internal_revenue_service number release date index numbers -------------------------------------------- ------------------------------- --------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id -------------------- telephone number ---------------------- refer reply to cc psi b03 plr-108931-16 date date legend x ------------------------------------------- -------------------------------------------- state --------------------- d1 --------------------------- dear -------------------- this letter responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code facts the information submitted states that x is a state limited_liability_company treated as a partnership for federal tax purposes x intended to file an election under sec_754 with its return for its taxable_year ended d1 x’s return was timely filed but inadvertently a sec_754 election to adjust the basis of partnership property was not filed with the return x represents that it has acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-108931-16 law and analysis sec_754 provides that a partnership may elect to adjust the basis of partnership property when there is a distribution_of_property or a transfer of a partnership_interest an election under sec_754 applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership must be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1_6031_a_-1 including extensions for filing the return for such taxable_year under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely upon the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and 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 make a sec_754 election for its taxable_year ended d1 and thereafter the election should be made in a written_statement filed with the applicable service_center for association plr-108931-16 with x's return for the taxable_year ended d1 a copy of this letter should be attached to the statement filed except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by __ s ___________________________ mary beth carchia senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


internal_revenue_service number release date index number ----------------------------------------------------- ------------------------------------------------------------ ----------- ----------------------------- ------------------------ in re ---------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------------------------- telephone number --------------------- refer reply to cc psi b04 plr-136219-04 date december legend grantor_trust date date date date year a b state state statute county court community_trust dear -------------------- -------------------- --------------------------------------------------------------------- -------------------------- --------------------- ----------------- ------------------- ------- ---- ---- -------- -------------------------------------------- ----------------------------------------------------------------------- ------------------------- ----------------------------------- this is in response to your date letter and other correspondence requesting a ruling concerning the income and generation-skipping_transfer_tax gst consequences of a proposed reformation of trust you have requested the following rulings the proposed reformation of trust will not affect the exempt status of trust for gst tax purposes the proposed reformation of trust will not result in the recognition of gain_or_loss to trust or any of trust’s beneficiaries the facts submitted are as follows plr-136219-04 grantor established trust on date before date article i a and b of trust provides in part that during the period of years from the date of execution of trust the charitable term the trustee is to hold the entire trust estate as a separate trust solely and exclusively for charitable scientific and educational_purposes during the charitable term the trustee is to distribute no less often than annually the entire net_income of the trust to or for_the_use_of entities for which a deduction under sec_2522 of the internal_revenue_code would be allowable such distribution is to be made as directed in writing by community_trust article i c provides that at the end of the charitable term the trustee at the direction of community_trust is to distribute all then accrued or undistributed_income to or for charitable scientific or educational_purposes or institutions nothing contained in trust is to be construed to divert from such purposes or institutions any part of the net_income of trust for the entire charitable term article ii a provides that at the end of the charitable term if the trust estate distribution date has not then occurred the trustee is to then divide the trust estate exclusive of all then accrued or undistributed_income into separate trust funds of equal value creating one fund for the primary benefit of each then living lawful descendant of grantor article ii b provides in part that as long as the beneficiary for whose primary benefit a separate trust fund is created under this article the trustee is to distribute the entire net_income of the trust fund to the beneficiary however any portion of the net_income in excess of the amount which the trustee deems requisite for the education and reasonable comfort of the beneficiary considering other funds available to the beneficiary may either be accumulated and added to the principal of the trust fund or may be distributed to or for the benefit of any of grantor’s lawful descendants in such proportions as the trustee deems requisite for the education and reasonable comfort and support of such individuals article ii d defines the trust estate distribution date as the later of i years after the death of the last survivor of grantor and all of his lawful descendants living on date or ii the end of the charitable term whichever event occurs later if the end of the charitable term is the trust estate distribution date then on the trust estate distribution date the trustee is to distribute the entire trust estate to community_trust if the end of the chartable term is not the trust estate distribution date then on the trust estate distribution date each trust fund held under article ii to the grantor’s then living lawful descendants per capita the taxpayer represents that on date approximately years after date at least one of the grantor’s lawful descendants who was living on date was still alive accordingly the trust estate distribution date will not occur until after the end of plr-136219-04 the charitable term therefore on the trust estate distribution date the trustee is to distribute each trust fund held under article ii to the grantor’s then living lawful descendants per capita that grantor has no power to modify alter amend or revoke trust in any manner or any extent into a settlement agreement the agreement primarily resolves disputes among the parties related to grant-making procedures fees and other current distributions on date trustee community_trust and the descendants of grantor entered article viii provides that trust is governed by the law of state article ix provides under paragraph a of the settlement agreement trustee is to distribute each calendar_year to community_trust the greater of the net trust accounting_income of trust or an amount equal to the applicable_percentage of the value of trust determined as of december of the prior year exhibit i of the settlement agreement provides that the applicable_percentage for year is a if the net value of trust is equal to or greater than the target benchmark figure set forth in column c of table a attached to the settlement agreement then the applicable_percentage for that year is to be the percentage set forth in column b of table a if the net value of trust is less than the target benchmark for that year then the applicable_percentage is to equal the previous year’s applicable_percentage in no event does the applicable_percentage decline in any year in no event does the applicable_percentage exceed b on date county court ordered that trust be reformed in accordance with the settlement agreement law and analysis ruling sec_2601 imposes a tax on every generation-skipping_transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip under section a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the tax reform act and sec_26_2601-1 the tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date and no addition actual or constructive was made to the trust after that date plr-136219-04 sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax will not cause the trust to lose its exempt status in general unless specifically noted otherwise these rules are applicable only for purposes of determining whether an exempt trust retains exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer sec_26_2601-1 provides that a modification will not cause an sec_26_2601-1 example considers a situation where a_trust that is otherwise exempt from the gst tax provides that trust income is payable to a for life and upon a's death the remainder is to pass to a's issue per stirpes in the appropriate local court approves a modification to the trust that converts a's income_interest into the right to receive the greater of the entire income of the trust or a fixed percentage of the trust assets valued annually unitrust_interest to be paid each year to a for life the example concludes that the modification does not result in a shift in beneficial_interest to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification rather the modification can only operate to increase the amount distributable to a and decrease the amount distributable to a's issue in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust will not be subject_to the provisions of chapter in this case as in example the modification changing the method for determining the amount distributable to the charitable organizations can only operate to increase the amount distributable to those organizations and decrease the amount distributable to individual remainder beneficiaries and their issue further the modification does not extend the time for vesting of any beneficial_interest in trust beyond the period provided for in the original trust accordingly based on the facts submitted and representations made we conclude that the proposed reformation of trust will not affect the exempt status of trust for gst tax purposes plr-136219-04 ruling sec_61 provides that gross_income includes gains derived from dealings sec_1_1001-1 of the income_tax regulations provides that except as revrul_56_437 1956_2_cb_507 provides that a partition of jointly owned in property sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided otherwise provided in subtitle a of the code the gain_or_loss realized from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the transaction thus neither gain nor loss is realized on a partition that an exchange of property results in the realization of gain_or_loss under sec_1001 if the properties exchanged are materially different properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the court held that mortgage loans made different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id pincite in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite 499_us_554 provides state statute authorizes a trustee to convert a_trust to a total_return_trust as defined in the statute if certain requirements are satisfied state statute also provides in part that the trustee may for any reason elect to petition the court to order conversion to a total_return_trust as defined in the statute under the statute the court has authority to order conversion to or adjustment of the distribution percentage of a total_return_trust if the court determines that the conversion or adjustment of the distribution percentage will enable the trustee to better carry out the purposes of the trust and the conversion or adjustment of the distribution percentage is in the best interests of the beneficiaries the rulings contained in this letter are based upon information and except as expressly provided herein no opinion is expressed or implied in the instant case the conversion of the trust in the manner described is in accordance with the power_of_attorney on file with this office a copy of this plr-136219-04 authorized under state law trustee has authority pursuant to state statute to convert trust to a total_return_trust as that term is defined in state statute the mere exercise of the trustee's authority is not a sale_or_other_disposition under sec_1001 of a_trust interest by any beneficiary thus neither gain nor loss is realized on the conversion accordingly based on the facts submitted and representations made we conclude that the proposed reformation of trust will not result in the recognition of gain_or_loss under sec_1001 letter is being sent to the taxpayer’s authorized representatives concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 the code provides that it may not be used or cited as precedent enclosure copy of letter for sec_6110 purposes _________________________ george l masnik branch chief branch office of the associate chief_counsel passthroughs and special industries this ruling is directed only to the taxpayer requesting it sec_6110 of sincerely yours


t c summary opinion united_states tax_court peter k chow petitioner v commissioner of internal revenue respondent docket no 19059-03s filed date peter k chow pro_se bradley c plovan for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure an addition_to_tax of dollar_figure pursuant to sec_6651 an addition_to_tax of dollar_figure pursuant to sec_6651 and an addition_to_tax of dollar_figure pursuant to sec_6654 for the taxable_year after a concession1 by respondent the issues for decision are whether petitioner was engaged in the trade_or_business of trading securities whether petitioner may deduct for taxable_year a net_operating_loss nol which purportedly arose in taxable_year whether petitioner may exclude any portion of his disability benefits from income for taxable_year and whether petitioner is liable for additions to tax pursuant to sec_6651 and sec_6654 for taxable_year background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference on the date the petition was filed in this case petitioner resided in north potomac maryland 1in the notice_of_deficiency as previously stated respondent determined petitioner was liable for an addition_to_tax in the amount of dollar_figure pursuant to sec_6651 however at trial respondent conceded that petitioner was not liable for the addition_to_tax under sec_6651 until when he was placed on short-term disability the petitioner was employed as an insurance agent for metropolitan life and affiliated companies inc met life petitioner--who holds an m b a degree--was previously employed by met life as a systems analyst and a financial planner petitioner also has been employed as an investment broker and is a registered investment_advisor petitioner suffers from serious medical conditions and physical impairments petitioner was placed on short-term disability in whereupon he was periodically examined for years before he was placed on long-term disability he has remained on long-term disability continuously since petitioner failed to file a tax_return for respondent prepared a substitute return and determined petitioner’s income_tax_liability and accordingly an amount in deficiency based on income as reported by third-party payers petitioner did not make any estimated income_tax payments for at a partial trial on date petitioner appeared before this court and--for the first time--delivered to respondent a completed federal_income_tax return for upon discovering that respondent had not reviewed the material contained in petitioner’s return this court retained jurisdiction issuing an order for both parties to submit written status reports however before petitioner offered his completed return this court heard testimony regarding the nature of the disability benefits paid to petitioner by met life in in sum although he did not raise the issue in his underlying petition petitioner argued that because he paid one-sixth of the premiums for his disability insurance_policy from his after-tax_income the amount attributable to his contribution should not be included in his gross_income following the partial trial and after reviewing petitioner’s submitted return respondent concluded that petitioner had improperly deducted expenses arising from his buying and selling of stock futures contracts respondent also concluded that petitioner had improperly excluded from income one-sixth of his disability benefits without a proper basis for doing so and impermissibly carried over a net_operating_loss from his taxable_year included among the stipulated exhibits for this case is a copy of petitioner’s form_1040 u s individual_income_tax_return for the taxable_year that petitioner supplied to respondent on date on the form_1040 petitioner reported dollar_figure in wages salaries and tips a business loss on schedule c profit or loss from business of dollar_figure a capital_loss on schedule d capital_gains_and_losses of dollar_figure pensions and annuities totaling dollar_figure and total social_security_benefits line 20a of dollar_figure with taxable social_security_benefits line 20b of dollar_figure in addition petitioner reported a loss of dollar_figure as an adjustment to long-term disability_income of the dollar_figure reported in wages salaries and tips met life reported to respondent wage income totaling dollar_figure pension income was reported by the social_security administration as dollar_figure dollar_figure was reported as income from interest and dividends and dollar_figure was reported by putnam investments as an early ira distribution further trial of this case was held on date petitioner argued that he was engaged in the trade_or_business of short-term trading of stock futures contracts during petitioner deducted both his business_expenses from the gross_receipts of his investment transactions and a capital_loss arising from these activities petitioner also claimed a carry over of a net_operating_loss from to his taxable_year discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct 290_us_111 moreover deductions are a matter of legislative grace and are allowed only as specifically provided by statute 503_us_79 292_us_435 in pertinent part rule a provides the general_rule that the burden_of_proof shall be upon the petitioner in certain circumstances however if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining proper tax_liability sec_7491 places the burden_of_proof on the commissioner sec_7491 rule a credible_evidence is ‘the quality of evidence which after critical analysis a court would find sufficient to base a decision on the issue if no contrary evidence were submitted’ 122_tc_143 quoting 116_tc_438 sec_7491 applies only if the taxpayer complies with substantiation requirements maintains all required records and cooperates with reasonable requests by the commissioner for witnesses information documents meetings and interviews sec_7491 although neither party alleges the applicability of sec_7491 we conclude that the burden_of_proof has not shifted to respondent with respect to the issue in the present case was petitioner engaged in a trade_or_business the term trade_or_business is not defined by the internal_revenue_code 480_us_23 889_f2d_29 2d 2we interpret the quoted language as requiring the taxpayer’s evidence pertaining to any factual issue to be evidence the court would find sufficient upon which to base a decision on the issue in favor of the taxpayer see bernardo v commissioner tcmemo_2004_199 cir affg 92_tc_180 the determination of whether petitioner’s securities activities during the year in issue constituted a trade_or_business is a question of fact 312_us_212 estate of yaeger v commissioner supra pincite paoli v commissioner tcmemo_1991_351 in determining whether a taxpayer in a securities activity is engaged in a trade_or_business courts have distinguished between ‘traders’ who are in a trade_or_business and ‘investors’ who are not mayer v commissioner tcmemo_1994_209 and the cases cited therein managing security investments no matter what the extent or scope of such activity is seen as the work of a mere investor not the trade_or_business of a trader estate of yaeger v commissioner supra pincite see also 373_us_193 higgins v commissioner supra pincite paoli v commissioner supra beals v commissioner tcmemo_1987_171 the outcome is the same notwithstanding the amount of time the individual devotes to the activity even full-time market activity in managing and preserving one’s own estate is not embraced within the phrase ‘carrying on a business’ and salaries and other expenses incident to the operation are not deductible as having been paid_or_incurred in a trade_or_business commissioner v groetzinger supra pincite however under certain circumstances an investor’s expenses may be deductible pursuant to sec_212 if incurred in the production_of_income sec_212 whipple v commissioner supra pincite 372_us_39 petitioner has not argued this point in the alternative to determine whether a taxpayer who manages his own investments is a trader we consider the following nonexclusive factors the taxpayer’s intent the nature of the income to be derived from the activity and the frequency extent and regularity of the taxpayer’s securities transactions 721_f2d_810 fed cir therefore as stated in mayer v commissioner t c memo a taxpayer’s activities constitute the trade_or_business of trading only where both of the following are true the taxpayer’s trading is substantial 89_tc_445 paoli v commissioner supra walker v commissioner tcmemo_1990_609 in this regard sporadic trading will not constitute a trade_or_business commissioner v groetzinger supra pincite paoli v commissioner supra the taxpayer seeks to catch the swings in the daily market movements and to profit from these short-term changes moller v united_states supra pincite 530_f2d_1332 9th cir affg tcmemo_1974_164 liang v commissioner 23_tc_1040 walker v commissioner supra rather than to profit from the long-term holding of investments estate of yaeger v commissioner supra pincite paoli v commissioner supra in connection with this courts look at whether the taxpayer’s securities income is principally derived from the frequent sale of securities rather than from dividends interest or long-term appreciation moller v united_states supra pincite purvis v commissioner supra pincite king v commissioner supra pincite liang v commissioner supra pincite petitioner has offered into evidence trading records which substantiate his purchasing and selling of paired purchases and sales of futures contracts during taxable_year it is clear from petitioner’s trading records that these activities sought to profit from short-term market swings however petitioner’s records show trading activities only during the months of april may august and december of in fact petitioner’s records indicate trading activities on only days during taxable_year further although petitioner testified that he handled his securities investments in a businesslike manner that fact is irrelevant to our determination of whether he was a trader or a mere investor see higgins v commissioner supra pincite moller v united_states supra pincite in higgins v commissioner supra pincite the taxpayer had substantial investments in real_estate stocks and bonds he devoted a considerable amount of time to oversight of his investments id he maintained two offices from which he conducted his investment activities in his new york office the taxpayer employed an office manager an assistant an accountant and a stenographer clerk 39_bta_1005 affd 111_f2d_795 2d cir affd 312_us_212 the taxpayer employed an additional employee who worked in the paris office id despite the taxpayer’s businesslike conduct of his investment activities the supreme court held that he was a mere investor and his activity did not constitute a trade_or_business higgins v commissioner u s pincite on the basis of the facts and circumstances of the present case we find that petitioner’s trading activities were not regular continuous and frequent enough for him to be considered a trader during taxable_year therefore petitioner was an investor not a trader as such he was not conducting a trade_or_business commissioner v groetzinger u s pincite whipple v commissioner supra pincite 89_tc_445 paoli v commissioner supra net_operating_loss because petitioner is not in a trade_or_business of trading securities he is not entitled to any net_operating_loss of such nonexistent business furthermore as of the time of trial respondent had not accepted petitioner’s form_1040 u s individual_income_tax_return as a valid_return therefore any carryover losses claimed by petitioner whether nol losses or capital carryover losses have not been proven by petitioner thus any such losses cannot be deducted by petitioner for taxable_year disability benefits included in the stipulated exhibits for this case is literature from met life detailing petitioner’s long-term disability insurance which provides an explanation of the taxable consequences resulting from the payout of disability benefits at trial petitioner testified that he had selected option as his long-term disability plan and asserted that because his monthly contribution an amount equal to one-sixth for the premium was deducted from his paycheck ‘after taxes’ that he should accordingly be entitled to exclude from his gross_income that amount attributable to his contribution one-sixth of the approximately dollar_figure paid as disability_income by met life in however it is clear from the information provided in the met life literature that petitioner is misguided in maintaining this position first at ltd-2 the brochure describes the taxability of the payouts stating that since the employee paid for the cost of the ltd coverage on a before tax basis the ltd benefits are taxable when you receive them then at ltd-14 the brochure reads option bases long-term disability benefits on percent of the participant’s pre-disability income ltd refers to met life’s long-term disability policy brochure under present law disability benefit payments are generally considered as part of gross taxable_income for federal_income_tax purposes when you are disabled the company will not automatically withhold income taxes from your ltd benefits however you may arrange with the company’s claim unit to have federal income taxes withheld although petitioner testified that his portion of the premium was paid with ‘after tax’ dollars both the brochure detailing the plan and the petitioner’s pay statement provide no evidentiary corroboration for these claims petitioner has failed to provide any evidence illustrating that tax was otherwise withheld from his disability payments in accordingly petitioner is not entitled to exclude from gross_income one-sixth of the total amount of disability benefits paid to him in the year at issue additions to tax a sec_6651 respondent determined an addition_to_tax as a result of petitioner’s failure_to_file timely his federal_income_tax return for the year at issue sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed for filing unless petitioner proves that such failure_to_file was due to reasonable_cause and not willful neglect sec_6651 higbee v commissioner t c pincite respondent must carry the burden of production with respect to the addition_to_tax under sec_6651 sec_7491 higbee v commissioner supra pincite to satisfy respondent's burden of production respondent must come forward with sufficient evidence indicating that it is appropriate to impose the addition_to_tax higbee v commissioner supra pincite the addition_to_tax is equal to percent of the amount of the tax required to be shown on the return if the failure_to_file is not for more than month sec_6651 an additional percent is imposed for each month or fraction thereof in which the failure_to_file continues to a maximum of percent of the tax id the addition_to_tax is imposed on the net amount due sec_6651 the addition_to_tax is applicable unless a taxpayer establishes that the failure_to_file was due to reasonable_cause and not willful neglect sec_6651 if a taxpayer exercised ordinary business care and prudence and was nonetheless unable to file the return within the date prescribed by law then reasonable_cause exists sec_301_6651-1 proced admin regs w illful neglect means a conscious intentional failure or reckless indifference 469_us_241 at trial petitioner testified that his income_tax return was not filed timely because of both his medical afflictions and his belief that he was being erroneously targeted by respondent as a tax_shelter marketer petitioner also responded that he accepted full responsibility for his failure to timely file his return petitioner also testified that although he hired persons to trade stock futures for him he did not hire anyone to help prepare his taxes because ‘he didn’t really know how much of an impact it would have ’ petitioner’s delay in filing a timely tax_return is not due to reasonable_cause petitioner failed to exercise ordinary care and willfully neglected to file his federal tax_return timely as a general_rule taxpayers are charged with knowledge of the law 99_tc_202 a taxpayer need not be an expert in tax law to know that tax returns have fixed filing dates united_states v boyle supra pincite petitioner’s federal_income_tax return was due on date petitioner filed his return on date and offered no rational explanation for his failure_to_file the return timely petitioner failed to show that he exercised ordinary care and prudence in this case accordingly petitioner is liable for the addition_to_tax under sec_6651 respondent is sustained on this issue b sec_6654 respondent also determined that petitioner is liable for an addition_to_tax for the underpayment of estimated_tax pursuant to sec_6654 for taxable_year sec_6654 provides that in the case of an underpayment of estimated_tax by an individual there shall be added to the tax an amount determined by applying the underpayment rate established under sec_6621 to the amount of the underpayment for the period of the underpayment unless the taxpayer demonstrates that one of the statutory exceptions applies imposition of the sec_6654 addition_to_tax is mandatory where prepayments of tax either through withholding or by making estimated quarterly tax_payments during the course of the taxable_year do not equal the percentage of total liability required under the statute see sec_6654 niedringhaus v commissioner supra pincite the amount of the addition_to_tax under sec_6654 stated in the notice_of_deficiency is based on the return respondent prepared for petitioner before the issuance of the notice_of_deficiency nothing in the record indicates petitioner made the required amount of estimated_tax payments for taxable_year petitioner has not shown that he falls within any of the exceptions to the sec_6654 addition_to_tax see sec_6654 75_tc_1 accordingly we conclude petitioner is liable for the addition_to_tax pursuant to sec_6654 for taxable_year reviewed and adopted as the report of the small_tax_case division to reflect the foregoing and respondent’s concession decision will be entered for respondent except as to the addition_to_tax pursuant to sec_6651


department of the treasury internal_revenue_service te_ge - eo mandatory review commerce street mc 4920-dal dallas tx tesa employer_identification_number person to contact tax_exempt_and_government_entities_division date july y number ' identification_number in reply refer to te_ge review staff legend org organization name address address xx date org address certified mail - return receipt requested dear this is a final adverse determination that you do not qualify for exemption from income_tax under sec_501 of the internal_revenue_code i r c as an organization described in sec_501 internal_revenue_service recognition of your status as an organization described in sec_501 is revoked effective september 20xx our adverse determination is made for the following reason s you have not established you are operated exclusively for charitable educational scientific or religious purposes you have failed to file an annual return as required by sec_6033 you have failed to reply to the irs’s requests for information to determine if you still qualify for tax exempt status under sec_501 as required by sec_6001 accordingly you no longer qualify for income tax-exemption under sec_501 as an organization described in sec_501 contributions made to you are no longer deductible as charitable_contributions by donors for purposes of computing taxable_income for federal_income_tax purposes see revproc_82_39 1982_2_cb_759 for the rules concerning the deduction of contributions made to you between october 20xx and the date a public announcement such as publication in the internal_revenue_bulletin is made stating that contributions to you are no longer deductible you are required to file income_tax returns on forms 990-pf as a taxable private_foundation and for all years beginning after august 20xx returns for the years ending august 20xx 20xx and 20xx must be filed with this office within days from the date of this letter unless a request for an extension of time is granted send such returns to the following address tax returns for subsequent years are to be filed with the appropriate campus identified in the instructions for those returns if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment you may write to the tax_court at the following address the processing of income_tax returns and assessment of any taxes due will not be delayed because a petition for declaratory_judgment has been filed under r c sec_7428 if you have questions about this letter please write to the person whose name and address are shown on this letter if you write please attach a copy of this letter to help identify your account keep a copy for your records also please include your telephone number and the most convenient time for us to call so we can contact you if we need additional information you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers your local taxpayer_advocate can be contacted at phone fax taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 this is a final revocation letter sincerely nanette m downing director eo examinations department of the treasury internal_revenue_service tax_exempt_and_government_entities_division org address metrotech center fulton street brooklyn ny tege eo 7909---5th floor date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have 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 if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation sincerely nanette m downing acting director eo examinations enclosures publication publication report of examination catalog number 34809f letter form_8 a name of taxpayer schedule no or exhibit year period ended 20xx explanation of items department of the treasury - internal_revenue_service org a legend org organization name xx date issue whether org qualifies for exemption under sec_501 of the internal_revenue_code as a private_foundation after failure to provide requested information facts org failed to respond to numerous form_4564 information document requests sent to the organization by the internal_revenue_service the service the organization did not submit the data in response to any of the aforementioned correspondence the initial contact letter was mailed to the last_known_address of the organization as well as to three officers listed in the last return filed by the entity for the tax period ending august 20xx telephone contacts were made with the department fire chief the fire chief was informed that if the entity failed to respond that the service would propose revocation of its exemption status the officer has indicated that it has failed to file the required tax returns due to a lack of funds to pay for the services of an accountant the organization’s current accountant has agreed to assist them after the tax season the officer stated that the accountant has all of their financial data at his office exhibit a provides copies of the internal_revenue_service correspondence requesting that the organization file the delinquent forms 990-pf for the tax periods ending august 20xx 20xx 20xx 20xx and 20xx the private_foundation failed to respond to the internal_revenue_service correspondence and file the forms 990-pf requested for the above tax periods law internal_revenue_code sec_6001 provides that every person liable for any_tax imposed by the internal_revenue_code or for the collection thereof shall keep form 886-a rev department of the treasury - internal_revenue_service page -1- form_8 a name of taxpayer schedule no or exhibit year period ended 20xx explanation of items department of the treasury - internal_revenue_service org a adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe internal_revenue_code sec_6033 provides that every organization_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 and shall keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe federal tax regulations sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained so long as the contents thereof may become material in the administration of any internal revenue law federal tax regulations sec_1_6033-2 provides that every organization which is exempt from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status and administering the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 of the code revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of internal_revenue_code sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 as well as the revenue_ruling organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these form 886-a rev department of the treasury - internal_revenue_service page -2- form_8 a department of the treasury - internal_revenue_service explanation of items name of taxpayet org a schedule no or exhibit yeat period ended 20xx requirements relate to the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax conclusions it is the position of the internal_revenue_service that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 as a private_foundation accordingly the organization’s exempt status is revoked effective april 20xx form_1120 returns should be filed for the tax periods ending on or after august 20xx form 886-a crev department of the treasury - internal_revenue_service page -3-