taxable_year e taxable_year f taxable_year g date a date b date c date d date e date f x y z issue s who is the proper party to execute form s for the former corp a subsidiaries consolidated_group for taxable years c and d 1a what is proper language to use on the form s for the corp a subsidiaries consolidated group’s taxable years c and d who is the proper party to execute form s for the former corp b subsidiaries consolidated_group for the taxable years b through c and the short d tax_year 2a what is proper language to use on the form s for the former corp b subsidiaries consolidated_group for the taxable years b through c and the short d tax_year who is the proper party to execute form s for the corp c subsidiaries consolidated_group for the taxable_year d 3a what is proper language to use on the form s for the corp c subsidiaries consolidated_group for the taxable_year d conclusion corp d is the proper party to execute form s with regard to corp a’s several_liability for the consolidated tax of the former corp a subsidiaries consolidated_group for taxable years c and d 1a identify the taxpayer on the form s as corp d as successor to corp c ein xx-xxxxxxx formerly corp b as the successor of corp a ein xx- xxxxxxx and put an asterisk after it at the bottom of the form_906 write this is with respect to the several_liability of corp a ein xx-xxxxxxx for the consolidated tax of the corp a ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable years c and d corp d is the proper party to execute form s with regard to corp b’s several_liability for the consolidated tax of the former corp b subsidiaries consolidated_group for the taxable years b through c and the short d tax_year 2a identify the taxpayer on the form s as corp d ein xx-xxxxxxx as successor to corp c ein xx-xxxxxxx formerly corp b ein xx-xxxxxxx and put an asterisk after it on the bottom of the form_906 write this is with respect to the several_liability of corp b ein xx-xxxxxxx for the consolidated tax of corp b ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable years b through c and the short d taxable_year corp d is the proper party to execute form s with regard to corp c’s several_liability for the consolidated tax of the former corp c subsidiaries consolidated_group for the tax_year d 3a identify the taxpayer on the form_906 as corp d as successor to corp c ein xx-xxxxxxx and put an asterisk after it on the bottom of the form_906 write this is with respect to the several_liability of corp c ein xx-xxxxxxx for the consolidated tax of the corp c ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable_year d instead of several form sec_906 as envisioned above you can use one form_906 for corp d with respect to its liability you can identify the taxpayer on this form_906 as follows corp d ein xx-xxxxxxx as successor_in_interest to corp c ein xx-xxxxxxx formerly corp b ein xx-xxxxxxx successor_in_interest to corp a with respect to the several liabilities of corp a ein xx-xxxxxxx for the consolidated tax of the corp a ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable years c and d corp c ein xx-xxxxxxx formerly corp b ein xx- xxxxxxx for the consolidated tax of the corp b ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable years b through c and the short taxable_year d and corp c ein xx-xxxxxxx for the consolidated tax of the corp c ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable_year d facts corp a and corp b were common parent agents for separate consolidated groups of affiliated corporations on or about date a corp a merged into corp b with corp b surviving as a result of the merger corp b changed its name to corp c corp c has represented to the service that this merger qualified as a tax-free reorganization under sec_368 notwithstanding the form of the transaction district_counsel indicates that the shareholders of old corp a owned x percent of the stock of corp c immediately after the merger as a result this transaction appears to constitute a reverse_acquisition and therefore the corp a and subsidiaries consolidated_group is treated as the continuing group with corp c as the common parent of the continuing group also as a result of this transaction corp b subsidiaries consolidated_group terminated on date b corp c merged into corp d ein xx-xxxxxxx with corp d surviving following the merger the former shareholders of corp d control y of corp d and the remaining z is owned by the former shareholders of corp c this transaction does not appear to constitute a reverse transaction and therefore this merger resulted in the termination of the corp a and subsidiaries consolidated_group prior to the merger of corp a into corp b corp b filed consolidated_returns for the corp b and subsidiaries consolidated_group for tax_year c and short taxable_year d consolidated_returns were filed on behalf of the corp a and subsidiaries consolidated_group for taxable years ended c and d prior to the merger of corp c into corp d corp c formerly corp b filed consolidated_returns for the corp c and subsidiaries consolidated_group for taxable years ending after taxable_year c on date c we responded to you informally with respect to the above stated issues our advice was as follows regarding the taxable_year c and short_year d consolidated_tax_liability of the corp b consolidated_group corp d as successor to corp c ein xx-xxxxxxx formerly corp b ein xx-xxxxxxx this is with respect to the several_liability of corp b ein xx- xxxxxxx for the consolidated tax_liabilities of corp b ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable years ended c and the short taxable_year ended date a regarding the taxable years e f and short_year g consolidated_tax_liability of corp c consolidated_group corp d as successor to corp c ein xx-xxxxxxx this is with respect to the several_liability of corp c ein xx- xxxxxxx for the consolidated tax_liabilities of the corp c ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable years ended after taxable_year c regarding the taxable years c and d consolidated_tax_liability of the corp a consolidated_group corp d as successor to corp c ein xx-xxxxxxx as the successor of corp a ein xx-xxxxxxx this is with respect to the several_liability of corp a ein xx- xxxxxxx for the consolidated tax_liabilities of corp a ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable years ended c and d there are three options regarding the several liabilities of the surviving members of the consolidated groups initially we note that the agency rules of temp_reg sec_1_1502-77t are inapplicable with respect to form sec_906 therefore we propose you do one of the following deal with each member individually regarding the form_906 closing_agreement have all members designate an agent to act on their behalf according to reg sec_1_1502-77 have all members sign one or several form sec_906 analogous to the procedure set forth in revproc_72_38 1972_2_cb_813 as modified by revproc_82_6 1982_1_cb_409 governing certain procedures for filing form sec_872 872-b and ss-10 by memorandum dated date d you informed us that the former consolidated members of the three consolidated groups intended to formally designate corp d as their agent you also stated that this designation will be formally ratified by the former surviving members of corp c and subsidiaries consolidated_group corp a and subsidiaries consolidated_group and corp b and subsidiaries consolidated_group on or before date e you also submitted to us the proposed taxpayer identification language that you intended to put on the form_906 that language is set forth below corp d ein xx-xxxxxxx as successor to corp c ein xx- xxxxxxx formerly corp b ein xx-xxxxxxx hereinafter taxpayer address with respect to the several_liability of corp c ein xx-xxxxxxx as successor to corp a ein xx-xxxxxxx and corp a ein xx-xxxxxxx for the several consolidated tax_liabilities of the corp a ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable years c and d with respect to the several_liability of corp c ein xx-xxxxxxx formerly corp b ein xx-xxxxxxx for the several consolidated tax_liabilities of the corp b ein xx-xxxxxxx and subsidiaries consolidated_group for the taxable years b through c and the short taxable_year ended date a with respect to the several_liability of corp c ein xx-xxxxxxx for the several consolidated tax_liabilities of the corp c ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable_year d and as the designated agent under sec_1_1502-77 for the several consolidated tax_liabilities of the surviving consolidated_group members of each consolidated_group listed in attachment we note that this language modifies the proposed language contained in our advice of date c we think you are attempting too much here although we advise that you deal with them separately we think it is permissible to use one combined form_906 for all the surviving members of each subject consolidated_group with regard to the tax years at issue for each group see analogous procedures set forth in revproc_72_38 1972_2_cb_813 as modified by revproc_82_6 1982_1_cb_409 governing certain procedures for filing form sec_872 872-b and ss-10 we urge you to use at least four form sec_906 one for corp d with regard to its entire liability and one for each consolidated_group at issue ie one for corp a and subsidiaries consolidated_group one for corp b and subsidiaries consolidated_group and one for corp c and subsidiaries consolidated_group further we do not believe that a form_906 can be obtained from corp d as the agent for any of the surviving members of these consolidated groups do not use agency language on the form_906 1it is possible to use one combined form_906 for all surviving members of both the corp a and subsidiaries consolidated_group and the corp c and subsidiaries consolidated_group with regard to their respective consolidated tax_liabilities because the first merger constituted a reverse_acquisition and therefore the corp a and subsidiaries consolidated_group continued in existence with corp c as its new common parent however we believe in the interest of clarity that you should obtain separate form sec_906 with regard to corp a and subsidiaries consolidated_group and the corp c and subsidiaries group sec_1_1502-77 in relevant part provides if the notice thus required is not given by the common parent or the designation is not approved by the district_director the remaining members may subject_to the approval of such district_director designate another member to act as agent emphasis added we interpret this language to mean that only another corporation that was a surviving member of the consolidated_group during the years at issue can be designated under this regulation corp d was not a member of any of the subject consolidated groups on date f you informed us that because of insufficient time and resources it was impracticable to get the former consolidated members of the three consolidated groups to formally designate corp d as their agent you then proposed to have individuals officers of the various taxpayers who in the aggregate have authority to sign for all taxpayers concerned sign one form_906 you state that you intend that they sign one time you will attach various affiliation schedules which will list the official positions in the various taxpayers held by these five individuals you stated that you are presently examining the proposed affiliation schedules for completeness and accuracy law and analysis generally the common parent with certain exceptions not applicable here is the sole agent for each member of the group duly authorized to act in its own name in all matters relating to the tax_liability for the consolidated_return_year sec_1_1502-77 the common parent in its name will give waivers and any waiver so given shall be considered as having also been given or executed by each such subsidiary sec_1_1502-77 thus generally the common parent is the proper party to sign consents including the form_872 waiver to extend the period of limitations for all members in the group sec_1_1502-77 the common parent and each subsidiary which was a member of the consolidated_group during any part of the consolidated_return_year is severally liable for the tax for such year sec_1_1502-6 a the facts indicate that corp a’s merger into corp b constituted a reverse_acquisition the elements of a reverse_acquisition are listed in sec_1_1502-75 which provides if a corporation first_corporation or any member of a group of which the first_corporation is the common parent acquires stock of another corporation second corporation and as a result the second corporation becomes a member of a group of which the first for the years in question and so we do not think that corp d can be designated an agent for the remaining members of these consolidated groups 3temp reg sec_1_1502-77t provides exceptions to the general_rule temp_reg sec_1_1502-77t provides for alternative agents in certain circumstances and applies to waivers of the statute_of_limitations for taxable years for which the due_date without extensions of the consolidated_return is after date temp_reg sec_1_1502-77t applies to the years at issue in this case however sec_1_1502-77t is inapplicable here because it applies only to waivers of the statute_of_limitations and to statutory notices of deficiency and not to closing agreements corporation is the common parent and the stockholders immediately before the acquisition of the second corporation as a result of owning stock of the second corporation own immediately after the acquisition more than percent of the fair_market_value of the outstanding_stock of the first_corporation then any group of which the first_corporation was the common parent immediately before the acquisition shall cease to exist as of the date_of_acquisition and any group of which the second corporation was the common parent immediately before the acquisition shall be treated as remaining in existence with the first_corporation becoming the common parent of the group according to the facts corp b is the first_corporation the acquiring_corporation and corp a is the second corporation or the acquired_corporation in the transaction corp b acquired the assets of corp a when corp a merged into corp b with corp b surviving the shareholders of corp a as a result of owning stock of corp a immediately before the acquisition owned immediately after the acquisition more than percent of the fair_market_value of the outstanding_stock of corp b thus this merger transaction constituted a reverse_acquisition as a result of the reverse_acquisition the corp b and subsidiaries consolidated_group ceased to exist and the corp a and subsidiaries consolidated_group continued in existence with corp c formerly corp b as its new common parent as a result of the second merger mentioned above corp c ceased to exist the corp a and subsidiaries consolidated_group ceased to exist and all remaining former members of the corp a consolidated_group the corp b consolidated_group and the corp a consolidated_group became members of the corp d and subsidiaries consolidated_group as a further result of this second merger corp d became a successor_in_interest to corp c formerly corp b which itself was a successor_in_interest to corp a thus corp d is a successor of corp c formerly corp b and is a successor to a successor of corp a depending on state law corp d may be primarily liable as successor for the debts of both corp a and corp c formerly corp b since it was a member of the corp a and subsidiaries consolidated_group during tax years c and d corp a is severally liable under sec_1_1502-6 a for the corp a and subsidiaries consolidated group’s tax for tax years c and d since corp b was a member of the corp b and subsidiaries consolidated_group during tax years b through c including short taxable_year d corp c formerly corp b is severally liable under sec_1_1502-6 a for the corp b and subsidiaries consolidated group’s tax for tax years b through c including short taxable_year d finally corp c was a member of the corp c and subsidiaries consolidated_group during taxable_year d thus corp c is severally liable under sec_1 a for the corp c and subsidiaries consolidated group’s tax for taxable_year d accordingly corp d as a successor to corp c formerly corp b and as a successor to the successor of corp a is liable with regard to the various several liabilities referred to above you should obtain one or several form s from corp d with regard to its liabilities the language you should use on the form s is as follows with regard to corp a’s several_liability -- identify the taxpayer on the form_906 as corp d as successor to corp c ein xx-xxxxxxx formerly corp b as the successor of corp a ein xx-xxxxxxx and put an asterisk after it at the bottom of the form_906 write this is with respect to the several_liability of corp a ein xx-xxxxxxx for the consolidated tax of the corp a ein xx-xxxxxxx and subsidiaries consolidated_group for taxable years c and d with regard to corp b’s later known as corp c ’s several_liability -- identify the taxpayer on the form_906 as corp d ein xx-xxxxxxx as successor to corp c ein xx-xxxxxxx formerly corp b ein xx-xxxxxxx and put an asterisk after it on the bottom of the form_906 write this is with respect to the several_liability of corp b ein xx-xxxxxxx for the consolidated tax of corp b ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable years ended c and the short taxable_year d with regard to corp c’s several_liability -- identify the taxpayer on the form_906 as corp d as successor to corp c ein xx-xxxxxxx and put an asterisk after it on the bottom of the form_906 write this is with respect to the several_liability of corp c ein xx-xxxxxxx for the consolidated tax of the corp c ein xx- xxxxxxx and subsidiaries consolidated_group for the taxable years ended after taxable_year c we note that the above language does not address the several liabilities of the surviving members of the former corp a consolidated_group the surviving members of the former corp b consolidated_group and the surviving members of the former corp c consolidated_group all of these former members are severally liable under sec_1_1502-6 a for the tax of their respective consolidated groups for the time when they were members of those consolidated groups we note that the proposed consolidated language contained in your memorandum of date d attempts to address this matter all on one form_906 again we do not agree with your proposed language or your proposal to use only one form_906 all form sec_906 should be executed by an authorized officer of the proper entity identified above analogous to the procedure set forth in revrul_83_41 1983_1_cb_399 clarified and amplified revrul_84_165 1984_2_cb_305 the service will apply the rules applicable to the execution of the original returns to the execution of consents to extend the time to make an assessment sec_6061 provides that any return statement or other document made under any internal revenue law must be signed in accordance with the applicable forms or regulations in the case of corporate returns sec_6062 provides that a corporation's income_tax returns must be signed by the president vice-president treasurer assistant treasurer chief accounting officer or any other officer duly authorized to act the fact that an individual's name is signed on the return is prima facie evidence that the individual is authorized to sign the return sec_6064 analogizing this situation to that set forth in revrul_84_165 1984_2_cb_305 we think that any such officer may sign a form_906 whether or not that person was the same individual who signed the return case development hazards and other considerations as noted above you propose to have individuals officers of the various taxpayers who in the aggregate have authority to sign for all taxpayers concerned sign one form_906 and you state that you are presently examining the proposed affiliation schedules for completeness and accuracy because your proposed method is out of the ordinary and that neither we nor procedural branch have had an opportunity to review these proposed affiliation schedules we will not opine on the validity or binding effect of these documents at this time please send in these affiliation schedules and a detailed explanation of how you intend to have the various individuals sign the form s and we will review and expeditiously advise you regarding the proposed affiliation schedules and your proposed method of binding these entities if you have any questions please contact of the corporate branch of the field service division at cc assistant regional_counsel tl assistant regional_counsel lc


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp - plr-110208-02 date date legend parent purchaser purchaser partnership target sellers date a date b company official plr-110208-02 tax professional this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election parent is requesting an extension to file a sec_338 election under sec_338 with respect to the acquisition of the stock of target sometimes hereinafter referred to as the election on date a all citations in this letter to regulations under sec_338 are to regulations in effect on date a additional information was received in a letter dated date the material information is summarized below parent is the common parent of a consolidated_group purchaser is a wholly owned subsidiary of parent purchaser is an llc wholly owned by purchaser and disregarded as an entity separate from purchaser for federal_income_tax purposes target is a foreign_corporation wholly owned by partnership a domestic_partnership sellers were the only partners of partnership on date a pursuant to a purchase agreement of the same date purchaser and purchaser acquired all of sellers’ partnership interests in partnership in exchange for cash it is represented that the acquisition of target by means of the acquisition of all of the partnership interests in partnership qualified as a qualified_stock_purchase as defined in sec_338 prior to the acquisition target did not file a united_states income_tax return was not subject_to united_states income_taxation nor was required under sec_1_6012-2 to file a united_states income_tax return target is a controlled_foreign_corporation within the meaning of sec_957 target is not a passive_foreign_investment_company for which an election under sec_1295 was in effect or foreign_investment_company or foreign_corporation the stock ownership of which is described in sec_552 parent intended to file the election the election was due on date b but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for parent’s consolidated group’s or target’s taxable_year in which the acquisition occurred the taxable_year in which the election should have been filed or any taxable_year that would have been affected by the election had it been timely filed plr-110208-02 sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338-2t d therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent to file the election provided parent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers' parent’s consolidated group’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is plr-110208-02 expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 parent must file the election in accordance with sec_1_338-2t d that is a new election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter must be attached to the election form parent must file or amend as applicable its return to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year and to attach to the return a copy of this letter and a copy of the election we express no opinion as to whether the acquisition of the target’s stock qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative cc sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number ----------------------------------------- ---------------------------------- ---------------------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ------------- telephone number --------------------- refer reply to cc fip b02 plr-141327-09 date november legend taxpayer ------------------------------------------------------------- corporation ------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------- state a state b x advisor lawyer accountant month month year date date date ------------ ------------ ----- ----------------------------- ------------------------------------------------- ------------------------- ---------- ------ ------- ------------------------- --------------------- ----------------------- plr-141327-09 date --------------------------- dear -------------- this is in reply to a letter dated date requesting a ruling on behalf of taxpayer and corporation specifically you have requested that taxpayer and corporation be granted an extension of time under sec_301_9100-1 of the procedure and administration regulations to file form_8875 taxable_reit_subsidiary election so that taxpayer and corporation may jointly elect for corporation to be treated as a taxable_reit_subsidiary trs of taxpayer effective date facts taxpayer was incorporated under the laws of state a on date and intends to make an election to be treated as a real_estate_investment_trust reit under subchapter_m of the internal_revenue_code effective for the year tax_year corporation was formed as a limited_liability_company under the laws of state b on date and filed an election under sec_301_7701-3 of the income_tax regulations to be taxed as a corporation for federal_income_tax purposes taxpayer owns x of the interests in corporation taxpayer and corporation are externally managed and advised by advisor and its affiliates the vice president of tax of advisor vice president is the primary advisor on tax matters for taxpayer and corporation advisor organized taxpayer for the specific purpose of qualifying as a reit that would own healthcare properties and lease such properties to a trs taxpayer and corporation intended to make a joint election under sec_856 to treat corporation as a trs of taxpayer reit and corporation closed on the purchase of a healthcare properties portfolio in month of year since the closing of the acquisition advisor has monitored the operations and activities of reit to ensure compliance with reit requirements furthermore advisor engaged lawyer to provide tax_advice including a tax opinion to be rendered to the investors of reit in month of year vice president realized that a trs election had not been filed for corporation while advisor understood that it was necessary to utilize a trs to serve as a lessee of the healthcare properties vice president and the other members of advisor’s tax department were unaware of the need to file an actual trs election within a proscribed time frame plr-141327-09 in late month of year vice president discussed the failure_to_file the trs election with accountant accountant advised that taxpayer and corporation file a form_8875 and seek a letter_ruling requesting an extension of time to make the election taxpayer and corporation filed the form_8875 on date taxpayer and corporation make the following representations the granting of relief under sec_301_9100-3 would not result in taxpayer or corporation having a lower tax_liability in the aggregate for all years to which the election applies than each would have had if the election had been timely made taking into account the time_value_of_money neither taxpayer nor corporation knowingly chose not to file the election neither taxpayer nor corporation used hindsight in requesting relief finally taxpayer and corporation represent that they are not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 taxpayer has submitted affidavits of vice president and an employee of lawyer all attesting to and supporting the facts and representations underlying this ruling_request law and analysis sec_856 provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a taxable_reit_subsidiary to be eligible for treatment as a taxable_reit_subsidiary sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition the election and the revocation may be made without the consent of the secretary in announcement 2001_1_cb_716 the internal_revenue_service service announced the availability of form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for tax years beginning after for eligible entities to elect treatment as a taxable_reit_subsidiary the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the tax_year the instructions further provide that the effective date of the election cannot be more than months and days prior to the date of filing the election or more than months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service officers of both the reit and the taxable_reit_subsidiary must jointly sign the form which is filed with the irs service_center in ogden utah sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in plr-141327-09 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_9100-3 through c i set forth rules that the internal_revenue_service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money based on the information submitted and representations made we conclude that taxpayer and corporation have satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to treat corporation as a trs of taxpayer effective as of date accordingly taxpayer and corporation are granted days from the date of this letter in which to file form_8875 to make the intended trs election this ruling is limited to the timeliness of the filing of the form_8875 this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether taxpayer otherwise qualifies as a reit or whether corporation would otherwise qualify as a trs under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of either taxpayer or corporation is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect plr-141327-09 this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely ___________________________ david b silber chief branch financial institutions products


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg e01 pubwe-113519-06 uilc date may to deputy area_counsel tax exempt and government entities cc tege glgc dal- from senior technician reviewer exempt_organizations branch cc tege eoeg eo1----------------------------------------------------------------------------------- subject procedural matters related to sec_7611 follow-up examinations and delegation of authority -issue if the irs concludes at the end of an examination under sec_7611 of the internal_revenue_code that a church has intervened in a political campaign but the irs is not revoking the church's tax exempt status can the examination function refer the church to the review of operations unit for follow-up in the coming election cycle overview and sec_7611 reasonable belief rule congress added sec_7611 to the internal_revenue_code by the tax_reform_act_of_1984 by enacting sec_7611 congress intended to protect churches from undue interference from the irs and to minimize irs contacts with churches to only those necessary to insure compliance with the tax laws sec_7611 limits the time and types of contacts the irs may utilize to determine compliance sec_7611 provides that the irs may begin a church_tax_inquiry if an appropriate_high-level_treasury_official reasonably believes that the church may not qualify for tax exemption sec_7611 generally provides that a church inquiry or examination on the same or similar issues within years of the earlier inquiry or examination needs to receive higher level approval before a subsequent inquiry can begin in addition to the requirement of an appropriate high-level treasury official's 'reasonable belief ' sec_7611 and b provide that during the course of an examination or if expanding the scope of an examination pursuant to sec_7611 the irs may only examine records or activities to the extent pubwe-113519-06 in our view under sec_7611 once an inquiry or examination involving a church is closed the irs action with respect to the organization on the same issue is final and any_action with respect to any subsequent allegations must comply with the procedures of sec_7611 this includes the basic requirement under sec_7611 that irs needs a reasonable belief before it can begin a later examination of the church it is our view that the statute does not intend to permit use of the prior inquiry or examination and its outcome by itself in determining whether a reasonable belief exists regarding a subsequent allegation the fact that a church was revoked for an earlier year given a strong advisory or assessed an excise_tax does not allow us to start an inquiry several years later unless we have a reasonable belief under sec_7611 based on a subsequent allegation and information received in connection with it from a referral or from public sources if the prior allegation or the outcome of the prior examination were sufficient to establish a new reasonable belief then a single credible allegation could give the irs perpetual authority to examine a church although there is no suggestion that anyone intends to use the old allegation or examination outcome by itself to create a basis for reasonable belief the use of that information to any degree in forming a reasonable belief could be controversial given the policy underlying the statute looking to a new allegation for purposes of forming a reasonable belief for a subsequent inquiry will avoid raising questions about the legality of the inquiry under sec_7611 this approach does not mean that the official responsible for determining reasonable belief is precluded from having access to administrative files or other information about the prior audit history of the church this information is relevant in determining whether the proposed subsequent examination is on the same or a different issue than the previous examination as discussed below if it is on the same or a similar issue a higher level of review is generally required before commencing the subsequent inquiry or examination this information regarding the previous allegation and examination also assists in providing institutional consistency and may also be considered in setting priorities for_the_use_of resources if examination resources preclude inquiries in all church cases where there is a reasonable belief under sec_7611 certainly there is a risk that a church could challenge the access or use of prior audit information by the official responsible for determining reasonable belief but that is in effect questioning whether the official's determination of reasonable belief was otherwise based upon adequate or reliable information related to the new allegation in all cases where we are considering a follow-up church_tax_inquiry we believe we will satisfy the requirements of sec_7611 for opening a church_tax_inquiry if the information related to the new allegation is sufficient to support reasonable belief that an examination is warranted regardless of the church's prior audit history necessary the standard set in sec_7611 and b to determine liability or church status this requirement arguably sets a higher standard for enforcing a summons in a church case than in other summons enforcement proceedings because the irs must show that the information is 'necessary' to demonstrate a failure of compliance pubwe-113519-06 sec_7611 five year rule any_action involving a subsequent church inquiry needs to comply with the limitations on additional inquiries and examinations under sec_7611 sec_7611 generally provides that a church inquiry or examination on the same or similar issues within years of the earlier inquiry or examination needs to receive higher level approval before a subsequent inquiry can begin treas reg q a provides that the higher signature level authority is the assistant_commissioner employee_plans and exempt_organization pursuant to delegation_order rev that authority is now delegated to the division commissioner tax exempt and government entities sec_7611 provides an exception to this higher level signature requirement where the earlier inquiry or examination resulted in an adverse action including revocation or notice_of_deficiency however it is important to note that sec_7611 does not remove the need for a reasonable belief under sec_7611 to start the subsequent inquiry in determining whether a subsequent inquiry during the year period discussed above involves the same or similar issues q a provides that substantive factual issues involved in the two examinations rather than legal classifications govern whether a subsequent inquiry involves the same or similar issues it follows from q a that if the subsequent inquiry is on political campaign intervention it is not a similar issue to the earlier political campaign intervention examination unless it is factually similar to the issue in the prior examination it is our view that a subsequent inquiry is similar to the prior examination if they both involve a specific type of political campaign intervention such as voter guides a sermon or a campaign contribution it is not clear what other kinds of factual similarities would trigger the requirement for higher level approval for example if a church had been examined for implied advocacy for a candidate in a church publication and a subsequent allegation was made in a different year that the church was engaging in implied advocacy for a different candidate during a sermon a taxpayer might argue that there were similar issues even though the concrete activities are different if eo examinations has any doubt as to whether a subsequent church_tax_inquiry requires higher level approval where both the first and the second inquiries involve alleged political campaign intervention and if the volume of such cases remains very low it can elevate such a case involving subsequent inquiries during the five-year period to a higher level alternatively counsel is available to provide its opinion as to whether the issues are the same or different in specific cases sec_7611 also provides an exception from the higher level signature requirement for a subsequent inquiry where the earlier inquiry or examination resulted in after the restructuring and reform act of delegation_order rev provides that actions previously delegated to assistant commissioners et al by treasury regulations par are now delegated to division commissioner et al par pubwe-113519-06 a request by the secretary for any significant change in the operational practices of the church the statute is silent as to whether the organization must have adopted the requested changes however it was likely assumed that if the church did not reassure the irs on future compliance the church’s exemption would have been revoked it seems unlikely the authors of the statute would have anticipated closing an unagreed_case with a written advisory therefore we believe that the exception in sec_7611 is best read as applying where irs requested changes and the organization committed to make changes to its policies regarding political campaign intervention as part of the earlier inquiry or examination where in the prior examination irs concluded political campaign intervention occurred and requested changes but the church disputed the irs conclusion and irs closed the inquiry or examination with an advisory it is our view that sec_7611 does not apply although the language of the statute speaks only to the request for changes and is silent on the organization’s response we believe the organization’s acquiescence is assumed therefore we believe a higher level of review would be required if a subsequent inquiry were proposed under circumstances where the church disputed that it had violated the law in the period covered by the first exam there may also be uncertainty as to whether the exception in sec_7611 applies where the church already had language in their policies and procedures forbidding political campaign intervention and the irs requested a clarification of the interpretation of political campaign intervention as applied to the specific incident or incidents that served as the cause for the inquiry or examination it is not clear whether a request for a clarification is a request for a change again if eo examinations wants certainty in these cases it will obtain the higher level approval for the subsequent examination in sum the potential need for higher level approval arises whenever the following circumstances are present cid both the initial and the subsequent allegations involve potential political campaign intervention cid the subsequent inquiry would fall within the five-year period and cid the prior examination did not result in revocation or assessment of tax elevating the approval to the division commissioner will avoid the risk that a subsequent inquiry or examination will be challenged by the church as violating sec_7611 however that level of approval is not required if the facts in the cases are not the same or similar data collection for a possible subsequent inquiry before a subsequent inquiry can begin irs needs a reasonable belief under sec_7611 that the church is not exempt from tax or may be otherwise engaged in pubwe-113519-06 activities subject_to tax it is important to consider the scope of irs’ ability to collect any data beyond acting as a passive recipient of allegations sent to irs by third parties treas reg q a states that i nformation received by the internal_revenue_service at its request may not be used to form the basis of a reasonable belief to begin a church_tax_inquiry it is our view that this reference applies to active requests by irs to a church or an individual connected to a church for documents or information that is otherwise not generally available to the public but does not apply to the perusal of documents available to the public by irs without request to the church or individuals connected with the church we recognize that churches may argue that by taking affirmative steps to look for violations regarding whether a church is engaged in activities subject_to tax the irs is violating the underlying intent of sec_7611 we find this argument unpersuasive if the irs is not able to consider the same information and material that is available to the general_public it would be limited to remaining passive and considering only that information that is referred to it by third parties who may not necessarily be the most impartial or reliable sources the irs could not respond to information or allegations published or broadcast widely to hundreds of thousands of people in newspapers on television or on radio we view the policy of sec_7611 as prohibiting random audits and audits based on speculation or the identity of an organization without any further information presenting a credible allegation of noncompliance with the requirements for tax exemption we do not believe sec_7611 is intended to force the irs to be utterly passive in the face of information in the public domain we believe that review of publicly available documents including but not limited to newspapers public data on campaign contributions court documents and web sites on the internet does not violate sec_7611 and can be used to develop a 'reasonable belief' under sec_7611 in our view perusal of these types of sources to search for any mention of churches or a specific church does not constitute a church_tax_inquiry let alone a church_tax_examination therefore we do not believe that review of publicly available material at our own initiative or as a measure taken in response to the result of a prior examination violates any provision of sec_7611 we believe this is the case even though sec_7611 was enacted prior to widespread use of the internet the internet has become one of the most utilized methods of making information available to the general_public as a practical matter websites on the internet including a church's website are all publicly available information moreover any organization including any church that operates a website has the ability to divide the website into sections with different types of access for example the church may have a part of the site that allows unrestricted access for the public and another part of the site that is restricted with secured access for members or employees in our view for purposes of sec_7611 irs viewing of the publicly available sections of any website would be no different than its perusal of any other publicly available document furthermore we believe that viewing a church's website is entirely distinguishable from contacting the church for information by creating the website the church has made the information on pubwe-113519-06 the website freely and publicly available to all just as if it had published a newspaper advertisement or church personnel had granted an interview to a newspaper if however the irs contacts the church with questions or requests for documents or information or the irs contacts other persons with questions or requests for documents or information that are not publicly available those contacts raise sec_7611 issues similarly viewing sections of a church’s website that are not intended to be publicly available for example sections with restricted or secured access for members or employees would also raise sec_7611 issues for these reasons we do not see any legal issues arising from having the examination function refer a church that was the subject of a prior examination to the review of operations unit for follow-up in the coming election cycle as long as the follow-up is limited to reviewing publicly available material in all cases before commencing an inquiry the irs must comply with applicable sec_7611 procedures including the reasonable belief requirements of sec_7611 and the requirements of sec_7611 for higher level approval in certain cases before beginning a subsequent inquiry issue is the director exempt_organizations examinations an appropriate high- level treasury official described in sec_7611 should we anticipate difficulties in sustaining this position if we do not revise our regulation which cites the abolished position of 'regional commissioner' as the appropriate_official sec_7611 requires that an appropriate_high-level_treasury_official have a reasonable belief that a church may not be exempt from federal_income_tax before the irs may start a church_tax_inquiry a church_tax_examination is legally valid under sec_7611 if and only if the church_tax_inquiry was legally valid thus in order to establish that a church_tax_examination is legally valid the irs must be able to document that an appropriate_high-level_treasury_official had the necessary reasonable belief prior to the opening of the church_tax_inquiry on the church in question sec_7611 provides that the term appropriate high level treasury official means any delegate of the secretary whose rank is no lower than that of a principal internal revenue_officer for an internal revenue region the designation of the regional_commissioner or higher treasury official as the appropriate higher-level treasury official for purposes of sec_7611 is provided in the legislative_history to sec_7611 h_r conf_rep no 98th cong 2d sess that designation was captured in regulations that are effective for all tax inquiries and examinations beginning after date sec_301 q a sec_1001 of the internal_revenue_service restructuring and reform act of publaw_105_206 rra provides that the commissioner of internal revenue shall develop and implement a plan to reorganize the irs the plan shall eliminate or substantially modify the existing organization of the internal_revenue_service which is based on a national regional and district structure and establish organizational units pubwe-113519-06 serving particular groups of taxpayers with similar needs under the reorganized structure tax exempt and government entities are recognized as a particular group of taxpayers with similar needs congress was aware that positions within the irs would be eliminated by the reorganization it was directing the commissioner to implement and accordingly sec_1001 of rra1998 provides a savings provision sec_1001 provides that all orders determinations rules regulations and other administrative actions which are in effect at the time this section takes effect shall continue in effect according to their terms until modified terminated superseded set_aside or revoked in accordance with law this savings provision applies to keep in effect regulations that make reference to officers whose positions no longer exist the legislative_history of rra at h_r conf_rep no 105th cong 2d sess explains that t he legality of irs actions will not be affected pending further appropriate statutory changes relating to such a reorganization eg eliminating statutory references to obsolete positions although the legislative_history to the savings provision only refers to statutory changes the provision refers to orders determinations rules regulations and other administrative the service therefore interprets the savings provision liberally applying it to regulations and other published rules after rra the irs issued delegation_order rev to specify who would take the place of various officials in performing delegated functions delegation_order provides in part that actions previously delegated to regional commissioners et al by treasury regulations par are now delegated to directors compliance services field et al although there is no further delegation_order specifically addressing functions under sec_7611 the irm has been amended to designate the director exempt_organizations examinations hereinafter director as having final authority in all cases to determine whether to conduct a church_tax_inquiry and requiring the director to sign the notice of examination this position is recorded in irm based on our understanding of the duties of the director the service's decision to designate the director to replace the regional_commissioner as the irs official responsible for determining whether to conduct a church inquiry is consistent with the policies underlying sec_7611 and the accompanying regulations in effect in challenges to the director's designation as an appropriate_high-level_treasury_official are likely to try to distinguish the director from the regional_commissioner based on the former regional commissioner's complete authority within a region and the regional commissioner's proximity to the commissioner in the chain of authority as cited in the rra legislative_history above the restructuring of irs was intended to change the only delegation_order specific to church tax inquiries and examinations is delegation_order rev delegation_order concerns the authority of certain officials to hold conferences described in sec_7611 and to execute agreements under sec_7611 to suspend the periods for completing church tax inquiries or examinations delegation_order does not address who may authorize a church_tax_inquiry pubwe-113519-06 focus from geographic location and concentrate on particular taxpayer groups these objectives are achieved by assigning the duty_of determining reasonable belief to an official who has national responsibility for tax exempt_organizations including churches and oversees the examination function in which the need to determine reasonable belief arises this designation of the director enables the irs to have nationwide consistency in the administration of sec_7611 and is consistent with the statutory directives on the goals of the reorganization as a direct report the regional_commissioner had closer management proximity to the commissioner but the more appropriate criteria for identifying a comparable official is the official’s scope of authority before amendment by rra the employee retirement income security act publaw_93_406 enacted sec_7802 which created the position of assistant_commissioner employee_plans and exempt_organizations at the same time that the legislative_history of sec_7611 indicated that regional commissioners should sign the sec_7611 reasonable belief letter to begin a church_tax_inquiry the suggestion was made that the assistant_commissioner employee_plans and exempt_organizations approve any subsequent examination under the five year rule_of sec_7611 h_r conf_rep no 98th cong 2nd sess as the assistant commissioner's approval was required for opening new examinations within years of a previous examination congress believed the national perspective of the assistant_commissioner carried more weight than the geographic perspective of the regional_commissioner when it came to the administration of sec_7611 cases thus for purposes of sec_7611 the regional_commissioner was not considered a higher official than the assistant_commissioner notwithstanding his position in the management chain as a direct report to the commissioner the director is at least an equivalent position to the regional_commissioner for the purpose of approving a church inquiry or examination under sec_7611 the regional_commissioner only had regional jurisdiction and in when the position was abolished it was necessary to assign the responsibility for approving church tax inquiries to someone with comparable authority the commissioner could have assigned this responsibility to area managers because they have complete management authority within a geographic span comparable to the old regional commissioners however by designating the director who has national jurisdiction as an appropriate_high-level_treasury_official the service was in fact being more conservative than necessary as noted above the intent of the reorganization was to move irs away from geographic divisions and focus upon particular groups of taxpayers with similar needs the position of the director is well suited for this purpose having national jurisdiction over all the organizations covered by sec_7611 and able to provide consistent application to the reasonable belief standard currently there is no significant litigation risk with respect to the delegation to director the arguments laid out above for considering the director to be at an equal or higher level than the regional_commissioner following the reorganization are sound pubwe-113519-06 nevertheless whenever the sec_7611 regulations are updated next we recommend the regulations be updated to reflect this change this is a ministerial change for clarity that would not make the current delegation to the director vulnerable while the litigating risk may increase without an update to the regulations at some future date because courts may give less weight to the savings provision in sec_1001 of rra98 over time due to its temporal attributes the regulations under sec_7611 are no more vulnerable to this possibility than other regulatory provisions that refer to positions that have been eliminated the service has updated several orders determinations rules and regulations to reflect position changes resulting from the reorganization but many significant orders determinations rules regulations and other administrative actions have not been modified following the reorganization and continue to reference positions eliminated as a result of the reorganization the plan generally is to update the positions in these orders rules and regulations whenever the orders rules or regulations are next revised therefore although an update is recommended there is no urgency requiring the service to consider a regulation project before other modifications to the regulations are needed the regulations include several references to district directors and other officials whose positions no longer exist sec_301_6212-1 authorizes a district_director or director of a service_center or regional_director_of_appeals to send a notice_of_deficiency to a taxpayer if the official determines that there is a deficiency in respect of income estate or gift_tax imposed by subtitle a or b or an excise_tax imposed by chapter or similarly sec_301 a authorizes and requires the district_director to make all inquiries necessary to the determination and assessment of all taxes and sec_301_6404-1 authorizes the district_director or the director of the regional service_center to abate any assessment or any unpaid portion thereof if the assessment is in excess of the correct_tax liability although the position of district_director was eliminated with the reorganization successor positions ie area directors and territory managers continue to take actions pursuant to these regulations we acknowledge that the area director and territory managers positions have similar management and tax_administration authorities as those previously held by the district_director and therefore the redelegation of these duties is not completely analogous to the redelegation of the sec_7611 authority but as with the church_tax_inquiry these critical functions continue to be performed and are unaffected by the elimination of the position referenced in the regulation


sop eo -oo rfremmat nate tesst washington d c contact person identitication number telepnone number tr by tax_exempt_and_government_entities_division dates june sec_2002 employer_identification_number legend dear sir or madam this is in response to your letter dated date in which you requested certain rulings with respect to a proposed transfer of all of the assets of c to b b is exempt under sec_501 of the internal_revenue_code and is classified as private_foundation under sec_509 c is exempt under sec_501 of the internal_revenue_code and is classified as a private_operating_foundation under sec_4942 the board_of directors for b and c intend to approve a plan of merger under which c would merge with b under the plan b would be the surviving entity the directors have concluded that the proposed merger would eliminate the overlap in objective and operational structures between b and c and believe that their consolidation into a single entity will streamline the conduct of their common charitable objectives on the effective date of merger all of the assets and liabilities of c would become and be deemed to be a part of the assets and liabilities of b c as a consequence of the merger would cease to exist as a legal entity as of the effective time of the merger b and c are effectively controlled by the same board_of directors c has never notified the service in the past that it intends to terminate its private_foundation_status nor has c ever received notification that its status as a private_foundation has been terminated furthermore c has not committed willful tepeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_507 of the code and the regulations to sec_507 sets forth rules applicable to terminating foundations the internal_revenue_service in revrul_2002_28 2002_20_irb_941 copy attached has issued guidance on the filing obligations and tax issues that arise when a private_foundation transfers all of its assets to one or more other private_foundations under sec_507 of the code the rev_rul presents three situations in which a private_foundation transfers all of its assets to one or more other effectively controlled private_foundations in situation one the foundation under a plan of dissolution distributes all of its remaining assets in equal shares to three other private_foundations in situation two the trustees of a private_foundation trust create a not-for-profit corporation to carry on the trust’s charitable activities which the trustees have determined can be more effectively accomplished by operating in corporate form all of the trust’s assets and liabilities are transferred to the not-for-profit corporation in situation three two private_foundations transfer all of their assets and liabilities to a newly formed private_foundation revrul_2002_28 provides that a private_foundation that transfers all of its assets to one or more private_foundations in a transfer described in sec_507 is not required to notify the manager exempt_organizations determinations tax exempt government entities that it plans to terminate its private_foundation_status under sec_507 the ruling further states that if the private_foundation does not provide notice that it plans terminate then it is not subject_to the termination_tax under sec_507 if the private_foundation provides notice of termination then it is subject_to the tax however if the private_foundation has no assets on the day it provides notice the sec_507 tax will be zero the rev_rul gives detailed information as to the applicability of the excise_taxes imposed by sections of the code the ruling further provides that a private_foundation that has disposed of all its assets and terminates its private_foundation_status must file a form pf for the tax_year of the disposition and must comply with any expenditure_responsibility reporting obligations on the return a private_foundation that has disposed of all its assets and does not terminate its private_foundation_status must file a form_990-pf for the tax_year of the disposition and must comply with any expenditure_responsibility reporting obligations on the return but does not need to file returns in the following tax years if it has no assets and does not engage in any activities activities in later years it must resume filing form_990-pf for those years if the private_foundation receives additional assets or resumes our evaluation of the facts and circumstances in your ruling_request indicates that the transfer of c’s assets to b would be similar to the facts and circumstances described in situation three of the rev_rul under the facts described the foundations would not be subject_to tax under sec_507 and sections of the code accordingly based on the information furnished and the code and regulations as interpreted in revrul_2002_28 we rule as follows the merger of c with and into b qualifies as a transfer under sec_507 and as such a will not result in a termination of c’s private_foundation_status under sec_507 b will not cause the imposition of the termination_tax described in sec_507 c will not cause b to be treated as a newly created organization and d will not constitute a willful and flagrant act or failure to act giving rise to liability for tax under chapter the merger and the resulting transfer of all of c’s assets to b and the assumption by b of all of the liabilities of c will not adversely affect the sec_501 tax exempt status of either b or c from and after the effective date of the merger b will continue to exist as an organization which is exempt from taxation under sec_501 b and c are effectively controlled within the meaning of sec_1_482-1a of the income_tax regulations directly or indirectly by the same persons therefore pursuant to sec_1_507-3of the regulations for purposes of the excise_taxes imposed under chapter and sec_507 through of the code b will be treated as if it is c upon the transfer of assets by c to b pursuant to the merger b will possess the attributes and characteristics of c specified in sec_1_507-3 of the regulations a b will succeed to the entire aggregate tax_benefit of c under sec_507 b substantial contributors to c under sec_507 will be treated as substantial contributors to b and c b will be responsible for any liabilities of c under chapter to the extent that c does not satisfy such liabilities the transfer of assets by c to b pursuant to the merger will not give rise to gross_investment_income or capital_gain_net_income within the meaning of sec_4940 because the transfer will not constitute a sale_or_other_disposition of property or other realizable event within the meaning of sec_4940 because b will be treated as if itis c under sec_1_507-3 for purposes of sec_4940 any investment_income of c for the taxable_year of the transfer will be includible in the computation of the net_investment_income of b for the taxable_year of the transfer the transfer of assets by c to b pursuant to the merger will not constitute self-dealing under sec_4941 because for purposes of sec_4941 the term disqualified_person does not include an organization described in sec_501 other than an organization described in sec_509 consequently such transfer will not subject b or c to tax under sec_4941 because b will be treated as if it were c under sec_1_507-3 of the regulations for purposes of sec_4942 c will not be required to meet the qualifying_distribution requirements of sec_4942 for the taxable_year of the transfer provided that b’s distributable_amount for the year of the transfer if any is increased by c’s distributable_amount for the year of transfer further c’s qualifying distributions made during the taxable_year of the transfer and the excess qualifying_distribution carryover of c under sec_4942 if any will be carried over to b and may be used by b to meet its distribution_requirements under sec_4942 the transfer of assets by c to b pursuant to the merger will not result in the application of sec_4943 with regard to excess_business_holdings because none of the assets transferred will place b in the position of having excess_business_holdings the transfer of assets by c to b pursuant to the merger will not constitute a jeopardizing investment within the meaning of sec_4944 the transfer of assets by c to b pursuant to the merger will not constitute a taxable_expenditure within the meaning of sec_4945 and c will not be required to exercise expenditure_responsibility with respect to the assets transferred to b to c in the merger will be required to exercise expenditure_responsibility with respect to any expenditure_responsibility grants of c c by the internal_revenue_service prior to the effective date of the merger respecting grant-making procedures under sec_4945 b will be entitled to rely on the approvals given b as the successor the legal accounting and other expenses_incurred by b and c in connection with this ruling_request and effectuating the proposed transfer will be considered qualifying distributions under sec_4942 and will not constitute taxable_expenditures pursuant to sec_4945 b will be entitled to the benefit of the savings provisions and provisional rules applicable to c with respect to the assets transferred in the merger as set forth in sec_1 a of the regulations we are informing the your organization's permanent records te_ge office of this action please keep a copy of this ruling in this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely ezakd v bact gerald v sack manager exempt_organizations technical group


tcmemo_2009_224 united_states tax_court don c long petitioner v commissioner of internal revenue respondent docket no 10551-07l filed date don c long pro_se susan k greene for respondent memorandum opinion cohen judge this case was commenced in response to a notice_of_determination concerning collection action s under sec_6320 and or the issue for decision is whether it was an abuse_of_discretion for the appeals_conferee to refuse to consider petitioner’s challenge to his underlying tax_liability for unless otherwise indicated all section references are to the internal_revenue_code background the material facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioner was a resident of texas at the time that he filed his petition petitioner filed a form_1040 u s individual_income_tax_return for on date based on third-party reporting the internal_revenue_service irs determined a deficiency and sent a notice_of_deficiency to petitioner petitioner received the notice_of_deficiency but did not petition the court to challenge the notice on date the irs assessed additional tax of dollar_figure plus additions to tax and interest for against petitioner on date petitioner signed a waiver extending the period of limitations on a suit for collection of his liabilities to date on date in conjunction with an installment_agreement petitioner agreed to further extend the period of limitations to date credits of overpaid taxes for and tax years have been applied to petitioner’s account for the tax_year as of date the unpaid balance of dollar_figure on petitioner’s tax_liability had grown to dollar_figure with additions to tax penalties and interest on date the irs sent petitioner a final notice - notice_of_intent_to_levy and notice of your right to a hearing in response petitioner requested a hearing under sec_6330 by sending a timely form request for a collection_due_process or equivalent_hearing to the irs in his request for a hearing during the telephone hearing conducted by a settlement officer in all filings in this case and at trial petitioner insisted that he was unemployed during and requested proof of the earnings that the irs relied on in sending the notice_of_deficiency petitioner also disputed the applications of his overpayments for subsequent years and questioned the remaining liability he did not offer any collection alternatives the settlement officer determined that petitioner was not entitled to dispute the deficiency verified the procedural prerequisites and application of credits by reference to transcripts and analysis of petitioner’s account and sustained the proposed levy discussion this opinion was held in abeyance while petitioner sought audit_reconsideration the records that led to the deficiency determination for are no longer available petitioner has now been advised that any claims for credits or refunds are barred by the statute_of_limitations he has received various transcripts and analyses that show how the penalties and interest accumulated so that the present balance is a large multiple of the original deficiency determined for upon review of the transcripts we see various credits for overpayments in subsequent years applied to the liability petitioner has not identified any unapplied credits or payments petitioner has not disputed and he ultimately stipulated that he received a notice_of_deficiency and did not petition the court with respect to his liability we are not unsympathetic to the predicament petitioner faces as a consequence of his failure_to_file a petition in response to that notice and the accumulation of penalties and interest on his account over the long period of time that a portion of the original assessment for that year has remained unpaid however our role in this proceeding is limited by the express provisions of sec_6330 that govern a taxpayer’s challenges to collection action sec_6330 generally provides that the irs cannot proceed with the collection_of_taxes by way of levy on a taxpayer’s property until the taxpayer has been given notice of and the opportunity for an administrative review of the proposed levy in the form of an irs office of appeals hearing sec_6330 provides that the appeals officer shall obtain verification that the requirements of any applicable law or administrative procedure have been met the record here supports the conclusion that proper verification by the appeals_office occurred and the review of records during and after trial shows no error in that portion of the determination during the hearing the taxpayer may raise challenges to the existence or amount of the underlying tax_liability only if he or she did not receive a statutory_notice_of_deficiency with respect to the underlying tax_liability and did not otherwise have an opportunity to dispute the liability sec_6330 although a taxpayer may also raise other issues such as challenges to the appropriateness of collection actions and alternatives to collection under sec_6330 petitioner did not do so our review is limited to the issues that he raised 129_tc_107 118_tc_488 although he raised the issue of application of overpayments for later years credits not previously claimed are barred by the passage of time see 116_tc_60 because the underlying deficiency may not be considered our review of the notice_of_determination sustaining the proposed levy is for abuse_of_discretion see 114_tc_176 in order to prevail petitioner must prove that the settlement officer who conducted the hearing acted arbitrarily capriciously or without sound basis in fact or law 112_tc_19 nothing in the record here would justify a conclusion that the settlement officer abused her discretion for the foregoing reasons 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 psi b03 plr-139109-07 date date legend --------------------------------- ----------------------- ------------------------ ------------------------- ---------------------- ------------------- company a date state dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code facts company was incorporated under state law on date a company’s sole shareholder intended for company to be an s_corporation effective date however company’s form_2553 election by a small_business_corporation was not filed timely plr-139109-07 company requests a ruling under sec_1362 that company will be recognized as an s_corporation effective date law and analysis to be an s_corporation sec_1362 provides in general that a small_business_corporation may elect sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a small_business_corporation makes an election under sec_1362 for any taxable_year and the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election shall be treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based on the facts submitted and representations made we conclude that company has established reasonable_cause for failing to make a timely s_corporation_election and that company is eligible for relief under sec_1362 accordingly if company makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 with an effective date of date within days following the date of this letter then such election shall be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether company is otherwise eligible to be an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-139109-07 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to company’s authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely s mary beth collins senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index numbers ---------------------------------- -------------------------------- ----------------------------- -------------- ----------------------------- in re ---------------------------- department of the treasury washington dc person to contact ------------------- id no ------------- telephone number refer reply to cc corp - plr-119594-04 date august ------------------------------------------------------------------------ ------------------ -------------------------- ---------------------------- ------------------------------- ------------------------ ------------------------------------------------- ------------------------------ distributing controlled ------------------------------------------------------------------------------------------------------------- shareholder a shareholder b shareholder c shareholder d shareholder e shareholder f business g business h -------------------------- -------------------------- --------------- -------------------------- --------------------- -------------------------- ------------------ -------------------------- ---------------- -------------------------- ------------------------------------------ ------------------------------------ ---- ------ ------ ------ ------ ---------------------------------------- -------------------------- this is in response to a letter dated date submitted on behalf of -------------------------- ---------------------------------------------------- ----------------------------- plr-119594-04 a b c d e key_employee llc dear ---- ------- distributing requesting rulings under sec_355 and sec_368 of the internal_revenue_code the code with respect to a proposed transaction additional information was received in letters dated june july and date the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover no information provided by the taxpayer has been reviewed and no determination has been made regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 and iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7t h distributing has supplied information indicating that each of business g and business h have had gross_receipts and operating_expenses representing the active_conduct of a trade of business for each of the past five years distributing has outstanding two classes of stock the non-voting common_stock is held as follows distributing is a calendar_year corporation engaged in business g and business ii iii i for what are represented to be valid business purposes distributing proposes following the proposed transaction the shareholders of controlled will organize key_employee will acquire an equity_interest in distributing consisting of e of distributing’s capital stock distributing will distribute all of the outstanding_stock of controlled to the shareholders of controlled on a pro_rata basis the distribution distributing will form controlled and will contribute the assets and liabilities of business h to controlled in exchange for all of the issued and outstanding shares of controlled stock the contribution plr-119594-04 shareholder a a shareholder b b shareholder c b shareholder d b and shareholder e b the voting preferred_stock is held as follows shareholder a d and shareholder f c the following transaction the proposed transaction llc and llc will make an election pursuant to sec_301_7701-3 to be taxed as a corporation for federal_income_tax purposes controlled will merge into llc the merger transaction by a shareholder as a creditor employee or in any capacity other than that as a shareholder of distributing representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted active_conduct of its business independently and with its separate employees corporate business purposes i to provide employee with an equity_interest and ii to reduce costs the distribution is motivated in whole or substantial part by these corporate business purposes distribution of the earnings_and_profits of distributing or controlled or both a no part of the consideration to be distributed by distributing will be received c following the distribution distributing and controlled each will continue the b the five years of financial information submitted on behalf of distributing is the following representations have been made with respect to the proposed d the distribution of the stock of controlled is carried out for the following e the proposed transaction is not used principally as a device for the i payments made in connection with all continuing transactions if any between g distributing neither accumulated its receivables nor made extraordinary f the total adjusted_basis and fair_market_value of the assets transferred to j no two parties to the proposed transaction are investment companies as h no intercorporate debt will exist between distributing and controlled at the plr-119594-04 controlled by distributing in connection with the contribution each equals or exceeds the sum of the liabilities assumed by controlled plus any liabilities to which the transferred assets are subject as determined under sec_357 the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred payment of its payables in anticipation of the proposed transaction time of or subsequent to the distribution distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length defined in sec_368 and iv k there is no acquisition of distributing or controlled stock including any predecessor or successor of any such corporation that is part of a plan or series of related transactions within the meaning of sec_1_355-7t that includes the distribution of controlled stock sec_355 because immediately after the distribution i no person determined after applying ' d will hold disqualified_stock defined in sec_355 in distributing that will constitute a percent or greater interest defined in sec_355 in distributing and ii no person determined after applying ' d will hold disqualified_stock defined in sec_355 in controlled that will constitute a percent or greater interest defined in sec_355 in controlled as follows the contribution followed by the distribution will constitute a reorganization within the meaning of sec_368 of the code distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 of the code sec_357 and sec_361 no gain_or_loss will be recognized by distributing on the contribution l the distribution will not be a disqualified_distribution as defined in based solely on the information submitted and the representations made we rule no gain_or_loss will be recognized by controlled on the contribution controlled’s basis in each asset received in the contribution will equal the plr-119594-04 sec_1032 and sec_357 basis of such asset in the hands of distributing immediately prior to the proposed transaction sec_362 include the period during which such asset was held by distributing sec_1223 ' c no gain_or_loss will be recognized by and no amount will be included in the income of the shareholders of distributing upon receipt of the controlled stock in the distribution ' a controlled’s holding_period for each asset received in the contribution will no gain_or_loss will be recognized by distributing upon the distribution the aggregate basis of the distributing and controlled stock in the hands of a distributing shareholder will equal such shareholder’s basis in the distributing stock held immediately before the distribution allocated between the distributing stock and the controlled stock in proportion to the relative fair_market_value of each immediately following the distribution in accordance with ' a ' a and b the holding_period of the controlled stock received by a distributing shareholder will include the holding_period of the distributing stock on which the distribution is made provided that such distributing stock is held as a capital_asset on the date of the distribution ' as provided in ' h proper allocation of earnings_and_profits between the rulings contained in this letter are based on facts and representations distributing and controlled will be made under ' a submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or income_tax regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the proposed transaction is not used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 and sec_1_355-2 plr-119594-04 and iii whether the distribution and any acquisition or acquisitions of the stock of controlled or distributing are not part of a plan or series of related transactions under sec_355 also no opinion is expressed regarding the tax status of llc as a disregarded_entity under sec_301_7701-3 and the federal_income_tax consequences of the merger in accordance with the power_of_attorney on file in this office a copy of this ruling this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant letter will be forwarded to the taxpayer and another representative cc ____________________________________ lisa a fuller assistant to chief branch sincerely yours associate chief_counsel corporate