department of the treasury internal_revenue_service washington d c date jun -9 contact person ‘ siz identification_number telephone number employer_identification_number o w w o u o legend y s w q o x dear we have considered a ruling_request regarding the federal_income_tax consequences of the joint_venture arrangement described below facts a hospital is a nonprafit organization that has been recognized as exempt from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 it has been classified as a hospital described in sec_509 and sec_170 of the code hospital formed b company to serve as the general_partner in a limited_partnership company is wholly-owned by hospital company is formed as a limited_liability_company under the laws of state x hospital is the sole member of company company will not elect to be treated as a separate_entity from the hospital for federal_income_tax purposes but rather will be a disregarded_entity such that assets owned or transferred to company will be treated as assets owned or transferred to hospital for federal_income_tax purposes c the partnership was formed as a limited_partnership under the laws of state x the partners of the partnership currently consist of company and hospital company holds one general_partnership unit representing one percent of the partnership hospital holds one limited_partnership unit representing ninety-nine percent of the partnership the partnership intends to offer for sale limited_partnership units of the partnership to eligible physician investors and related physician groups the investors assuming the offering is fully subscribed company will continue to own one general_partnership unit hospital will own fifty-four limited_partnership units the investors will own forty limited_partnership units and d manager the company engaged by the partnership to manage the partnership's facility will own five limited_partnership units under the partnership_agreement partnership interests will be proportional to and equal in value to their respective contributions all financial arrangements will be negotiated on an arm’s-length basis and will be based on fair_market_value partnership contributions and allocations of income loss deduction and credits will be in proportion to the partners’ percentage interests there will be no special allocations of income or loss to any particular partner the partnership was formed to significantly expand the scope of available diagnostic imaging services in the local area by owning and operating a free-standing imaging center center the imaging services to be provided at the center will include mri x-ray ct ultrasound and mammography most of which are not currently available in or around the local area the partnership_agreement provides company as general_partner with the sole and exclusive right to manage and supervise the partnership's business and property under the partnership_agreement the general_partner company has all the rights and powers which may be necessary or helpful in carrying out the partnership's business without any management rights given to the other partners the board_of managers of company is composed of community leaders with experience in health care matters including officers and board members of hospital individuals elected by hospital these individuals are the partnership_agreement also provides that the partnership and its facilities will be operated and managed in a manner that furthers the charitable purposes of the hospital by promoting health for a broad cross-section of the community under the partnership_agreement this duty to operate and manage the partnership in a charitable manner overrides any duty that company as the general_partner may have to operate the partnership and the center for the financial benefit of the partners or anyone else the partnership_agreement states that the general_partner can only be removed by the limited partners holding more than eighty percent of the sharing ratios of all partners the partnership will engage manager an independent third party expertin managing imaging centers to manage the center pursuant to a management agreement the hospital contracted with an independent health care consultant to select a management company the consultant screened management companies interviewed of the companies and requested proposals from of the companies before selecting d the hospital does not have any other business relationship with manager nor does manager have any affiliation with any other potential investors manager will provide all services direction advice supervision and assistance necessary to make the center fully operational the management agreement provides that the manager will manage the facility in a manner that furthers the charitable purposes of the hospital by promoting health for a broad cross section of the community and that this duty to operate and manage the partnership in a charitable manner overrides any duty the manager may have to operate the center for the financial benefit of the partners or anyone else the management agreement will provide for an initial year term which with the consent of the partnership and of manager can be renewed for one additional 2-year term the management agreement may be terminated earlier than that for cause the management agreement will provide for a management fee based on a percentage of funds collected in payment of center services rendered to patients subject_to a ceiling_amount the partnership will also pay a an upfront organization fee of dollar_figure b a percent of total costs incurred in the construction and development fee of development of the center and c a purchasing service fee of of purchases made prior to the center being operational limited to medical equipment and medical instruments that are not purchased directly from a center in the process of being converted from one ownership structure organization to another the partnership_agreement prohibits the partnership from paying manager more than fair_market_value for services the management agreement will provide that all fees paid will be subject_to a ceiling_amount that will not exceed fair_market_value percent of the net cost the center will follow the charity care policy of the hospital which will be advertised to patients the center will not limit its charity care patients to only those of the hospital the approximate percentages of patients that will be served by the center are as follows medicare - pay - percent and third-party payor- -_ percent percent medicaid-- percent indigent- percent self- the staff of the center is expected to include technicians a small office staff an administrator who will supervise the day-to-day activities of the center and a medical director the center will receive its revenues from medicare medicaid commercial health_plans managed care organizations employers private insurance self-pay and other miscellaneous public or private payment programs the center’s radiologists will have a requirement to treat all members of the community including medicare medicaid and indigent patients physician privileges will not be dependent on owning a partnership_interest it is anticipated that there will be medical staff physician partners and approximately -non-partner physicians on the center's the center will occupy a building the building located on the campus of the hospital the building will be constructed and owned by the hospital hospital intends to provide -_ percent of the total anticipated costs of completing the building with the remainder of the costs being paid_by the partnership the partnership is expecting to obtain financing to complete the development of the facility the partnership will lease the building from the hospital the initial term of the years with a renewal option of one additional lease willbe be an additional renewal option for a renewal term the rental amount will be a fixed amount per square foot and will reflect years the rent will be adjusted fair_market_value for the leased space after the first annually in accordance with the applicable consumer_price_index the partnership will be responsible for all real_estate and sales_taxes insurance utilities and maintenance_expenses related to the lease of the center '-year term which may be exercised after any year term there will you request the following rulings that the proposed transactions described will not adversely affect the status of the hospital and the hospital will continue to qualify as an organization exempt from _ federal_income_tax under sec_501 of the code as an organization described in sec_501 that any income received from the distributive_share of the partnership's profits will not result in unrelated_business_taxable_income as defined in sec_512 of the code taxable to the hospital under sec_51 a that any rents received from the partnership will not result in unrelated_business_taxable_income as defined in sec_512 of the code taxable to the hospital under sec_511 applicable law sec_501 of the code describes as exempt from federal_income_tax as provided under sec_501 organizations organized and operated exclusively for charitable scientific or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that an organization will be regarded as operated exclusively for exempt purposes onlly if it engages primarily in activities which accomplish such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for an exempt_purpose unless it serves a public rather than a private interest thus an organization must establish that it is not organized or operated for the benefit of designated individuals sec_1_501_c_3_-1 of the regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense the promotion of health has long been recognized as a charitable purpose see restatement second of trusts sec_368 sec_372 4a scott and fratcher the law of trusts sec_368 sec_372 ed revrul_69_545 1969_2_cb_117 provides that a nonprofit corporation whose purpose and activity are providing hospital care is promoting health and therefore furthers charitable purposes as provided in sec_501 of the code if it meets the community benefit requirements number of factors indicating the operations of a hospital benefit the community rather than serving private interests the community benefit standard focuses ona revrul_98_15 1998_1_cb_718 compares two situations where an exempt hospital forms a joint_venture with a for-profit entity and then contributes its hospital and all of its other operating_assets to the joint_venture which then operates the hospital in situation the revenue_ruling concludes that the exempt_organization will continue to further charitable purposes when it participates in the joint_venture favorable factors include the commitment of the joint_venture to give charitable purposes priority over maximizing profits the community make-up and structure of the board the voting control held by the exempt organization's representatives on the board the specifically enumerated powers of the board and the reasonable terms and conditions of the management_contract in situation the revenue_ruling concludes that the organization fails the operational_test when it participates in the joint_venture because activities of the joint_venture will result in greater than incidental private benefit to the for-profit partner _ sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 of the code defines unrelated_business_taxable_income as the gross_income derived from any unrelated_trade_or_business regularly carried on less the allowable deductions that are directly connected with the carrying on of the trade_or_business computed with the modifications described in subsection b sec_512 of the code provides that there shall be excluded from unrelated_business_taxable_income all rents_from_real_property and all rents from personal_property leased with such real_property if the rents attributable to such personal_property are an incidental amount of the total rents received under the lease unless the determination of such rent depends in whole or in part on the income or profits derived by any person from the property leased other than an amount based on a fixed percentage of receipts or sales sec_512 of the code provides that if a trade_or_business regularly carried on by a partnership of which an organization is a member is an unrelated_trade_or_business with respect to such organization such organization in computing its unrelated_business_taxable_income shail include its share whether or not distributed of the gross_income of the partnership from such unrelated_trade_or_business and its share of the partnership deductions directly connected with such gross_income sec_513 of the code defines unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for income or funds or the use its makes of the profits derived to the exercise or performance by such organization of its exempt purposes sec_1_513-1 of the regulations states that a trade_or_business is related to exempt purposes only where the conduct of the business activity has a causal relationship to the achievement of an exempt_purpose and is substantially related for purposes of sec_513 only if the causal relationship is a substantial one thus for the conduct_of_a_trade_or_business from which a particular amount of gross_income is derived to be substantially related to the purposes for which exemption is granted the production or distribution of the goods or the performance of services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes analysis under the regulations an organization that is organized and operated exclusively for charitable purposes may qualify for exemption under sec_501 of the code the promotion of health has long been recognized as a charitable purpose whether a hospital or other health care organization promotes health in a charitable manner is determined under the community benefit standard of revrul_69_545 supra this standard focuses on a number of factors to determine whether the hospital benefits the community as a whole rather than private interests after the creation of the partnership and operation of the center the charitable and exempt purposes of hospital will continue to be the same as prior to the creation of the partnership hospital will provide health care to the community through the operation of its hospital facility in conformity with the community benefit requirements of revrul_69_545 supra as provided in revrul_98_15 supra the activities of a partnership are considered to be the activities of an exempt_organization that owns a partnership_interest when evaluating whether the nonprofit organization is operated exclusively for exempt purposes within the meaning of sec_501 of the code a sec_501 organization may form and participate in a partnership and meet the operational_test of sec_1_501_c_3_-1 of the regulations if participation in the partnership furthers a charitable purpose and the partnership arrangement permits the exempt_organization to act exclusively in furtherance of its exempt purposes and only incidentally for the benefit of any for-profit partners based on revrul_98_15 supra whether a sec_501 organization whose principal activity is the participation in a partnership that is engaged in health care activities satisfies the community benefit standard depends on all the facts and circumstances company a wholly-owned disregarded_entity of hospital will bé the general_partner of the partnership as general_partner company will have effective_control over major decisions under the partnership_agreement the partnership_agreement will specifically provide that the duty_of the partnership is to operate the partnership in a manner that furthers charitable purposes by promoting the health of a broad cross section of the community and that this duty overrides any duty to operate the partnership for the financial benefit of its members company’s control of major decisions ensures that the center will be operated in a charitable manner in order to promote health for a broad cross section of the community regardless of ability to pay including medicare medicaid and indigent patients the center will utilize the charity care policy of hospital and make it known to patients company’s board_of managers will be representative of the community the center will have an open medical staff contributions to the partnership and allocations of profits losses and distributions from it will be in proportion to the interests of the partners the manager will have a duty under the management agreement to operate the center for charitable purposes with charitable purposes taking precedence over any profit_motive although the management fee is based on a percentage a ceiling_amount will be stated to reflect and not exceed fair_market_value accordingly the facts and circumstances establish that hospital's participation in the partnership will further its exempt purposes hospital’s participation in and operation of the center will promote health for the community in a manner that satisfies the requirements of revrul_69_545 supra in addition the structure of the partnership and operation of the center will allow hospital to act exclusively in furtherance of charitable purposes with no undue private benefit to the physician partners to determine whether an exempt organization's distributive_share of ordinary_income from a partnership is treated as unrelated_business_taxable_income it is necessary to look through the partnership to determine whether the partnership's trade_or_business is substantially related to the exempt organization’s exempt purposes under sec_501 of the code sec_512 to be substantially related the partnership’s trade_or_business must further the organization’s exempt_purpose the charitable purposes of hospital will be furthered by the participation of company hospital’s wholly-owned disregarded_entity in the partnership company's participation in the partnership enables hospital to provide expanded and improved health care services to the community the purposes of partnership specifically include enhancing the quality of health care and promoting the general health and well being of the community these purposes override any duty to the members to maximize profits accordingly such participation will not constitute an unrelated_trade_or_business to hospital within the meaning of sec_513 of the code consequently pursuant to sec_512 of the code any distributive_share of partnership's profits to hospital through company will not be considered unrelated_business_taxable_income the partnership will lease the space for the center from the hospital on a fixed per square footage amount and not on the basis of profits of the center accordingly the rent received by the hospital from the partnership for the center will be excluded from unrelated_business_taxable_income pursuant to sec_512 of the code conclusions accordingly we rule as follows the proposed transactions described will not adversely affect the status of the hospital and the hospital will continue to qualify as an organization exempt from federal_income_tax under sec_501 of the code as an organization described in sec_501 the income received from the distributive_share of the partnership's profits will not result in unrelated_business_taxable_income as defined in sec_512 of the code taxable to the hospital under sec_511 rents received from the partnership will not result in unrelated_business_taxable_income as defined in sec_512 of the code taxable to the hospital under sec_511 this ruling is based on the understanding that there will be no material_change in the facts upon which it is based any changes that may have a bearing on your tax status should be reported to the service this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described 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 because this letter could help resolve future questions about your income_tax responsibility please keep a copy of this ruling in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely s michael seto manager exempt_organizations technical group


internal_revenue_service number release date index number ------------------- ----------------------- ----------------------------- re --------------------------- - 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 b09 plr-159486-04 date date --------------------------- ------------------- --------------------- -------------------------- --------------------------------------------------------------------------------- legend date taxpayer husband date federal court -------------------------------------------------------------------------------------------------------------- date trust individual state citation citation ------------------------- ------------------------------ ----------------------- ------------- ------------------------------------------------------ --------------------------------------------------------------------------------- --------- ---------------------------------------------------------------- citation dear -------------- requesting rulings regarding the federal gift_tax consequences of a proposed transaction taxpayer’s husband husband was killed on date taxpayer filed claims for wrongful death in federal court the facts and representations submitted are summarized as follows on date this is in response to your authorized representative’s letter dated november on date taxpayer created trust an irrevocable_trust for the benefit of taxpayer’s children and more remote descendants the current trustee of trust is individual article ninth paragraph b of the trust instrument prohibits taxpayer from serving as a trustee in addition the trust instrument requires that at all times there shall be at plr-159486-04 least one independent_trustee an independent_trustee is defined as a trustee who has no present or future beneficial_interest in the trust does not owe a duty_of support to any person having such an interest and is neither the transferor of any property held in trust nor a_related_or_subordinate_party as defined in sec_672 with respect to any transferor article twelfth provides that trust is irrevocable_trust may be amended by an instrument executed by all of the independent trustees but only to the extent that any purported amendment a clarifies the meaning of any provision so as to avoid the necessity of instructions by a court b alters or adds to the administrative power of the trustee for the better accomplishment of the purposes of the trust or c alters or adds to the instrument so that its provisions are in better conformity with relevant provisions of federal and state tax laws the trust instrument may not be altered or added to in any manner as to add to the beneficiaries or classes of beneficiaries taxpayer proposes to irrevocably assign part or all of the potential proceeds of the wrongful_death_action or the proceeds from the settlement of the action to trust by executing an assignment agreement consequently taxpayer requests a ruling that her proposed assignment of potential proceeds from the judgment or settlement of the cause of action to trust constitutes a completed_gift at the time of the assignment sec_2501 imposes a tax on the transfer of property by gift by any individual sec_2511 provides that the tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2512 provides that if a gift is made in property the value of thereof at the date of the gift shall be considered the amount_of_the_gift sec_25_2511-1 of the gift_tax regulations provides that the gift_tax applies to every kind of transfer by way of gift whether direct or indirect and whether the property is real or personal tangible or intangible for this purpose the term property is used in its broadest and most comprehensive sense and reaches every species of right or interest protected by law and having an exchangeable value h_r rep no 72d cong 1st sess s rep no 72d cong 1st sess both reprinted in part c b some rights however are not property see eg 15_tc_224 nonvested pension rights were not property rights includible in gross_estate under sec_811 of the code 40_tc_227 acq 1964_1_cb_4 death_benefits payable at discretion of board_of directors who usually but not always agreed to payment were in the nature of hope or expectancy and not property rights includible in gross_estate for estate_tax purposes sec_25_2511-2 provides that the gift_tax is not imposed upon the receipt of the property by the donee nor is it necessarily determined by the measure of plr-159486-04 enrichment resulting to the donee at the time of the transfer the tax is a primary and personal liability of the donor is an excise upon the act of making the transfer is measured by the value of the property passing from the donor and attaches at the time the property passes regardless of the fact that the identity of the donee may not then be known or ascertainable under sec_25_2511-2 generally a gift is complete and subject_to the gift_tax when the donor has so parted with dominion and control_over the property as to leave the donor no power to change its disposition whether for the donor's own benefit or for the benefit of another in revrul_80_186 1980_2_cb_280 a parent transferred to a child for nominal consideration an option to purchase real_property for a specified period of time at a price below fair value revrul_80_186 holds that the transfer is a completed_gift at the time the option is transferred provided the option is binding and enforceable under state law on the date of the transfer under state law the potential proceeds of a judgment or settlement from a cause of action are recognized as a property interest that can be equitably assigned by one party to another citation citation citation in the present case taxpayer proposes to assign a portion of the potential proceeds from a wrongful_death_action to trust trust is irrevocable and the provisions may be amended only under very limited circumstances the trust instrument may not be modified in any manner that would alter the interest of any beneficiary in addition under the terms of trust taxpayer is expressly prohibited from serving as a trustee following the assignment of a portion of taxpayer’s interest in the proceeds to trust taxpayer will remain the named party in the claim and will continue to have direct responsibility for directing legal representation and making settlement decisions notwithstanding taxpayer’s continued involvement in the administrative aspects of the claim taxpayer will have no means to reacquire the economic benefit of the assigned proceeds or to change any of the interests created under trust accordingly when taxpayer assigns a portion of the potential proceeds of the cause of action to trust she will have parted with dominion and control_over the proceeds in addition as noted above the potential proceeds of a wrongful_death_action are recognized as an interest in property under state law further state law permits the assignment of potential proceeds of a wrongful_death_action from one party to another based on the foregoing we conclude that taxpayer’s proposed assignment of a portion of the potential proceeds from the cause of action to trust will constitute a completed_gift at the time of the assignment we express no opinion on the value for gift_tax purposes of the potential proceeds at the time of the assignment plr-159486-04 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 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 representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely melissa c liquerman branch chief branch passthroughs special industries copy for purposes enclosure cc


internal_revenue_service number release date index number ------------------------- ------------------- ---------------------------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-137249-08 date date ------------------------------------------------------------- x -------------------------------------------------- country date year --------------- -------------------------- ------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an entity classification election the information submitted states that x was formed under the laws of country x represents that x is a foreign_entity eligible to be treated as a partnership however x failed to timely file a form_8832 entity classification election sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides guidance on the classification of a foreign_entity for federal_income_tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 plr-137249-08 sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center and that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a partnership effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose a copy of the form_8832 should be attached to an amended year return 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 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-137249-08 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely curt g wilson associate chief_counsel office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court estate of jose martinez deceased patrick g martinez personal representative petitioner v commissioner of internal revenue respondent docket no filed date robert b scarlett for petitioner bradley c plovan for respondent memorandum opinion thornton judge mr jose martinez decedent was a general_partner in a partnership decedent personally guaranteed certain of the partnership’s debts after the partnership filed for bankruptcy under chapter the bankruptcy court discharged decedent’s personal liability with respect to the partnership’s debts and decedent’s personal guaranty thereof the issue for decision is whether the resulting discharge_of_indebtedness income is excludable from gross_income pursuant to sec_108 we hold that it is background the parties submitted this case fully stipulated pursuant to rule the stipulations of the parties with accompanying exhibits are incorporated herein by this reference on date decedent died his estate was administered by patrick martinez and was closed on date when the petition was filed patrick martinez resided in timonium maryland the partnership’s debts at all relevant times decedent was a general_partner in notchcliff associates the partnership a maryland general_partnership that was engaged in the business of developing a continuing care facility on date the partnership borrowed dollar_figure million from the commercial bank the bank for use in its business on that same date decedent and other general partners of the partnership executed a personal guaranty agreement whereby they jointly and unless otherwise indicated section references are to the internal_revenue_code for the taxable_year at issue and rule references are to the tax_court rules_of_practice and procedure essentially identical issues are presented in three other cases also decided today ralph j and joan b mirarchi docket no chester l price docket no and jose gracia and nancy gracia docket no severally guaranteed this loan on date the partnership borrowed an additional dollar_figure from the bank the partnership’s bankruptcy case on date the partnership initiated a bankruptcy case by filing a voluntary chapter bankruptcy petition in the u s bankruptcy court for the district of maryland the bankruptcy court on date the bankruptcy court appointed a chapter trustee the trustee to administer the partnership’s assets and to develop an orderly liquidation and sale of the assets decedent’s contribution agreement the trustee negotiated with the partnership’s general partners including decedent to obtain some contribution from them to pay the partnership’s debts the trustee filed a reorganization plan which among other things proposed a means whereby general partners of the partnership could contribute to a partnership release fund as a means of resolving the partnership’s claims and other creditor’s claims against its general partners on date the bankruptcy court confirmed the plan thereafter the trustee reached a negotiated settlement with some of the general partners including decedent whereby in exchange for paying agreed-upon sums to the partnership’s bankruptcy_estate the contributing partners would be discharged the date personal guaranty agreement also applied to this loan from liability as permitted by the confirmed bankruptcy plan on date decedent executed a contribution agreement and pursuant to its terms contributed dollar_figure to the partnership’s bankruptcy_estate in exchange for release of all claims or potential claims of creditors against decedent arising out of or related to the partnership on date the bankruptcy court entered an order approving the contribution agreement in its order the bankruptcy court specifically discharged and released decedent from any and all liability to the trustee and the bank arising out of or relating to the partnership decedent’s status as a general_partner in the partnership and the date personal guaranty agreement in addition the bankruptcy court’s order released decedent from the claims or potential claims of all creditors of the partnership the bankruptcy court further ordered that decedent is subject_to the jurisdiction of the bankruptcy court tax reporting for the tax_year the partnership issued decedent a schedule_k-1 partner’s share of income credits deductions etc allocating to him dollar_figure of discharge_of_indebtedness income decedent excluded this entire amount from his gross_income as reported on his federal_income_tax return notice_of_deficiency by notice_of_deficiency respondent determined that dollar_figure of discharged debt should be included in decedent’s income discussion generally discharge_of_indebtedness gives rise to gross_income to the obligor sec_61 see 531_us_206 sec_108 provides certain exceptions to this general_rule pursuant to one of these exceptions income_from_discharge_of_indebtedness is excluded from gross_income if the discharge occurs in a title_11_case sec_108 this provision is applied at the partner level sec_108 consequently the relevant question is whether decedent’s debt as opposed to the partnership’s debt was discharged in a title_11_case for purposes of sec_108 a title_11_case is defined as a case under title of the united_states_code relating to bankruptcy but only if the taxpayer is under the jurisdiction of the court in such case and the discharge_of_indebtedness is granted by the court or is pursuant to a plan approved by the court sec_108 the partnership’s chapter bankruptcy was a case under title of the united_states_code see u s c ch pursuant to its date order the bankruptcy court discharged and released decedent from all liability to the trustee the bank and all other creditors that might have claims arising from or relating to the partnership decedent’s status as a general_partner in the partnership and the date personal guaranty agreement in the same order the bankruptcy court explicitly asserted its jurisdiction over decedent for this purpose giving due regard to principles of judicial comity we discern no reason to second-guess the bankruptcy court’s assertion of jurisdiction over decedent in the partnership’s chapter bankruptcy case see u s c sec_151 we conclude that decedent’s debts in question were discharged in a title_11_case within the meaning of sec_108 accordingly we hold that decedent’s discharge_of_indebtedness income is excludable from gross_income pursuant to sec_108 we have considered all arguments raised by the parties arguments not addressed herein are moot irrelevant or without merit to reflect the foregoing decision will be entered for petitioner


internal_revenue_service department of the treasury number release date index number 280g washington dc person to contact telephone number refer reply to cc tege eb ec-plr-116295-00 date date legend corporation exchange a b date c d corporation e holding corporation acquisition corporation acquisition corporation f g h i k plr-116295-00 m n dollar_figurep dollar_figureq r s t this letter is in response to the letter dated date submitted by your authorized representative requesting rulings under sec_280g of the internal_revenue_code specifically the letter requests rulings that under the facts outlined below the merger will not cause a change in ownership or effective_control of corporation the merger will not cause a change in a substantial portion of corporation’s assets and the provisions of sec_280g and sec_4999 of the code will not apply to payments that are contingent on the merger corporation’s stock is publicly held and actively_traded on exchange the authorized capital of corporation consists of a shares of common_stock of which b shares were issued and outstanding as of date with outstanding options to acquire c shares of common_stock and d shares of preferred_stock none of which were issued and outstanding corporation e’s stock is also publicly held and actively_traded on exchange as of date the authorized capital of corporation e consists of f shares of common_stock of which g were issued and outstanding with additional options to acquire h shares of corporation e common_stock outstanding half of the outstanding capital stock of holding corporation is owned by corporation and half of the outstanding capital stock of holding corporation is owned by corporation e acquisition corporation and acquisition corporation are wholly owned subsidiaries of holding corporation corporation corporation e holding corporation acquisition corporation and plr-116295-00 acquisition corporation have entered into an agreement and plan of merger agreement dated as of date agreement contemplates that acquisition corporation will merge with and into corporation and that acquisition corporation will merge with and into corporation e pursuant to the merger each share of common_stock of corporation will be converted into the right to receive i shares of common_stock of holding corporation and each share of common_stock of corporation e will be converted into the right to receive k shares of holding corporation as a result of the merger and related stock transaction former shareholders of corporation will hold approximately m of holding corporation a greater than interest and the former shareholders of corporation e will hold approximately n of holding corporation based on the number of common shares currently outstanding corporation and corporation e have agreed to use commercially reasonable efforts to repurchase common_stock for consideration of dollar_figurep and dollar_figureq respectively prior to the consummation of the merger it is not expected that this repurchase will affect the percentages discussed in the above paragraph following the merger the board_of directors of holding corporation will consist of r members s of which will be former corporation directors and t of which will be former corporation e directors the chairman of the board_of corporation will serve as the chairman of the board_of directors of holding corporation corporation is unaware of any agreements among the corporation e shareholders to act in a concerted way to control the management and policies of holding corporation corporation previously entered into employment agreements with certain employees these employment agreements provide certain compensation and benefits following a termination of employment coincident with or related to the occurrence of a change in control as defined in the various employment agreements sec_280g of the code provides that no deduction will be allowed for any excess_parachute_payment sec_280g defines excess_parachute_payment as an amount equal to the excess of any parachute_payment over the portion of the base_amount allocated to such payment sec_280g of the code defines parachute_payment as any payment in the nature of compensation to or for the benefit of a disqualified_individual if i such payment is contingent on a change in the ownership or effective_control of the corporation or in the ownership of a substantial portion of the assets of the corporation and ii the aggregate present_value of the payments in the nature of compensation to or for the benefit of such individual which are contingent on such change equals of exceeds an amount equal to three times the base_amount plr-116295-00 sec_280g of the code provides that all members of the same affiliated_group as defined in sec_1504 determined without regard to sec_1504 should be treated as one corporation for purposes of sec_280g sec_4999 of the code imposes on any person who receives an excess_parachute_payment a tax equal to percent of the amount of the payment sec_1_280g-1 of the proposed income_tax regulations q a sec_27 sec_28 and sec_29 published in the federal_register on date fed reg big_number provides guidance concerning when a corporation will be considered to have undergone a change in ownership or effective_control or a change in the ownership of a substantial portion of its assets q a a provides that a change in the ownership or control of a corporation occurs on the date that any one person or more than one person acting as a group acquires ownership of stock of the corporation that together with stock held by such person or group possesses more than percent of the total fair_market_value or total voting power of the stock of such corporation q a b provides that persons will not be considered to be acting as a group merely because they happen to purchase or own stock of the same corporation at the same time or as a result of the same public offering however persons will be considered to be acting as a group if they are owners of an entity that enters into a merger consolidation purchase or acquisition of stock or similar_business transaction with the corporation q a c provides that sec_318 shall apply in determining stock ownership example of q a deals with a corporate merger there corporation p merged into corporation o and the shareholders of p received o stock in exchange for their p stock the example concludes that because p shareholders received a greater than percent interest in o o experienced a change in ownership by implication the example concludes that p did not experience such a change q a a provides in part that a change_of effective_control of a corporation is presumed to occur on the date that either any one person or more than one person acting as a group acquires or has acquired during the 12-month_period ending on the date of the most recent acquisition by such person or persons ownership of stock of the corporation possessing percent or more of the total voting power of the stock of such corporation or a majority of the members of the corporation’s board_of directors is replaced during any 12-month_period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board_of directors the presumption of q a a and may be rebutted by establishing that the acquisition or acquisitions of the corporation’s stock or the replacement of the majority of the members of the corporation’s board_of directors does not transfer the plr-116295-00 power to control directly or indirectly the management and policies of the corporation from any one person or more than one person acting as a group to another person or group q a c contains the same language as q a b concerning when persons will be considered to be acting as a group q a d contains the same language as q a c concerning the application of sec_318 q a provides that a change in the ownership of a substantial portion of a corporation’s assets occurs on the date that any one person or more than one person acting as a group acquires or has acquired during the 12-month_period ending on the date of the most recent acquisition by such person or persons assets from the corporation that have a total fair_market_value equal to or more than one third of the total fair_market_value of all of the assets of the corporation immediately prior to such acquisition or acquisitions for this purpose a transfer of assets by a corporation is not treated as a change in the ownership of the assets if the corporation transfers the assets to an entity in which immediately_after_the_transfer the shareholders of the corporation own a greater than percent interest by value or voting power see q a b and example of q a d q a c contains the same language as q a c concerning the application of sec_318 as a result of the merger corporation will surrender potential ownership and control when it issues its stock to holding corporation for issuance of holding corporation stock to corporation shareholders however corporation shareholders will receive greater than of the total fair_market_value and voting power of outstanding holding corporation stock because corporation shareholders will acquire sufficient stock value and voting power due to the merger no change in ownership of corporation will occur under q a also as a result of the merger corporation e’s stock will be transferred to holding corporation in consideration for the issuance of holding corporation stock to corporation e shareholders this will result in corporation e shareholders receiving a greater than voting interest in holding corporation and indirectly in corporation thus under q a it is presumed that corporation will experience an effective change in control the presumption of an effective change in control is rebutted by the facts of the merger as the merger will not transfer the power to control directly or indirectly the management and policies of corporation to another person or group the facts submitted indicate that corporation e shareholders will not act in a concerted way to control the management and policies of holding corporation or corporation after the merger the facts also indicate that the composition of the post-merger board was agreed upon by both corporation and corporation e pursuant to agreement no change in the ownership of a substantial portion of the assets of corporation is contemplated as a result of the merger plr-116295-00 based on the above described facts and representations we rule as follows provided that after the merger the shareholders of corporation e do not act in a concerted way to control the management and policies of holding corporation the merger will not cause a change in the effective_control of corporation within the meaning of sec_280g of the code also the merger will not cause a change in ownership or a change in the ownership of a substantial portion of corporation’s assets within the meaning of sec_280g and ii the provisions of sec_280g of the code do not apply to any payments received by employees or former employees of corporation and its subsidiaries that are contingent upon the merger and the provisions of sec_4999 of the code do not apply to any payments that are received by employees or former employees of corporation and its subsidiaries that are contingent upon the merger except as specifically ruled on above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced above 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 the taxpayer should attach a copy of this ruling to any income_tax return to which it is relevant temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent that the regulations are inconsistent with any conclusion in the ruling however when the criteria in section dollar_figure of revproc_00_4 2000_1_irb_4 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances sincerely robert misner assistant chief executive compensation branch office of the division counsel associate chief_counsel tax exempt and government entities enclosure copy for purposes


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc tege eoeg et2 genin-143948-12 o f f i c e o f t h e c h i e f c o u n s e l number release date uil -------------------------- --------------------------- ------------------------------ dear ------------------ this letter responds to your request for information dated date you indicate that you qualify for a refund of federal_insurance_contributions_act fica_taxes on wages you earned for services performed as a medical resident for --------------------------- from you indicate that -----------------------filed refund claims on your behalf you ask about the length of time it takes for the irs to process your refund sec_3121 of the internal_revenue_code provides that certain services students perform are excepted from fica_taxes the student fica exception applies only to services performed for an organization that has the status of a school_college_or_university scu and only if the student who performs the services is enrolled and regularly attends classes at that scu our long-held position is that the student fica exception does not apply to services that individuals performed as medical residents however in the wake of extensive litigation we made an administrative determination on date to accept the position that medical residents are excepted from fica_taxes based on the student exception for tax periods ending before date when new regulations clarifying this issue went into effect as a result of this administrative determination institutions that employed medical residents and the individual medical residents are eligible to receive refunds if covered under a timely filed fica refund claim institutions can be covered under fica refund claims they filed individual medical residents can be covered under fica refund claims institutions filed on their behalf or under fica refund claims they filed themselves i understand your concern with the timeline for processing your refunds we intend to pay these claims as soon as possible however these claims are subject_to the same procedural requirements that apply to all fica refund claims employers file including genin-143948-12 certifications on the employee share of the tax and verification by the irs of the timeliness and the amount of the claim we have taken steps to make this refund process as efficient as possible these steps include processing all medical resident fica refund claims in one location and processing all refund claims of an employer at one time the law provides that we will pay interest on the refunds because receipt of a fica refund will cause a decrease in the medical residents’ earnings record with the social_security administration for the refunded periods we are coordinating with the social_security administration so that it can ensure that residents or their beneficiaries who are currently receiving social_security_benefits understand the potential impact on their social_security_benefits before they receive their refunds given the large number of claims we must process as well as the number of steps involved we are processing the refunds as quickly as possible unfortunately we are unable to provide a timeline for when the refund will be paid i hope this information is helpful if you have any additional questions please contact -- -----------------of this office at -------------------- sincerely paul j carlino branch chief employment_tax branch exempt_organizations employment_tax government entities tax exempt government entities


internal_revenue_service national_office technical_advice_memorandum date number release date index uil no case mis no tam-165476-02 cc fi p b04 team manager lmsb financial services lmsb ctm taxpayer's name taxpayer's address taxpayer's identification no years involved date of conference legend taxpayer holding parent annuities x year year year year plan y plan z tam-165476-02 issue may actuarial_guideline_33 ag33 be used in computing taxpayer’s carvm tax_reserves for annuity_contracts that were issued before the date on which the guideline took effect or the date of adoption by the national association of insurance commissioners naic whichever is later under sec_807 of the internal_revenue_code conclusion the issuance of ag by the naic affects the computation of tax_reserves under sec_807 of the internal_revenue_code only for annuity_contracts issued on or after the date on which ag took effect or was adopted by the naic whichever is later taxpayer’s use of ag in computing its tax_reserves for annuities issued before date is impermissible under sec_807 of the internal_revenue_code facts taxpayer is a life_insurance_company within the meaning of sec_816 of the internal_revenue_code and is subject_to the tax imposed by sec_801 taxpayer is the principal subsidiary of holding which in turn is a subsidiary of parent during the taxable years involved taxpayer joined with parent and other eligible life_insurance_company members of parent’s consolidated_group in filing a life nonlife consolidated_return pursuant to sec_1504 and sec_1_1502-76 of the income_tax regulations taxpayer issues annuities to x the national association of insurance commissioners naic adopted actuarial guideline determining minimum commissioners’ annuities reserve_valuation method carvm reserves for individual annuity_contracts ag which took effect on date for all contracts issued on or after date for year sec_1 and in computing its end of the year life_insurance_reserves for annuity_contracts issued prior to date taxpayer implemented the changes which had been set forth by the naic in ag prior to the issuance of ag taxpayer used plan y valuation rates for all of its annuity products in an attempt to comply with ag taxpayer changed to plan z valuation rates for certain products where the policyholder could receive the full annuity value without reduction if received in periodic_payments over a time period of at least three years prior to ag taxpayer held constant interest rates throughout the deferred period of the policy after ag was enacted taxpayer began using different valuation interest rates when different assumed annuitization dates affected the estimated duration in addition after ag33 was enacted taxpayer began to consider partial annuitization and withdrawal tam-165476-02 scenarios in the calculation of the greatest present_value of future_benefits taxpayer’s reserve strengthening represented the company’s application of the changes necessary to comply with the guidance provided in ag and the changes were applied for both statutory accounting and tax_accounting purposes applicable law and analysis sec_807 provides that other than for purposes of sec_816 relating to qualification as a life_insurance_company the amount of the life_insurance_reserve with respect to any contract is the greater of i the net_surrender_value of the contract or ii the reserve determined under sec_807 at no time may the reserve for any contract exceed the amount taken into account with respect to that contract as of that time in determining statutory_reserves sec_807 provides in part that the reserve for any contract must be determined using the tax_reserve_method applicable to that type of contract the tax_reserve_method applicable to annuity_contracts is the carvm commissioners’ annuities reserve_valuation method prescribed by the naic under sec_807 the carvm to be used for a particular contract is that which is in effect on the date of the issuance of the contract the legislative_history of sec_807 confirms congressional intent that with one exception specifically provided for in that legislative_history an actuarial guideline be applied only to contracts issued after the guideline took effect see h_r conf_rep no 98th cong 2d sess 1984_2_cb_1052 h_r rep no 99th cong 1986_3_cb_945 s rep no 99th cong 2d sess 1986_3_cb_964 accordingly we conclude that because ag was not in effect on the date_of_issuance of the annuities taxpayer may not use ag in determining the tax_reserves for those annuities caveats a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent


tax_exempt_and_government_entities_division release number release date uil code department of the treasury internal_revenue_service commerce street mc dallas tx date taxpayer_identification_number tax period ended december 20xx person to contact identification_number contact information telephone fax certified mail - return receipt requested dear this is a final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in code sec_501 for the tax period s above your exempt status is hereby revoked effective january 20xx our adverse determination as to your exempt status was made for the following reason s an organization exempt under code sec_501 must provide for the exemption of business_leagues and similar organizations sec_1_501_c_6_-1 defines a business league as an association of persons having a common interest whose purpose is to promote a common business_interest it has been determined that you are not operated exclusively for the promotion of common business interests of your members and you are not an organization described in sec_501 if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia these three courts must be filed within days from the a petition or complaint in one of date this determination_letter was mailed to you please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory_judgment by referring to the enclosed publication you may write to the courts at the following addresses united_states tax_court second street n w washington d c u s court of federal claims madison place n w washington d c u s district_court for the district of columbia constitution ave n w washington d c processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code you may also be eligible for help from the taxpayer_advocate_service tas ta sec_1s an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayeradvocate irs gov or call if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours enclosures publication envelope margaret von lienen director eo examinations department of the treasury internal_revenue_service tax exempt and government entities irs exempt_organizations examinations commerce st mc dal dallas tx peay taxpayer identification ification n number form tax_year s ended december 20xx person to contact id number contact numbers telephone fax manager's name id number manager's contact number telephone response due_date june 20xx certified mail-return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an rs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to publication generally doesn't apply after we issue this letter in you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown inthe heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely if margaret von lienen director eo examinations enclosures report of examination form_6018 publication publication schedule number or exhibit form 886-a rev date name of taxpayer explanations of items tax identification_number year period ended dec 20xx issue whether recognition of tax exempt status under sec_501 of the internal_revenue_code hereinafter ‘code’ for the calendar_year tax period ending december 20xx qualifies for facts is an association of authorized hereinafter ‘ ’ automobile dealerships in the or some combination thereof it was organized to function as a that originates from and is defined by of that sell automobiles within the - family of vehicles -aterm the advertising and promotional efforts on a market-by-market basis its goal is to improve new-vehicle retail and wholesale parts service accessories and certified used pre-owned retail sales and market share in participating markets dealers a complete portfolio of group and individual dealer retail programs is a program designed by _ offers participating in order to leverage the group component of this program is also known as a requires each of its to be individually incorporated and to fit within the geographic boundaries of a designated market area defined by the nielsen company dealership participation is not compulsory a dealership may choose to enroll in the group component of depending on its own business needs and applicable market conditions upon meeting the basic requirements to qualify as an turnkey approach or a custom approach with a turnkey approach the preferred retail marketing agency and pays a x percent administration fee to approach the coordination creative production and media activities with this approach administration fee each must choose whether to adopt a chooses to retain the with the custom chooses to hire any qualifying retail advertising agency to handle all account collects a x xx percent each dealership participating in the elects to contribute to the an incremental contribution amount is added to the invoice for each pays the same contribution at a rate between a minimum if a dealership enrolls in an new car purchased from rate the board_of directors of each of x x percent to a maximum of x percent of manufacturers suggested retail price msrp of each eligible vehicle invoiced to the dealer the received funds are pooled in a cooperative advertising account sends a weekly report to each participating dealership which details the amount of contributions made to date after an individual dealer has made a contribution to an right or interest in the contributions considerations decide to cap or eliminate contributions for certain vehicle models or trims at its sole discretion may based on business or market it forfeits any _ subject_to program guidelines the expenses creative and production expenses and authorized non-media expenses the specifically each has control_over its own advertising content as well as the ability to hire its own advertising media planning and purchasing agencies up to xx percent of net contributions for each board_of directors has the authority to decide on which media will incur form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended dec 20xx calendar_year may be used to fund authorized non-media expenditures spend program funds on non-media expenditures only when substantial media levels are being obtained any time for any reason upon days’ prior written notice to all affected dealers if the designated market area is terminated by in accordance with has the right to terminate or cancel any or the entire group component of any remaining encourages guidelines ina contributions will be spent on media to at is the group component of since contributions through new car invoices in the same manner required of other of the dealerships in the account less administrative fees were deposited into a cooperative advertising for one particular market area its dealerships make the contributions used the turnkey approach for the relevant tax period under this approach agreed to use the advertising agency endorsed by is a division of company negotiates the terms of this contract for all a publicly traded global marketing and corporate communications for its advertising campaigns is not a party to a written contract with or because that use the turnkey approach the only bank account used by recipient of substantially_all disbursements paid from this account physical custody of financial records is maintained by despite no agents or representatives of serving on is the cooperative advertising account governing board is the has not submitted form_1024 application_for recognition of exemption under sec_501 a or received a favorable ruling or determination_letter granting recognition of tax-exempt status has filed form_990 return of organization exempt from income_tax for every tax period starting in 20xx to current date on these returns it has declared itself to meet the criteria to be described as exempt under sec_501 of the code law sec_6033 of the code provides that every organization subject_to certain exceptions exempt from taxation under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purpose of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe sec_501 of the code provides that certain organizations described in sec_501 sec_501 or sec_401 shall be exempt from taxation unless exemption is denied under another code section sec_501 of the code exempts from federal_income_tax organizations seeking to operate as business_leagues the primary activity for these organizations must be improving business conditions in one or more lines of business sec_1_501_c_6_-1 of the treasury regulations defines a business league as an association of persons having a common business_interest whose purpose is to promote the common business_interest and not to engage in a regular business of a kind ordinarily carried on for profit its activities are form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended dec 20xx directed to the improvement of business conditions of one or more lines of business rather than the performance of particular services for individual persons in 7_tc_1449 acg 1947_1_cb_1 the tax_court ruled that for purposes of sec_501 of the code the term business is construed broadly interpreting the meaning of business under the predecessor of sec_501 the term ‘pusiness' is very comprehensive and embraces everything about which a person can be employed revrul_55_444 c b provides that an organization formed to promote the business of a particular industry and that conducted a general advertising campaign to encourage the use of products and services of the industry as a whole qualified for sec_501 exempt status notwithstanding that such advertising to a minor extent constituted the performance of particular services for its members in 46_bta_64 acg 1942_1_cb_17 an association of apple growers that engaged in promoting the sale of apples grown in the state was held exempt under the predecessor of sec_501 since its purpose was to promote the industry as a whole and not members of the organization and to improve a line_of_business even though its benefits were limited to a particular geographic area revrul_70_80 1970_1_cb_130 provides that a nonprofit trade_association of manufacturers whose principal activity was the promotion of its members' products under the association's required trademark did not qualify under sec_501 revrul_58_294 1958_1_cb_244 provides that an association of licensed dealers in a certain type of patented product did not qualify as a business league where the association owned the controlling_interest in a corporation holding the basic patent was engaged mainly in furthering the business interests of its member-dealers and did not benefit people who manufacture competing products of the same type covered by the patent revrul_67_77 1967_1_cb_138 provides that an association of dealers which sold a particular make of automobile and that engaged in financing general advertising campaigns to promote the sale of that make was not exempt because it performed particular services for its members rather than promoting a line_of_business ie the automotive industry as a whole revrul_83_164 1983_2_cb_95 provides that an organization whose members represented diversified businesses that own rent or leased computers produced by a single computer manufacturer did not qualify for exemption under sec_501 revrul_74_147 1974_1_cb_136 provides that an organization that directed its activities to users of computers made by diverse and competing manufacturers had a common business_interest concerning the use of computers in 440_us_472 the supreme court held that an association of a particular brand name of muffler dealers did not qualify for sec_501 status because it was not engaged in the improvement of business conditions of a line_of_business form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended dec 20xx in 369_f2d_250 7th cir the seventh circuit had concluded that that an association of the bottlers of a particular brand of soft drink was promoting a line_of_business the government had contended that it was not promoting a line_of_business since the entire soft drink industry rather than a particular brand was the line_of_business the service subsequently reiterated its position in revrul_68_182 1968_1_cb_263 revrul_68_182 1968_1_cb_263 provides that it is the position of the service that an organization promoting a single brand or product within a line_of_business did not qualify for exemption from federal_income_tax under sec_501 of the code in 667_fsupp_250 d c md the court held that an organization that served the needs of users of a specific brand of computer promoted only a segment of a line_of_business and was not exempt under sec_501 in 948_f2d_360 7th cir the court concluded that an association of computer users did not qualify for exemption under sec_501 because it essentially benefitted only users of i b m equipment in 168_f2d_366 6th cir exemption under sec_501 of the code was denied to an association that published catalogues that listed only products manufactured by the members the protecting americans from tax hikes act of path act p l sec_406 expands declaratory_judgment rights under sec_7428 to all sec_501 and sec_501 organizations as a result of these expanded rights the irs will revoke or treat as a revocation for declaratory_judgment purposes any organization that no longer qualifies under the code section for which tax-exemption was granted or self-declared sec_7428 of the code explains declaratory_judgment relating to the status and classification of exempt_organizations declaratory_judgment is a form of legally binding preventive adjudication in which a party involved in an actual or possible legal matter can ask a court to conclusively rule on analysis and position has not applied with irs to be recognized as exempt from federal income taxes therefore irs has not previously given status its filing of form_990 returns for calendar_year 20xx was intended to fulfil its duty under section of the code to file an annual information_return with gross_income and expenses on each of its returns code self-declared it meets the requisite criteria to be described in sec_501 of the consideration whether or not it qualifies for recognition of exempt sec_501 organizations are typically business_leagues chambers_of_commerce boards_of_trade and similar organizations in order to qualify for exemption under sec_501 and sec_501 -1 an organization must meet the following criteria e it must be an association of persons having a common business_interest and its purpose must be to promote this common business_interest form 886-a catalog number 20810w publish no irs gov page department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended dec 20xx e its activities must be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual members it must not be engaged in a regular business of a kind ordinarily carried on for profit no part of its net_earnings may inure to the benefit of any private_shareholder_or_individual its primary activity cannot be performing particular services for members it must be a membership_organization and have a meaningful extent of membership support the starting point for analysis in determining whether there is a common business_interest among members of an organization is whether the organization serves a business_purpose for its members is organized to promote the sale of advertising campaigns its members all operate from the same television market and have agreed to pool resources to produce television advertising that benefits each in associated industries of cleveland v commissioner the term business is comprehensive the promotion of automobiles available for sale is one such business included within the meaning of this term have a common business_interest to promote the sale of automobiles within its designated advertising market in branded automobiles in via tailored members an organization properly described in sec_501 of the code is also required to be funded to a meaningful extent by its members because is funded exclusively by membership dues it has more than a meaningful amount of membership support an organization properly described in sec_501 of the code is also not permitted to allow its net_earnings to inure to the benefit of a private individual despite its strict prohibition neither the internal_revenue_code nor the treasury regulations specifically defines inurement nevertheless its meaning can be discerned by looking at related provisions sec_1_501_c_3_-1 of the regulations states that an organization is not exclusively operated for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals does not have disbursements of funds to individual officers or members it does not allow its net_earnings to inure to others the activities of an organization properly described in sec_501 of the code must be directed to the improvement of business conditions of one or more lines of business this aspect must be distinguished from the performance of particular services for individual members the performance of particular services for members does not preclude recognition of exemption unless it becomes the primary activity in revrul_55_444 an organization formed to promote the business of a particular industry and that conducted a general advertising campaign to encourage the use of products and services of the industry as a whole qualified for sec_501 exempt status nevertheless such advertising to a minor extent constituted the performance of particular services for its members which is not an exempt_purpose in washington state apples inc v commissioner an association of apple growers that engaged in promoting the sale of apples grown was held exempt because it promoted the industry as a whole and not its members the association was limited to a particular geographic area but its membership was not limited to a particular brand or by other intellectual_property trademarks patents industrial design rights form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page schedule number or exhibit form 886-a rev date name of taxpayer explanations of items tax identification_number year period ended dec 20xx principal activity is advertising it is the sole purpose for which the organization was formed its its contracted marketing agency supports that it delegation of financial record-keeping to does not have additional meaningful activities aside from advertising the advertising activity is branded automobiles at dealerships in the relevant market designed to increase sales of advertisements are limited to branded automobiles and claim the types of accolades ordinarily seen in television and print advertising in revrul_70_80 an association of manufacturers whose principal activity was the promotion of its members’ products under the association's required trademark did not qualify under sec_501 because the association's principal activity was the promotion of these products through various advertising media the advertising claimed the superior quality of the trademarked products and made no mention of comparable non-trademarked products a series of public administrative rulings have been issued for associations that limit their business_interest to certain products encumbered by intellectual_property rights in revrul_58_294 an association did not qualify for exemption under sec_501 in part because it did not benefit people who manufactured competing products of the same type in the same line_of_business in revrul_68_182 an association which promoted a single brand or product within a line_of_business did not qualify for exemption as a business league in revrul_83_164 an organization whose members promoted computer sales and service of products produced by a single computer manufacturer did not qualify for exemption in contrast in revrul_74_147 an organization directed its activities to users of computers made by diverse and competing manufacturers the common business_interest was not limited by trademark patent industrial design right or other intellectual_property historically there have been similar associations which have attempted to limit their business_interest and membership to a particular brand in national muffler dealers association v united_states the supreme court held that an association of one particular brand name of muffler dealers did not qualify as a business league in pepsi-cola bottlers’ association inc v united_states the court concluded that an association of bottlers of one particular brand of soft drink was promoting a line of businesses the association’s line_of_business was promoting one particular brand of drink instead of promoting the soft drink industry as a whole in national prime users group inc v united_states the court held that an organization that served only the needs of users of one specific brand of computer was not exempt as a business league in guide international corporation v united_states the court determined that an association of computer users does not qualify for exemption as a business league because it benefitted users of only one computer company in automotive electric association v commissioner the court denied sec_501 exemption because it produced advertising that listed only products manufactured by its members in revrul_67_77 an association of automobile dealers which sold a particular make of automobile engaged in financing general advertising campaigns to promote the sale of that particular make the association was determined not to be exempt because it was performing particular services for its members rather than promoting the automobile industry as a whole this set of circumstances is quite similar to the facts at hand particular make of the sale of individual members it is not directed to the improvement of business conditions for the automobile industry in branded vehicles and which finances general advertising campaigns to promote automobiles this activity is geared towards the performance of particular services for is an association of automobile dealers which is limited to a at-large form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page_6 schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended dec 20xx therefore on the basis of its advertising being limited to meaningful activities it is the position of the government that criteria to qualify for exempt status under sec_501 of the code its primary activity is performing particular services for individual members branded vehicles and having no other does not meet the requisite the irs does not recognize as tax exempt_organizations that self-certify themselves to qualify for tax exemption under sec_501 unless they have first submitted an application to request recognition using form_1024 since is not recognized because it did not submit an application its tax exempt status cannot be revoked however under p l sec_406 will be treated as if its tax exempt status were revoked for declaratory_judgment purposes taxpayer’s position agrees it does not qualify for exempt status under sec_501 of the code for the specific tax_year in question conclusion based on the facts and application of the law sec_501 of the code for the specific tax_year in question since irs did not previously recognize as if its tax exempt status were revoked for declaratory_judgment purposes as tax-exempt its tax exempt status cannot be revoked however it will be treated does not qualify for exempt status under form 886-a publish no irs gov department of the treasury-internal revenue service catalog number 20810w page_7