department of the treasury internal_revenue_service p o box irs cincinnati oh release number release date uil code date date employer id number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we'll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 we sent a copy of this letter to your representative as indicated in your power_of_attorney letter rev catalog number 47635z sincerely director exempt_organizations enclosures notice redacted letter proposed adverse determination under sec_501 other than c redacted letter final adverse determination under sec_501 other than c - no protest cc letter rev catalog number ‘ department of the treasury internal_revenue_service irs p o box cincinnati oh legend b date c state dear ’ date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issue do you qualify for exemption under sec_501 of the code no for the reasons described below facts you were incorporated on b in the state of c the following purposes are outlined in both your articles of incorporation and your bylaws e to institute and maintain a method of exchanging and interchanging business information among members to create and encourage cooperation business efficiency and service to members to bring members in touch with business opportunities to encourage local national and foreign trade expansion of members to promote a better acquaintance and closer association among members article ii of your bylaws defines membership as persons firms and corporations each representing a different trade_or_business occupation or profession article ii also states any person firm or letter rev catalog number 47628k corporation whose main activity or profession is not in competition with the main activity or profession of a member is eligible for membership in the association an application_for membership shall not be denied by reason of any conflict between the main activity of such applicant and an incidental activity of a member your bylaws state that all members are classified by their business or profession further your bylaws state that you allow only one membership for each classification no member is allowed to hold more than one classification unless otherwise approved by your board_of directors article iv of your bylaws titled obligations of members outlines the following member requirements e sec_1 attendance members by their designated representatives shall attend each and every meeting of the association members shall have the privilege of making up enforced absences from regular meetings by attending an after-hours event or a meeting of the board_of directors within sixty days of missing a regular meeting _ sec_2 leads a lead is specific information not otherwise readily known in the community in which a current member can rely upon to generate business information which cannot benefit any member is not a valid lead each member is required to bring in a minimum of one complete lead at each weekly meeting or pay dollar_figure if the member is unable to submit this information at a meeting the information may be called emailed or faxed to the prospective business that will be receiving the lead a member who does business with another member for the first time shall be entitled to lead credit for that transaction repeat business with that same member does not entitle the member to additional lead credit unless the transaction is new business sec_3 classification talks and after hours events members shall give a classification talk within the first three months and host an after-hours event within the first six months of membership and at least once every two years thereafter what constitutes an after-hours event shall be determined by the board_of directors a member may be excused from hosting an after-hours event by appearing in person before the board_of directors and presenting reasons for not having an after-hours event if excused by the board_of directors the member shall sponsor an event in an amount equal to the average cost of an after-hours event as determined by the board_of directors sec_4 after hours registration members shall register at each after-hours event in order for their attendance credit if unable to register at the after-hours event they have the week following the after- hours event to do so sec_5 business familiarity members shall familiarize themselves with the business interests of fellow members to the extent that they recognize opportunities for helping them in a business way section employee associate assistance members shall solicit through systematic effort the cooperative help of his her associates and employees in the performance of these duties e e e e letter rev catalog number 47628k e ‘section diligence members shall act promptly on all information received following it up diligently and making every reasonable attempt to turn it into business e section recommendations whenever possible members shail recommend the services and products of his her fellow members to friends and business associates members shall handle all recommendations reported to them in such a thorough manner that it will reflect credit on the member recommending their products and service as well as the membership of the association as a whole e e section satisfactory service every member of the association is considered a dependable source of supply and has thereby incurred an obligation to give satisfactory service as to price quality quantity delivery maintenance etc equal to or superior to that of his competitor section preferences in keeping with the association’s objectives members are encouraged to always give fellow members every possible preference in business transactions other things being equal and subject_to legitimate demands of policy with reference to established business connections article viii of your bylaws discusses committees and board liaisons you shall have a membership committee composed of five members whose duties will be to determine a whether a conflict exists between a prospective member and a current member b the nature of the prospective member’s business its reputation in the community and other information necessary to educate the board_of directors that shall vote on prospective members application and c the position of the intended designated representative and alternate and their authority within the organization you will also have a leads committee appointed by the president the purpose shall be to promote leads determine whether a lead is valid and report to the board_of directors any member who fails to comply with the leads requirement of the bylaws you were formed to institute and maintain a method of exchanging and interchanging business information among your members you will aid members in growing their businesses and exchange information among members at weekly meetings you have bi-weekly presentations in order to create and encourage cooperation business efficiency and service to your members as well as to aid businesses to provide better customer service and for growth of the business you bring members in touch with business opportunities through weekly emails that include business networking activities the potential networking activities are also discussed at weekly meetings these activities should increase both the members’ own clientele as well as the members’ network for referral opportunities through your networking and referral activities as well as your participation in as an organization in community social and networking events you encourage the local national and foreign trade expansion of your members finally you have group after-hours events to promote a better acquaintance and closer association among your members this provides members with a better knowledge of the type of business that fellow members engage in you sponsor events designed to promote all of your members’ businesses in the community with an emphasis on the importance of shopping locally in addition you maintain both a website and a social media site on facebook which is used to promote each of your members’ businesses you are funded solely through membership dues your expenses are incurred to fund activities related to your exempt_purpose letter rev catalog number 47628k law sec_501 of the internal_revenue_code_of_1986 provides exemption from federal_income_tax for business_leagues not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_6_-1 of the income_tax regulation states that a business league is an association of persons having some common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit it is an organization of the same general class as a chamber of commerce or board_of trade thus its activities should 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 persons an organization whose purpose is to engage in a regular business of a kind ordinarily carried on for profit even though the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining is not a business league revrul_56_65 1956_1_cb_199 denied exemption to an organization whose principal activity consisted of furnishing particular information and specialized individual service to its individual members engaged in a particular industry through publications and other means to effect economies in the operation of their individual businesses by furnishing information to and advertising the products of its members the organization was performing particular services for its members revrul_59_391 1959_2_cb_151 held that an organization created for the purpose of exchanging information on business prospects in an attempt to increase sales for members was not entitled to tax exemption as a business league under sec_501 of the code the organization described in this ruling restricted its membership to individuals firms associations and corporations each of which represented a different trade business occupation or profession and no one of which was in competition with another the applicant held weekly meetings operated a central information service for the exchange of business information among members encouraged member cooperation and business efficiency and required members to provide referrals to fellow members each member agreed to keep the organization’s members informed of business changes which would indicate potential markets for the sale of members' products revrul_76_409 1976_2_cb_154 denied exemption to an organization whose principal activity was the publication and distribution of an annual directory consisting almost entirely of members’ names addresses and telephone numbers the directory was distributed free to those members of the business community who were likely to require the services of the profession it was held that the publication and distribution of a directory containing the names and addresses of members constituted advertising for individuals and therefore was the performance of particular services to members rather than an activity aimed at the improvement of general business conditions application of law you are not described in sec_501 of the internal_revenue_code because you were formed to provide particular services to your members you are not described in sec_1_501_c_6_-1 of the income_tax regulations because you are not formed to improve the business conditions of one or more lines of business rather your sole purpose is to promote the letter rev catalog number 47628k expansion and improvement of your member businesses you achieve this purpose by membership to specific membership classes with each class representing a specific type of business b disallowing membership applications from businesses that would compete with the business of an existing member and c requiring members to provide active business leads and referrals to other members a limiting your you are similar to the organization described in revrul_56_65 because you are providing particular services to your members by providing your members with regular business leads and restricting membership to noncompeting classes representing a single line_of_business you are promoting the private interests of your member businesses rather than the broad common interests of a particular trade or industry your activities are almost indistinguishable from those of the organization described in revrul_59_391 because you restrict your membership to individuals firms associations and corporations each of which represent a different trade business occupation or profession and no one of which is in competition with another further your members are required to provide leads and referrals to fellow members like the organization described in this ruling you do not meet the requirements for tax exemption under sec_501 of the code because your activities are not directed to the improvement of business conditions of one or more lines of business rather you are operated to serve the private interests of your members you are performing particular services for your members in a manner similar to the organization described in revrul_76_409 though you do not publish a directory you do maintain a website and social media site on facebook which is used to promote each of your members like the organization described in revrul_76_409 the services you provide to members constitute particular services and preclude tax exemption under sec_501 of the code your position you state that you qualify for tax exemption under sec_501 of the code because you are an association of persons having the common business_interest of improving the business conditions as a whole for your members to accomplish this goal topics of an educational nature are discussed at your weekly meetings the topics discussed are designed to educate members in the operation of their businesses and thereby improve the conditions of each member’s line_of_business the meetings provide an interdisciplinary forum for the exchange of ideas and all members are invited to participate to help solve problems common to all members in addition you state that you sponsor events designed to promote all of your members’ businesses in the community with an emphasis on the importance of shopping locally finally you state that you maintain both a website and a social media site on facebook which is used to promote each of your members our response to your position although you are promoting the business interests of your members your activities are not directed to the improvement of business conditions of one or more lines of business as required by sec_1_501_c_6_-1 of the income_tax regulations rather you restrict your membership to noncompeting representatives from different trades businesses occupations or professions and you are primarily operated to promote the private interests of your members your membership limitations also preclude you from qualifying as a board_of trade or chamber of commerce as these types of organization do not limit their membership in this way while you do conduct various educational activities at your weekly meetings this does not deter from the fact that your membership structure and business referral activities constitute particular services to your members and preclude tax exemption under sec_501 of the code letter rev catalog number 47628k conclusion the facts clearly show that you are not operated as a business league your activities are not directed to the improvement of business conditions of one or more lines of business or any other purpose defined in sec_501 of the code rather your activities and purposes are directed at the improvement of your members’ individual businesses accordingly you do not qualify for exemption as an organization described in sec_501 of the code if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we'll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more letter rev catalog number 47628k inform tion about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter we sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely director exempt_organizations cc thomasina f moore enclosure publication letter rev catalog number 47628k


t c memo united_states tax_court ted cowan petitioner v commissioner of internal revenue respondent docket no filed date ted cowan pro_se julie l payne for respondent memorandum opinion dinan special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency in petitioner's to the internal_revenue_code in effect for the taxable_year in unless otherwise indicated all section references are federal_income_tax in the amount of dollar_figure and an addition_to_tax pursuant to sec_6651 in the amount of dollar_figure the issues for decision are whether petitioner is liable for federal_income_tax on the proceeds from the sale of property and social_security_benefits received during the year in issue whether sec_6501 bars assessment and collection of petitioner's tax and whether petitioner is liable for an addition_to_tax pursuant to sec_6651 some of the facts have been stipulated and are so found the stipulations of fact and attached exhibits are incorporated herein by this reference petitioner resided in issaquah washington on the date the petition was filed in this case petitioner failed to file his federal_income_tax return for the taxable_year despite receiving proceeds from the sale of property in the amount of dollar_figure and social_security_benefits in the amount of dollar_figure respondent determined a deficiency in petitioner's federal_income_tax based on a seller's tax reporting information for i r s form prepared by puget sound mortgage escrow inc information report and form 1099-ssa and determined an addition_to_tax thereon issue all rule references are to the tax_court rules_of_practice and procedure company conducting the settlement of petitioner's property the information report was filed by the mortgage petitioner testified that he sold unimproved land which he had inherited from his grandmother petitioner failed to produce any evidence of a basi sec_3 in the inherited property however the information report reflected that the seller of the property was petitioner and lola cowan in addition the information report reflected that the sellers' net_proceeds were dollar_figure in his petition and at trial petitioner raised traditional tax_protester type arguments alleging that respondent is barred from making an assessment after years respondent's determinations as to petitioner's tax_liability are presumed correct and petitioner bears the burden of proving otherwise rule a 290_us_111 sec_61 defines gross_income as all income from whatever source derived included within the definition of gross_income is gains derived from dealings in property sec_61 however expenses paid in connection with the disposition of real_property ordinarily are capital expenditures which must be offset against the selling_price in determining the gain_or_loss 49_tc_38 the information report reflected that petitioner and lola cowan were the sellers of the unimproved land petitioner sec_1014 provides that the basis_of_property acquired from a decedent is generally the fair_market_value of the property at the date of the decedent's death lola cowan is believed to be petitioner's wife testified that the unimproved land was inherited from his grandmother and was free and clear of any encumbrances the information report further reflected that the net_proceeds received by the sellers were dollar_figure the difference between the sales_price of dollar_figure and the net amount received of dollar_figure by the sellers represents selling_expenses in the amount of dollar_figure moreover petitioner and lola cowan were residents of the state of washington during the year in issue washington is a community_property_state petitioner's testimony was that he inherited the property from his grandmother inherited property constitutes separate_property in washington and is not subject_to the community_property rules wash rev code ann sec_26 however the information report reflects the sellers of the property to be petitioner and lola cowan petitioner and lola cowan as the listed sellers on the information report is compelling evidence which suggests that if the property was separate_property it was converted to community_property see volz v zang wash p individuals who are married and reside in a community_property_state must each report one-half of their community_property income if they file separately for federal_income_tax purposes 403_us_190 therefore we hold that petitioner must report only one-half of the net_proceeds from the sale of the unimproved land in the amount of dollar_figure with respect to the social_security_benefits sec_86 provides that gross_income includes social_security_benefits in the amount equal to the lesser_of one-half of the social_security_benefits received during the year or one-half of the excess over certain base amounts the base_amount for a taxpayer using married_filing_separately status is zero if the taxpayer lived with his spouse at any time during the year sec_86 petitioner failed to present any evidence contrary to respondent's position that one-half of petitioner's social_security_benefits were taxable rule a accordingly we hold that one-half of petitioner's social_security_benefits in the amount of dollar_figure is taxable sec_86 we need not address petitioner's tax_protester arguments which have been rejected repeatedly by the courts for petitioner was required to file an income_tax return5 and was required to pay taxes thereon see sec_1 a petitioner is raising traditional protester arguments see 737_f2d_1417 5th cir in crain v commissioner supra pincite when a tax_protester raised for a taxpayer with married_filing_separately filing_status is required to file if his gross_income exceeds dollar_figure the standard_deduction of dollar_figure plus the personal_exemption of dollar_figure similar arguments the court_of_appeals for the fifth circuit opined we perceive no need to refute these arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit this court and the court_of_appeals for the ninth circuit have held petitioner's arguments to be nothing more than tax_protester rhetoric and legalistic gibberish see 786_f2d_1437 9th cir 766_f2d_1288 9th cir 640_f2d_1014 9th cir 91_tc_88 82_tc_403 80_tc_1111 76_tc_1027 affd 696_f2d_1234 9th cir snyder v commissioner tcmemo_1995_405 devon v commissioner tcmemo_1995_206 mcganty v commissioner tcmemo_1995_178 diehl v commissioner tcmemo_1990_48 petitioner contends that the tax_liability for the taxable_year in issue is uncollectible because respondent failed to make an assessment within years however pursuant to sec_6501 in the case of the failure_to_file a return the tax may be assessed or a proceeding in court for the collection of such tax may be begun without assessment at any time sec_6651 imposes an addition_to_tax for failure to timely file a return unless the taxpayer establishes the failure did not result from willful neglect and the failure was due to reasonable_cause willful neglect has been interpreted to mean a conscious intentional failure or reckless indifference 469_us_241 reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence and was nonetheless unable to file a return within the prescribed time id pincite sec_301_6651-1 proced and admin regs the addition_to_tax equal sec_5 percent of the tax required to be shown on the return for the first month with an additional percent for each additional month or fraction of a month during which the failure_to_file continues not to exceed a maximum of percent sec_6651 petitioner presented no evidence of reasonable_cause or any evidence of attempts made to comply with the law respecting the timely filing of returns accordingly respondent's determination with respect to the addition_to_tax under sec_6651 is sustained to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number 468a ----------------------- ---------------- ----------------------------------------------------- ----------------------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc psi b06 plr-131800-17 date march legend taxpayer seller x y parent state a state b unit operator state b commission buyer date date date date year year a b c d e director ----------------------------------------------------- ein ----------------- ------------------------------------------------------------------------ ein ----------------- ------------------------------------------------------------------------ ein ----------------- ein ----------------- -------------- ------------ ------------------------------------------------------ -------------------------------------------- ----------------------------------------------- ---------------------------------------------------------- -------------------------- ------------------------ -------------------- --------------------------- ------- ------- ---------------- -------------- ---------------- -------------- ---------------- ------------------------------------------------ -------------------------------------------- plr-131800-17 dear --------------- this letter responds to your request for private_letter_ruling dated date you requested that we rule on certain tax consequences of the proposed transaction discussed below taxpayer has represented that at the time that the private_letter_ruling was submitted the facts were as follows x a state a limited_liability_company is an indirectly wholly-owned subsidiary of parent y a state a corporation is a direct wholly-owned subsidiary of parent both x and y are included in the consolidated federal_income_tax return of parent in year x through its disregarded subsidiary taxpayer acquired the unit and the associated nuclear decommissioning trust ndt and assumed the nuclear decommissioning liability ndl for the unit x was the tax owner of the unit until date at which time taxpayer issued an equity_interest to y thereby converting taxpayer to a partnership for federal_income_tax purposes taxpayer is the owner of the unit which is operated by operator a corporate affiliate of taxpayer with respect to the unit taxpayer is subject_to the jurisdiction of the federal energy regulatory commission ferc the nuclear regulatory commission nrc and the state b commission taxpayer shut down and defueled the unit in year the unit began decommissioning on date as the owner taxpayer is obligated to undertake the decommissioning of the unit taxpayer is also the tax owner of the ndt that is dedicated to the decommissioning of the unit the ndt currently holds assets in a_trust that meets the requirements for a qualified decommissioning fund within the meaning of sec_468a of the internal_revenue_code the qualified_fund as of date the assets of the ndt had a fair_market_value of approximately dollar_figurea that were held entirely in the qualified_fund taxpayer also maintains a_trust srt separate and apart from the ndt for the restoration of the site as required by the state b commission this srt is treated as a nonqualified_fund as of date the fair_market_value of the srt was approximately dollar_figureb prior to the closing date of the proposed transaction on or about date taxpayer will transfer the unit and associated assets such as land and improvements and the ndt to a limited_liability_company that will be a disregarded_entity for federal_income_tax purposes the proposed transaction contemplates subject_to obtaining regulatory approval that all assets held by the srt will be converted to cash and contributed to the qualified_fund prior to the closing date plr-131800-17 on the closing date taxpayer will sell all membership interests in the disregarded_entity to the buyer for federal_income_tax purposes taxpayer will be treated as conveying to the buyer all assets and liabilities of the disregarded_entity and the buyer will be treated as assuming the liabilities associated with the unit including the ndl on the closing date the qualified_fund is expected to hold assets valued at approximately dollar_figurec on the same date the ndl associated with the unit is expected to be approximately dollar_figured which exceeds the fair_market_value of the assets held in the qualified_fund by dollar_figuree the transfer of the unit ndt to the buyer is referred to as the fund transfer rulings requested the qualified_fund will not be disqualified by reason of the fund transfer the qualified_fund will not recognize gain_or_loss or otherwise take any income_or_deduction into account by reason of the fund transfer seller will not recognize gain_or_loss under sec_468a or otherwise take any income_or_deduction into account under sec_468a by reason of the fund transfer the tax basis of the qualified_fund in its assets will not change by reason of the fund transfer the amount_realized by seller from the proposed transaction will include the amount of liabilities assumed by buyer including the ndl associated with the unit but not including the portion of the ndl funded by the qualified_fund on the date of the proposed transaction to the extent that it is included in the amount_realized from the proposed transaction seller will be entitled to treat the ndl as satisfying economic_performance under sec_1_461-4 law and analysis issues sec_468a of the code provides that a taxpayer may elect to deduct payments made to a nuclear decommissioning reserve fund that meets the requirements of sec_468a ie a fund that is a qualified nuclear decommissioning fund or a qualified_fund sec_1_468a-1 of the income_tax regulations provides that a qualified nuclear decommissioning fund is a fund that satisfies the requirements of sec_1_468a-5 plr-131800-17 sec_1_468a-5 sets out the qualification requirements for nuclear decommissioning funds it provides in part that a qualified nuclear decommissioning fund must be established and maintained pursuant to an arrangement that qualifies as a_trust under state law sec_1_468a-5 provides that an electing taxpayer can establish and maintain only one qualified nuclear decommissioning fund for each nuclear power plant if a nuclear power plant is subject_to the ratemaking jurisdiction of two or more public_utility commissions and any such public_utility commission requires a separate fund to be maintained for the benefit of ratepayers whose rates are established or approved by the public_utility commission the separate funds maintained for such plant whether or not established and maintained pursuant to a single trust agreement shall be considered a single nuclear decommissioning fund sec_1_468a-6 provides rules applicable to the transfer of an interest in a nuclear power plant and transfer of the qualified nuclear decommissioning fund where certain requirements are met specifically sec_1_468a-6 provides that sec_1_468a-6 applies if- immediately before the disposition the transferor maintained a qualified nuclear decommissioning fund with respect to the interest disposed of and immediately after the disposition-- i the transferee maintains a qualified nuclear decommissioning fund with respect to the interest acquired ii the interest acquired is a qualifying interest of the transferee in the nuclear power plant in connection with the disposition either- i the transferee acquires part or all of the transferor’s qualifying interest in the plant and a proportionate amount of the assets of the transferor’s fund all such assets if the transferee acquires the transferor’s entire qualifying interest in the fund is transferred to a fund of the transferee or ii the transferee acquires the transferor’s entire qualifying interest in the plant and the transferor’s entire fund is transferred to the transferee and the transferee continues to satisfy the requirements of sec_1_468a-5 which permits an electing taxpayer to maintain only one qualified nuclear decommissioning fund for each plant plr-131800-17 sec_1_468a-6 provides that a disposition that satisfies the requirements of sec_1_468a-6 will have the following tax consequences at the time it occurs i neither the transferor nor the transferor’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not be considered a distribution of assets by the transferor’s qualified nuclear decommissioning fund ii notwithstanding sec_1_468a-6 if the transferor has made a special transfer under sec_1_468a-8 prior to the transfer of the fund or fund assets any deduction with respect to that special transfer allowable under sec_468a for a taxable_year ending after the date of the transfer of the fund or fund assets is allowed under sec_468a for the taxable_year that includes the date of the transfer of the fund or fund assets neither the transferee nor the transferee’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not constitute a payment or a contribution of assets by the transferee to its qualified nuclear decommissioning fund transfers of assets of a qualified nuclear decommissioning fund to which this section applies do not affect basis thus the transferee’s qualified nuclear decommissioning fund will have a basis in the assets received from the transferor’s qualified nuclear decommissioning fund that is the same as the basis of those assets in the transferor’s qualified nuclear decommissioning fund immediately before the distribution under sec_1_468a-6 the service may treat any disposition of an interest in a nuclear power plant occurring after date as satisfying the requirements of the regulations if the service determines that such treatment is necessary or appropriate to carry out the purposes of sec_468a issue plr-131800-17 sec_1001 provides that the amount_realized from the sale_or_other_disposition of property is the sum of any money received plus the fair_market_value of the property other than money received sec_1_1001-2 provides that the amount_realized from the sale_or_other_disposition of property includes the amount of liabilities from which the transferor is discharged as a result of the sale or disposition the decommissioning liabilities from which taxpayer will be relieved are fixed and determinable for purposes of sec_461 and as discussed below under issue are described in sec_1_461-4 these amounts are included in the amount_realized as an owner of a nuclear-powered plant taxpayer is required_by_law to provide for eventual decommissioning and the amount of taxpayer’s liability can be determined with reasonable accuracy accordingly the amount of taxpayer’s nuclear decommissioning liability that is assumed by buyer in excess of the fair_market_value of the assets in the qualified_fund on the date of the transfer will be included in taxpayer’s amount_realized and taken into account in computing taxable_income in the year of the proposed transaction as discussed above the proposed transaction will not result in the disqualification of the qualified_fund and taxpayer will not have any gain or income as a result of the transfer of its interests in the assets of the qualified_fund to buyer because the transfer of the qualified_fund from taxpayer to buyer will not be a taxable transfer the amount of the liabilities assumed by buyer that are included in taxpayer's amount_realized will not include the portion of the liability to decommission the unit that is equal to the fair_market_value of the assets in the qualified_fund on the date of the transfer issue sec_1_446-1 provides that under an accrual_method of accounting a liability is incurred and generally taken into account for federal_income_tax purposes in the year in which all the events have occurred that establish the fact of the liability the amount of the liability can be determined with reasonable accuracy and economic_performance has occurred with respect to the liability sec_461 provides that in determining whether an amount has been incurred with respect to any item during any taxable_year the all_events_test shall not be treated as met any earlier than when economic_performance with respect to such item occurs see also sec_1_461-4 sec_461 provides that the all_events_test is met with respect to any item if all events have occurred that determine the fact of liability and the amount of such liability can be determined with reasonable accuracy sec_461 provides that in the case of a liability that requires the taxpayer to provide services economic_performance occurs as the taxpayer provides the services sec_1_461-4 provides that except as otherwise provided in sec_1_461-4 if a liability requires the taxpayer to provide services to another person economic_performance occurs as the taxpayer incurs costs in connection with the satisfaction of the liability sec_1_461-4 provides an exception to the general plr-131800-17 economic_performance rule for services where the taxpayer sells or exchanges a trade_or_business where the purchaser expressly assumes a liability arising out of the taxpayer's trade_or_business that the taxpayer but for the economic_performance requirement would have been entitled to incur as of the date of the sale economic_performance with respect to that liability occurs as the amount of the liability is properly included in the amount_realized on the transaction by the taxpayer the first prong of the all_events_test requires that the fact of the liability be established at the time of the deduction this prong of the all_events_test is satisfied in the instant case for taxpayer here taxpayer as an owner of a nuclear-powered plant was required to obtain an operating license before commercial operations begun c f_r sec_50 see also c f_r sec_50 k taxpayer also has an obligation to seek license termination c f_r sec_50 a and the license termination process provides that a licensee shall take actions necessary to decommission and decontaminate the facility c f_r sec_50 b and bb see also c f_r sec_72 the fact of the obligation arose at the time taxpayer became subject_to the decommissioning requirements associated with the unit’s license moreover congress recognized the existence of the decommissioning liability when in it enacted sec_461 and sec_468a noting that g enerally under federal and state laws utilities that operate nuclear power plants are obligated to decommission the plants at the end of their useful lives h_r conf_rep no see also s rpt no vol 98th cong 2d sess the second prong of the all_events_test requires that the amount of the liability be determined with reasonable accuracy see sec_1_461-1 this prong is also satisfied in the instant case the amount of taxpayer’s decommissioning liability has been determined by experts in the nuclear decommissioning industry the estimate has been accepted by the nuclear regulatory commission which is charged with ensuring that sufficient funds are available to decommission the plants in addition there is also support in the internal_revenue_code for finding that the amount of the decommissioning liability can be determined with reasonable accuracy at the time of a sale sec_468a generally permits a current deduction for a ruling_amount based on estimated future decommissioning expenses to the extent the decommissioning costs are sufficiently determinable to entitle a utility to a deduction under sec_468a it is reasonable to conclude that the costs must also be sufficiently determinable to satisfy the second prong of the all_events_test conclusions based on the information submitted by taxpayer we reach the following conclusions the qualified_fund will not be disqualified by reason of the fund transfer the qualified_fund will not recognize gain_or_loss or otherwise take any income_or_deduction into account by reason of the fund transfer plr-131800-17 taxpayer seller will not recognize gain_or_loss under sec_468a or otherwise take any income_or_deduction into account under sec_468a by reason of the fund transfer the tax basis of the qualified_fund in its assets will not change by reason of the fund transfer the amount_realized by taxpayer from the proposed transaction will include the amount of liabilities assumed by buyer including the ndl associated with the unit but not including the portion of the ndl funded by the qualified_fund on the date of the proposed transaction based on taxpayer’s representation that the unit will be taxpayer’s only electricity generation plant at the time of the proposed transaction taxpayer will be entitled to treat the ndl as satisfying economic_performance under sec_1_461-4 to the extent that taxpayer includes the ndl in the amount_realized from the proposed transaction except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above specifically we express no opinion on the tax consequences of the transaction under sec_351 also except as specifically determined above we express no opinion on the federal_income_tax consequences to buyer resulting from the acquisition of assets and liabilities including the nuclear-powered electric generating plants and the nuclear decommissioning liabilities of taxpayer this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides 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 we are also sending a copy of this letter_ruling to the director sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br 1-plr-133372-01 date oct this responds to a letter dated date and subsequent correspondence submitted on behalf of a requesting a ruling that the partners of x will not recognize pre-contribution gain under sec_704 or sec_737 as a result of the in-kind distribution of a assets on or after date that were contributed to the partnership on date because the assets were contributed pursuant to a written binding contract for the contribution of a fixed amount of property that was in effect on date and at all times thereafter before such contribution and thus qualified for transitional relief under section b of the taxpayer_relief_act_of_1997 x a a year year year year date date date date date facts plr-133372-01 the taxpayer represents the following facts in year trustor established trusts one for his wife and one for primary benefit of each of his four children there currently are eight year trusts remaining with trustor’s grandchildren as the sole current income beneficiaries each trust owns undivided_interest in a assets and substantial portfolio of investment securities and will terminate upon the earlier of the death of the grandchild or years after the death of the last child during the early year the corporate trustee became increasingly concerned that the orderly control of the a assets might be seriously disrupted if undivided interests passed out of the common_control upon the death of a third generation income_beneficiary and the resulting trust terminated in year the trustee decided to contribute all of the a assets to a partnership the partnership’s original limited_partnership agreement lpa was executed on date and obligated each of the partners to contribute their a assets to the partnership in exchange for limited_partnership interests due to the trustee’s concern that certain beneficiaries of the trusts would oppose the limited_partnership agreement the agreement was made contingent upon obtaining court approval it was also made contingent upon obtaining a ruling from the internal_revenue_service that the partnership was a partnership for federal tax purposes this requirement was subsequently eliminated as unnecessary after the promulgation of the regulations under sec_301_7701-1 through the state court litigation took several years to resolve ultimately on date the court entered an order requiring the trustee to execute a lpa substantially_similar to the amended and restated lpa previously submitted to the court although the amended and restated lpa contained numerous changes from the original lpa no change was made to the partners’ obligation_to_contribute their a assets to the partnership the court authorized the trustee to make further changes to the amended and restated lpa prior to the formation of the partnership subject_to the right of an interested_party to object and hearing by the court the final lpa which contained minor changes to the amended and restated lpa was executed by all parties on date the partnership was formed and the a assets were contributed to the partnership on date although the execution of the final lpa could have occurred any time after date date was chosen because that was the date on which interested trust beneficiaries the trustee and persons involved in managing the a assets have traditionally met in addition the trustee wanted to utilize the interim period to make sure that all administrative details were given proper attention including necessary changes to computer systems and accounting procedures date is prior to date and date is subsequent to it law and analysis plr-133372-01 section of the taxpayer_relief_act_of_1997 extended from to years the period during which precontribution gain is recognized if property contributed to a partnership is distributed in-kind the amendment applies to property contributed to a partnership after its date effective date it does not apply however to any property contributed pursuant to a written binding contract in effect on date and at all times thereafter before such contribution if such contract provides for the contribution of a fixed amount of property conclusion based solely on the facts submitted and the representations made we conclude that the partners of x had a binding contract in effect on date to contribute a assets to x accordingly we conclude that section of the taxpayer_relief_act_of_1997 does not apply and that a will not recognize pre-contribution gain under sec_704 or sec_737 as a result of the in-kind distribution of a assets on or after date except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code 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 sincerely david r haglund senior technician chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------------- --------------------------------------------------------------- ---------------- ---------------------------------------- ---------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-106740-11 date date legend x ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ --------------- ---------------- state date ------------- ------------------------- dear ------------ this responds to a letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on date it was intended that x elect s_corporation treatment effective date however a form_2553 election by a small_business_corporation was not timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-106740-11 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective date within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning date a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact 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 sincerely melissa c liquerman chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


lyitoree cue list 4atsdollar_figure a department of the treasury ou internal_revenue_service washington d c tax_exempt_and_government_entities_division jan tep rat legend company a plan x dear this letter is in response to a request for a ruling letter submitted on your behalf by your authorized representatives on date as supplemented by tetters dated date date and date concerning the prepayment of an exempt loan upon termination of an employee_stock_ownership_plan esop have submitted the following facts and representations in support of this request your authorized representatives company a a c_corporation is engaged in the manufacturing and importation of company a established plan x effective plan x is leveraged and is intended to be qualified under sec_401 of the employees internal_revenue_code code and is intended to be an esop within the meaning of code sec_4975 for the benefit of its the trustee of plan x’s related trust trustee entered into an exempt loan loan which with a third-party lender the on in the amount of approximately dollar_figure enabled plan x’s related trust to purchase approximately shares shares the loan after the loan was repaid and all of the company a continued to make annual cash contributions from which were generally used to repurchase shares which had been allocated to the accounts of plan_loan shares were released and allocated to plan x through page 20u7 x participants who became eligible for distributions of their account balances during the year these repurchased shares remained in plan x and were reallocated to other participants’ accounts outstanding of the total shares of company a stock then as of date plan x held’ the loan the company a made a second exempt loan to plan x in the amount of ‘loan enabled plan x to purchase by a tender offer shares of company a stock loan shares which were pledged as security for the on dollar_figure to all of company a’s shareholders the tender offer the tender offer plan x acquired an additional outstanding the and have been released and allocated to eligible participants’ accounts as plan x makes scheduled payments of principal and interest on the be retired in loan as a result of the of the total shares of company a stock then loan shares are held in a suspense_account under the terms of plan x unless prepaid by plan x loan is scheduled to loan the company a represents that at the time it made the contributions to plan x sufficient to permit plan x to pay all installments of principal and interest as those installments became due and that it fully intended to maintain plan x at least through the scheduled retirement date for the loan it fully intended to make loan as of been released from plan x’s suspense_account and remained unallocated _a total of shares or of the -or loan shares had ofthe ‘loan shares company a began experiencing a significant decline in demand for its domestically imports demand for continued to decline in subsequent years causing company inlate produced products due primarily to increasing competition from domestically manufactured a to close manufacturing facilities and resulting in a substantial decline in company a’s workforce since plan x company a does not expect the size of its workforce to increase in response to increasing competition from foreign strategy away from domestic domestically produced and an approximate reduction in the number of active participants in does not improve it will make additional workforce reductions manufacturing and expects that if the market for its manufacturers company a has shifted its business_company a proposes to terminate plan x because the reduction in the number of plan x participants described above has made plan x increasingly burdensome for company a to continue to maintain and because company a and the trustee of plan x have not been able to _ _ loan that would allow company a to effectively agree to a method of restructuring the address the burdens associated with continuing to maintain plan x in light of the significant change in economic circumstances and drastic decline in plan x participation in accordance with the terms of plan x company a proposes to redeem that number of the unallocated ___ value equal to the then outstanding balance principal and accrued interest of the company a will simultaneously direct the trustee of plan x’s related trust to use the redemption loan shares held in plan x’s suspense_account which have a total fair market loan _ page loan will then be proceeds to repay the then outstanding balance of the retired the number of shares to be redeemed will be determined based on the closing price per share of company a stock as reported on the nasdaq capital market on the day which the redemption occurs the redeemed shares will be retired ie become authorized but unissued shares loan the the shares that remain in plan x’s suspense_account after the repayment of the ___ loan surplus esop shares along with any unallocated interest-bearing cash will then be allocated to the accounts of all participants in plan x as earnings pro_rata on the basis of their respective account balances in plan x as of the termination_date your authorized representatives have represented that this proposed allocation will be made in a manner that passes the general test for nondiscrimination under code sec_401 for employer contributions event that the total value of unallocated the then outstanding balance of the the your authorized representatives have further represented that in the unlikely loan shares as of the redemption date is less than loan company a will forgive the remaining balance of loan immediately following the proposed repayment of the will be terminated and participants’ accounts in plan x including any surplus esop shares that have been allocated to participants’ accounts will be transferred in a trustee-to-trustee transfer to another qualified_retirement_plan sponsored by company a loan plan x and its related trust your authorized representatives have requested rulings to the effect of the following on your behalf _ loan in connection with the termination of plan x with the the repayment of the proceeds of the proposed redemption by company a of unallocated a fair_market_value equal to the outstanding balance principal and accrued interest of the loan at the time of such redemption will not cause the requirements for exemption under code sec_4975 and loan to fail to satisfy the loan shares that have the allocation of surplus esop shares to participants’ plan x accounts immediately following the proposed repayment of the and will not constitute annual_additions to those participants’ accounts under code sec_415 loan will be treated as an allocation of earnings with respect to your first requested ruling an esop is designed to invest primarily in employer_securities an esop must be part of a stock_bonus_plan qualified under sec_401 of the code or a stock_bonus_plan in a money purchase plan qualified under sec_401 a leveraged_esop borrows funds which it uses to purchase employer_securities usually from the employer the esop_loan or loans are generally from the employer or guaranteed by the employer the acquired employer_securities are held in a suspense_account pending allocation to the accounts of plan participants in accordance with the rules of sec_54_4975-11 of the excise_tax regulations regulations an esop generally uses employer contributions to the plan and cash dividends on employer stock held by the plan to repay the exempt loan page sec_54_4975-7 of the regulations provides that all of under sec_4975 of the code an esop_loan generally is exempt from the prohibitions provided in sec_4975 and the excise_taxes imposed by sec_4975 and b only if the loan is primarily for the benefit of the participants and beneficiaries of the plan primary benefit requirement the surrounding facts and circumstances will be considered in determining whether an esop_loan satisfies the primary benefit requirement among the relevant facts and circumstances are _ whether the transaction promotes employee ownership of the employer stock whether contributions to the esop are recurring and substantial and the extent to which the method of repayment of the loan benefits the employees all aspects of the loan transaction including the method of repayment will be scrutinized to determine whether the primary benefit requirement is satisfied sec_54_4975-7 of the regulations indicates that the employer has the primary responsibility for the repayment of an exempt loan through contributions to the plan sec_54_4975-7 provides for the repayment of an exempt loan in the event of default however the exemption provided by sec_4975 of the code and described in the associated regulations will not fail to be met merely because the trustee sells the unallocated suspense_account shares and uses the proceeds to repay the exempt loan if the transaction satisfies the primary benefit requirement based on all the surrounding facts and circumstances sec_54_4975-7 of the regulations also provides that the only assets of an esop that may be given as collateral on an exempt loan are qualifying employer_securities of two classes those acquired with the proceeds of the loan and those that were used as collateral on a prior exempt loan repaid with the proceeds of the current exempt loan no person entitled to payment under the exempt loan shall have any right to assets of the esop other than i collateral given for the loan ii contributions other than contributions of employer_securities that are made under an esop to meet its obligations under the loan and iii earnings attributable to such collateral and the investment of such contributions sec_54_4975-7 of the regulations does not establish a per se prohibition against exempt loan prepayment by an esop however as noted above if an esop contemplates prepaying an exempt loan the funds used to prepay the loan must be limited as described in this regulation loan nearly percent of the in this case company a has made consistent and substantial contributions to plan x for loan shares have been released repayment of the from the plan x suspense_account and allocated to participants’ accounts at the time plan x was established and at the time the loan was repaid and all shares of common_stock held in the suspense continue until the account were allocated to participants however company a decided to terminate plan x for the financial and business reasons described above a will redeem that number of the unallocated account which have a total fair_market_value equal to the then outstanding balance principal and accrued interest of the x’s related trust to use the redemption proceeds to repay the then outstanding balance of the loan company a will simultaneously direct the trustee of plan_loan occurred company a intended that plan x would loan shares held in the plan x suspense upon the termination of plan x company page z2uv7z16u2z _ loan the loan will then be retired the number of shares redeemed will be determined based on the closing price per share of company a stock as reported on the nasdaq capital market on the day which the redemption occurs the redeemed shares will be retired the remaining shares in plan x’s suspense_account will then be allocated as earnings to the company a stock accounts of plan x participants on the basis of their account balances as of plan x’s termination_date accordingly with respect to your first requested ruling we conclude that the repayment of the ___ loan in connection with the termination of plan x with the proceeds of the proposed redemption by company a of unallocated to the outstanding balance principal and accrued interest of the redemption will not cause the code sec_4975 loan shares that have a fair_market_value equal _ loan at the time of such loan to fail to satisfy the requirements for exemption under _ with respect to your second requested ruling sec_415 of the code provides that contributions and other additions under a defined_contribution_plan including an esop with respect to a participant for any taxable_year may not exceed the limits of subsection c sec_415 of the code states that contributions and other additions with respect to a participant exceed the limitation of this subsection if when expressed as an annual_addition to the participant’s account such annual_addition is greater than the lesser_of dollar_figure or of the participant’s_compensation sec_415 generally defines annual_addition as the sum for any year of employer contributions the employee contributions and forfeitures sec_1 g of the income_tax regulations sets forth special rules for esops sec_1 g provides in part that for purposes of applying the limitations of sec_415 of the code and sec_1 g of the regulations to an esop to which an exempt loan has been made the amount of employer contributions which is considered an annual_addition for the limitation_year is calculated with respect to employer contributions of both principal and interest used to repay the exempt loan for that limitation_year sec_1 b i of the income_tax regulations provides in part that the commissioner may in appropriate cases considering all of the facts and circumstances treat transactions between the plan and the employer as giving rise to annual_additions loan remain there because it was not necessary to redeem them to prepay the in the present case the shares remaining in plan x’s suspense_account following the prepayment ofthe _ loan thus they reflect the extent of the appreciation in the value of the shares held in the suspense_account and are in effect earnings and are properly treated as such as part of the termination of plan x since the shares remaining in plan x’s suspense_account are treated as earnings they do not constitute annual_additions under sec_1 b of the income_tax regulations upon their allocation to participants’ accounts in this situation accordingly we conclude with respect to your second requested ruling that the allocation of surplus esop shares to participants’ plan x accounts immediately following the proposed page repayment of the annual_additions to those participants’ accounts under code sec_415 loan will be treated as an allocation of earnings and will not constitute this ruling letter is based on the assumption that plan x is qualified under code sec_401 a all times relevant to the transaction described herein and that it is an esop as described in sec_4975 deduction will be taken with regard to this transaction this ruling letter is also based on the assumption that no sec_404 at we note that the department of labor has jurisdiction with respect to the provisions of part of title i of the employee_retirement_income_security_act_of_1974 erisa including the requirement in sec_404 and sec_404 of erisa that fiduciaries discharge their duties for the exclusive purpose of providing benefits to participants and their beneficiaries and in a prudent manner therefore we express no opinion as to whether the subject transactions are consistent with such provisions this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent copies of this ruling letter have been sent to your authorized representatives in accordance with a power_of_attorney on file with this office if you have any questions please contact please refer to se t ep ra t3 at sincerely yours panta ve bra frances v sloan manager employee_plans technical group enclosures notice deleted copy of ruling letter cc


internal_revenue_service department of the treasury index numbers washington dc number release date person to contact telephone number refer reply to cc dom corp - plr-117229-99 date date distributing controlled business m business n a family b c family d e trust trust f corp partnership x y date z we respond to your date request for rulings regarding certain federal_income_tax consequences of a proposed transaction plr-117229-99 summary of facts distributing is an accrual_method corporation directly engaged in business m and business n the distributing common_stock is owned x percent by family b and y percent by family d distributing was managed primarily by a the spokesman for family b and c of family d until c’s death on date z since then a and e now the primary spokesman for family d have disagreed over how best to manage business m and business n to resolve these differences the two families propose to divide the assets of distributing as follows i distributing will transfer to newly formed controlled all the assets associated with business n plus assets needed to equalize the value of controlled with the value of family b’s interest in distributing the additional assets will include stock in f corp and an interest in partnership in exchange controlled will issue controlled stock to distributing and assume related liabilities altogether the contribution ii distributing will distribute controlled stock to each of the family b members in exchange for all of the member’s stock in distributing collectively the exchanging shareholders and the distribution after the distribution distributing will continue to conduct business m and controlled will continue to conduct business n representations the parties have submitted the following representations concerning the proposed transaction a distributing controlled and their shareholders each will pay its his or her own expenses if any incurred in connection with the proposed transaction b the fair_market_value of the controlled stock received by each exchanging shareholder will approximately equal the fair_market_value of the distributing stock surrendered in the exchange c no part of the consideration distributed by distributing will be received by an exchanging shareholder as a creditor employee or in any capacity other than as a shareholder of distributing d the five years of financial information submitted on behalf of distributing represents the corporation’s present operations and with regard to such corporation plr-117229-99 there have been no substantial operational changes since the date of the last financial statement submitted e following the transaction distributing and controlled will each continue the active_conduct of its business independently and with its separate employees f the distribution is motivated in whole or substantial part by the corporate business_purpose of eliminating disputes between a and e over how best to manage the businesses of distributing g there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any distributing or controlled stock after the transaction except that trust and trust each may distribute part of the stock held by the trust to its beneficiaries as required by the terms of the trust h there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 i there is no plan or intention to liquidate distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business j the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing will equal or exceed the amount of the liabilities assumed as determined under sec_357 of the internal_revenue_code by controlled k the liabilities assumed as determined under sec_357 in the transaction were incurred in the ordinary course of business and are associated with the assets being transferred l payments made in any continuing transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length m the investment_tax_credit previously computed with respect to the sec_38 property transferred if any will be adjusted in the year of transfer to reflect an early disposition of the property pursuant to sec_47 and of the code n no intercorporate debt will exist between distributing and controlled at the time of or after the distribution of the controlled stock plr-117229-99 o no two parties to the transaction are investment companies as defined in sec_368 and iv p the distribution is not part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the combined voting power of all classes of stock of distributing or controlled entitled to vote or percent or more of the total value of shares of all classes of distributing or controlled stock within the meaning of sec_355 q distributing is not an s_corporation within the meaning of sec_1361 but will elect to be an s_corporation pursuant to sec_1362 for its taxable_year beginning date distributing will be an s_corporation on the date of the distribution controlled will elect to be an s_corporation on the first available date after the distribution and there is no plan or intention to revoke or otherwise terminate the s_corporation_election of either distributing or controlled rulings based solely on the information submitted and the representations set forth above we rule as follows the contribution followed by the distribution will be a reorganization under sec_368 distributing and controlled each will be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled in the contribution will equal the basis of that asset in the hands of distributing immediately before the contribution sec_362 the holding_period of each asset received by controlled will include the holding_period of that asset in the hands of distributing sec_1223 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the exchanging shareholders on their receipt of controlled stock in the distribution sec_355 plr-117229-99 the basis of the controlled stock in the hands of each exchanging shareholder will equal the basis of the distributing stock surrendered in exchange therefor sec_358 the holding_period of the controlled stock received by each exchanging shareholder will include the holding_period of the distributing stock exchanged therefor provided the stock is held as a capital_asset on the date of the distribution sec_1223 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 of the income_tax regulations caveats we express no opinion on the federal_income_tax treatment of the proposed transaction under other provisions of the code or 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 procedural statements this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in the transaction should attach a copy of this letter to the taxpayer's federal_income_tax return for the taxable_year in which the transaction is completed in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer and to a second authorized representative by wayne t murray sincerely assistant chief_counsel corporate senior technician reviewer branch