t c summary opinion united_states tax_court hasan huseyin babaturk petitioner v commissioner of internal revenue respondent docket no 9950-06s filed date hasan huseyin babaturk 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 pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies of dollar_figure and dollar_figure and accuracy-related_penalties under sec_6662 of dollar_figure and dollar_figure in petitioner’s federal_income_tax for and respectively the deficiencies resulted from respondent’s disallowance of dollar_figure and dollar_figure of business_expense deductions claimed on schedule c profit or loss from business for and respectively respondent’s disallowance of dependency_exemption deductions petitioner claimed for his girlfriend arlene makris ms makris in and and dollar_figure of unreported income for in the deficiency computations respondent also made adjustments to petitioner’s self-employment_income itemized_deductions and alternative minimum taxes based on the aforementioned disallowances and income adjustment after concessions the issues for decision are whether petitioner is entitled to certain business_expense deductions for and whether petitioner is entitled 1the parties agree that petitioner received dollar_figure in nonemployee compensation from erdman medical center inc in which was reported on the schedule c for erdman medical center inc however petitioner’s deduction of a dollar_figure insurance expense resulted in zero business income respondent allowed this expense to dependency_exemption deductions for ms makris for and and whether petitioner is liable for accuracy-related_penalties under sec_6662 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 petitioner resided in maryland at the time the petition was filed during petitioner was a general practice physician who provided medical services for seven medical clinics in baltimore maryland and the surrounding area these were erdman medical center inc mount claire medical center inc alameda medical center inc liberty medical and injury center inc slade medical center inc northern medical and physical therapy center llc and goodcare medical services petitioner also provided medical services as a telemedicine physician for medical advisory systems inc in owings maryland petitioner attached eight schedules c one for each clinic where he worked and one for his work at medical advisory systems inc to his federal_income_tax return on which he reported combined gross_income of dollar_figure received from the above sources and combined business_expenses totaling dollar_figure the business_expenses deducted were as follows services car and truck expenses commissions and fees insurance legal and professional office expenses repairs and maintenance supplies taxes and licenses travel meals and entertainment total dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number 1petitioner classified his cellular phone expenses for both years as office expenses during petitioner worked at medical advisory systems inc erdman medical center inc and ms-hc l l c a multispecialty health clinic the latter two facilities were in baltimore petitioner submitted two schedules c with his federal_income_tax return one for medical advisory systems inc and the other for erdman medical center inc on these schedules c he reported combined gross_income totaling dollar_figure and combined business_expenses totaling dollar_figure these business_expenses were as follows services car and truck expenses insurance legal and professional office expenses travel meals and entertainment total dollar_figure big_number big_number big_number big_number big_number big_number 1in the notice_of_deficiency for respondent disallowed dollar_figure of business_expenses petitioner worked at eight medical facilities in he divided his time between working at medical clinics in and around baltimore and the telemedicine facility in owings maryland approximately miles from baltimore petitioner would often work at more than one of the baltimore-area clinics per day petitioner kept regular office hours at each of these clinics and support staff employed by the clinic would arrange his patient schedule all supplies and equipment that petitioner used while at the facility were provided by the clinic with the exception of personal items limited to his lab coat and stethoscope petitioner would occasionally work a full_day seeing patients at one or more of the medical clinics and then travel to owings to work at medical advisory systems inc owings is approximately hour from baltimore by car as a telemedicine physician petitioner staffed an internet phone with video capabilities in order to consult with and treat patients working overseas as u s department of defense contractors and oil workers petitioner would usually arrive at the call center in the early evening and work his assigned shift through the night the facility provided all of the equipment necessary for petitioner’s work at the call center including a break sleep room for him to rest in during and after his shift petitioner would often go to breakfast with the other call center physicians before returning to baltimore on his and returns petitioner claimed two dependency_exemptions deductions one for his minor child b b and one for ms makris at the time of trial petitioner’s minor son was years old and he had been in a relationship with ms makris the child’s mother for years ms makris and the child resided with petitioner and ms makris did not work outside of the home in either or respondent disallowed petitioner’s claimed dependency_exemption deductions for ms makris because the relationship between petitioner and ms makris was in violation of local law following notification that his and returns had been selected for examination petitioner met with a revenue_agent on the basis of that meeting petitioner was convinced that the revenue_agent was biased against him because he is a muslim following the meeting both the revenue_agent and an appeals officer attempted on several occasions to reschedule petitioner’s examination and later an appeals_conference however either petitioner’s schedule would conflict with the time that the revenue_agent or the appeals officer proposed or petitioner would change his mind about attending the scheduled 2the court uses initials when referring to a minor child conference on the basis of his perception of racial bias stemming from his previous meeting with the revenue_agent discussion in general the commissioner’s determination as set forth in a notice_of_deficiency is presumed correct 290_us_111 in pertinent part rule a provides the general_rule that the burden_of_proof shall be on the taxpayer in certain circumstances however if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the proper tax_liability sec_7491 shifts the burden_of_proof to the commissioner sec_7491 rule a respondent argues that petitioner has not produced sufficient evidence such that the burden_of_proof should shift to him for the reasons discussed infra we agree schedule c expenses deductions are strictly a matter of legislative grace and the taxpayer bears the burden of proving entitlement to any deduction claimed 503_us_79 a taxpayer is required to maintain records sufficient to establish the amount of any deduction claimed sec_6001 sec_1_6001-1 income_tax regs with respect to the schedule c expenses petitioner bears the burden of proving that respondent’s determinations as set forth in the notice_of_deficiency are erroneous see rule a welch v helvering supra pincite sec_162 generally allows a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business the determination of whether an expenditure satisfies the requirements for deductibility under sec_162 is a question of fact see 320_us_467 in general an expense is ordinary if it is considered normal usual or customary in the context of the particular business out of which it arose see 308_us_488 ordinarily an expense is necessary if it is appropriate and helpful to the operation of the taxpayer’s trade_or_business see 383_us_687 83_tc_356 affd 777_f2d_662 11th cir sec_262 generally disallows a deduction for personal living or family_expenses a taxpayer whose principal_place_of_business is at a distance from his residence cannot deduct the cost of the transportation to and from the business or the costs of meals_and_lodging at the place of business such expenses are regarded as personal commuting expenses and under sec_262 are not deductible 413_us_838 326_us_465 if a taxpayer has several regular places of work however commuting expenses from the taxpayer’s home to his first work site and from his last work site to his home are not deductible but transportation_expenses between the work sites are deductible 335_f2d_496 5th cir affg tcmemo_1962_233 63_tc_129 travel away from home generally requires that the taxpayer remain either overnight or for a period requiring sleep or rest 389_us_299 for certain kinds of expenses otherwise deductible under sec_162 such as expenses related to travel meals and entertainment and listed_property as defined in sec_280f a taxpayer must satisfy substantiation requirements set forth in sec_274 before such expenses will be allowed as deductions see sec_1_274-5t temporary income_tax regs fed reg date as pertinent here listed_property is defined in sec_280f to include passenger automobiles and other_property used as a means of transportation unless excepted by sec_280f or b and cellular phones see sec_280f ii v with respect to such listed_property a taxpayer must prove the amount of each separate expenditure with respect to such property the amount of each business use based on the appropriate measure and the business_purpose for an expenditure or use with respect to such property sec_1_274-5t temporary income_tax regs fed reg date in order to satisfy his burden_of_proof petitioner relies on the following his testimony certain credit card statements pertaining to two calendars one for and the other for that contain abbreviated notes as to his work assignments and a document entitled irs review of taxpayer’s papers received which petitioner prepared following a meeting with the revenue_agent at the outset we note that petitioner’s testimony as to his business’s expenses for the years in issue was at times inconsistent vague conclusory and self-serving as such we are not required to nor shall we rely on his testimony to establish his entitlement to any deductions at issue see 112_tc_183 we are convinced however from petitioner’s testimony that his trips between the clinics in the baltimore area would generally qualify as deductible transportation_expenses also on the basis of petitioner’s testimony we do not believe that petitioner’s overnight work at medical advisory systems inc required a period of sleep or rest as the nature of his job was to provide telemedicine services throughout the night irrespective of the foregoing and for the reasons discussed infra we conclude that petitioner has not complied with the rules and regulations for record keeping that if satisfied might entitle him to deduct certain business_expenses at issue see sec_6001 sec_1 a income_tax regs first and with respect to the credit card statements produced petitioner testified that these statements listed items purchased both for his business and for personal_use and that since his business and personal lives were inextricably connected it would be impossible to distinguish the two in an attempt to do just this petitioner placed a check mark on the statements beside those expenses which were either for his personal or business use without any testimony to clarify these marks it is impossible for us to presume their relevance and even if we were to know whether petitioner used the check marks to indicate the expenses as business_expenses we lack credible_evidence of explanation as to why they would be so for example several of the expenses listed are for purchases from department stores convenience stores and drug stores without detailed elaboration it is impossible to determine whether any of these expenses were business_expenses of the type that petitioner would be entitled to claim a deduction for with respect to the calendars we note that petitioner admitted that the notations on the calendars were not always contemporaneously made additionally petitioner appears to have used an abbreviation system to record the number of hours each day that he would work at a particular location there is no record of the number of miles or the total weekly miles that he drove from location to location moreover petitioner did not testify as to how far each clinic was from the others given the coded nature of the calendars and the lack of any testimony as to the distances between petitioner’s work sites we do not find that the calendars are either credible or of any assistance to the court finally and with respect to the document entitled irs review of taxpayer’s papers received petitioner prepared this document from his recollection following his meeting with the revenue_agent as respondent pointed out at trial the nature of the expenses and the amounts for those expenses listed on this document were based on what petitioner felt that respondent would accept during the appeals process in fact as respondent also pointed out at trial contrary to petitioner’s opinion that the revenue_agent was racially biased against him that agent was willing to allow some of the claimed expenses despite petitioner’s inability to produce all receipts and records pertaining to those items therefore we view the document as no more than petitioner’s opinion as to the items that he felt himself entitled to as business_expense deduction sec_3if there is such a record it is by no means evident from our examination of the calendar and petitioner did not testify to such a notation at trial at the time of his meeting with the revenue_agent or the appeals officer on the basis of our review of the entire record we cannot allow petitioner any of the claimed expenses for or petitioner’s glaring lack of substantiation is abundantly clear along with his audacious position that it is the court’s function to sift through the unclear and incomplete records that he provided us in order to determine his correct_tax liability we find neither the calendars nor the credit card statements to be clear or credible_evidence to substantiate any of his claimed expenses with respect to the legal services deductions the record is devoid of any invoices from his attorneys that might permit us to allow those items in short we have no evidence to approximate where permissible a base for any of the items claimed 39_f2d_540 2d cir where sec_274 requires strict substantiation for those items previously mentioned we lack any evidence to determine any exact expenses or the business nature of those items finally as to petitioner’s argument that were he to comply with the substantiation requirements of the code he would be constantly recording his expenses we are unmoved petitioner characterized almost two-thirds of his gross_income for as business_expense deductions and produced in substantiation only two nearly illegible personal calendars and partial copies of two credit card statements for those years his testimony at trial that he had more receipts and odometer readings was not supported by the production of any credible tangible evidence of such items moreover we simply do not believe that petitioner had such documentation to wit respondent’s counsel in preparation of this case for trial sent petitioner no less than five requests for production in accordance with our decision in 61_tc_691 none of these requests were answered accordingly for all of the foregoing reasons we sustain respondent in full with respect to his disallowance of petitioner’s business_expense deductions for and dependency_exemption deductions petitioner claimed two dependency_exemption deductions on his and returns petitioner listed one minor child and one adult--ms makris--as dependents respondent disallowed the dependency_exemption deductions claimed for ms makris generally the burden_of_proof rests with the taxpayer rule a this burden will shift however in respect of any new_matter increases in deficiency and affirmative defenses pleaded in the answer id a new argument presented to sustain a deficiency will be treated as a new_matter when it alters the original deficiency or requires the presentation of different evidence 93_tc_500 if the new argument merely clarifies or develops the commissioner’s original determination it is not a new_matter that will shift the burden to the commissioner id respondent disallowed the claimed dependency_exemption deductions for ms makris on the basis that the relationship between petitioner and ms makris was in violation of local law see sec_152 at trial respondent abandoned this position and argued that we should sustain respondent’s determination on the basis that petitioner had failed to show that he had provided more than one-half of the support for ms makris during the years in issue the evidence required to show that the relationship between petitioner and ms makris violated local law is different from the evidence required to establish that petitioner had failed to show that he had provided more than one-half of the support for ms makris during the years in issue the latter argument is therefore a new_matter accordingly the burden of proving that petitioner did not establish that he furnished more than one-half of the total support for ms makris during the years in issue is on respondent see rule a sec_151 allows deductions for personal exemptions including exemptions for dependents of a taxpayer see sec_151 sec_152 defines the term dependent as relevant here to include an individual who has as his or her principal_place_of_abode for the taxable_year the home of the taxpayer if over half of his or her support for the calendar_year was received from the taxpayer the term support includes food shelter clothing medical and dental care education and the like sec_1_152-1 income_tax regs in determining whether an individual received more than half of his or her support from a taxpayer there shall be taken into account the amount of total support received from the taxpayer as compared to the entire amount of support which the individual received from all sources id petitioner testified that ms makris lived with him throughout and that she did not work outside of the home that he provided her with credit cards for her personal_use and that he asked her to purchase items for himself and their home petitioner stated that ms makris received only occasional support from her elderly mother respondent presented no evidence as to the total amount of support provided to ms makris from all sources and that dr babaturk furnished less than percent of her support accordingly we conclude that respondent has failed to meet his burden_of_proof on this issue and hold that dr babaturk is entitled to claim dependency_exemption deductions with respect to ms makris for and accuracy-related_penalties in the notice_of_deficiency respondent determined that petitioner is liable for accuracy-related_penalties under sec_6662 for underpayments of taxes with respect to any penalty or addition_to_tax sec_7491 places the burden of production on the commissioner sec_6662 imposes a 20-percent penalty with respect to any portion of an underpayment_of_tax required to be shown on a return this penalty applies to underpayments attributable to any substantial_understatement_of_income_tax sec_6662 b an understatement of income_tax is defined as the excess of the tax required to be shown on the return over the tax actually shown on the return sec_6662 an understatement is substantial if it exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 sec_6664 provides a defense to the accuracy-related_penalty if a taxpayer establishes that there was reasonable_cause for any portion of the underpayment and that he or she acted in good_faith with respect to that portion sec_6664 sec_1_6664-4 income_tax regs whether a taxpayer acted with reasonable_cause and in good_faith is decided on a case-by-case basis taking into account all the pertinent facts and circumstances sec_1_6664-4 income_tax regs the taxpayer’s education experience and knowledge are considered in determining reasonable_cause and good_faith and generally the most important factor is the extent of the taxpayer’s effort to assess his or her proper tax_liability id respondent determined an accuracy-related_penalty under sec_6662 to be applicable because petitioner understated his income_tax by dollar_figure on his return and dollar_figure on his return because each understatement_of_tax was greater than percent of the tax required to be shown on the return or dollar_figure each understatement was a substantial_understatement_of_income_tax pursuant to sec_6662 petitioner argues that he should not be held liable for the penalty because he was in compliance with the applicable rules and regulations for the reasons previously discussed we disagree the commissioner bears the burden of production under sec_7491 with respect to the accuracy-related_penalty under sec_6662 to meet that burden the commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the penalty 116_tc_438 although the commissioner bears the burden of production with respect to the penalty the commissioner need not introduce evidence regarding reasonable_cause or similar provisions t he taxpayer bears the burden_of_proof with regard to those issues id petitioner concedes that if we determine that he did not comply with the rules and regulations with respect to record keeping for the years in issue underpayments of taxes would exist for those years petitioner offered no evidence under sec_6662 with respect to those items raised in the petition on the basis of the foregoing we hold that respondent has satisfied the burden of production under sec_7491 we further conclude that petitioner has failed to show that his reliance on the documents produced to substantiate the claimed expenses was reasonable on the entire record before us we hold that petitioner has failed to carry his burden of proving that he is not liable for accuracy-related_penalties for and under sec_6662 we accordingly sustain respondent’s determination with respect to that issue decision will be entered under rule


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp 1-plr-106718-00 date date re legend group parent parent purchaser target fholdco sellers company official tax professional date a date b date c date d plr-106718-00 business w country x dear this letter responds to your authorized representative’s letter dated date requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election group parent as common parent of the consolidated_group of which parent the united_states_shareholder of purchaser the foreign purchasing company is a member is requesting the extension to file an election under sec_338 of the internal_revenue_code and sec_1_338-1 and sec_1_338-1 of the income_tax regulations with respect to the acquisition of the stock of target sometimes hereinafter referred to as the election additional information was received in letters dated may may july and date the information submitted for consideration is summarized below all citations in this letter refer to regulations as in effect for date a group parent is the common parent of a consolidated_group that has a week taxable_year and uses the accrual_method of accounting parent is a wholly owned u s subsidiary of group parent and is included in group parent’s consolidated federal_income_tax return purchaser is a wholly owned country x subsidiary of parent and is part of the same affiliated_group for purposes of sec_338 company official is an officer of group parent prior to the acquisition described below target was wholly owned by sellers target is a country x corporation sellers are nonresident foreign individuals target is engaged in business w prior to the acquisition sellers and target did not file u s income_tax returns and they were not subject_to u s income_taxation target was not a controlled_foreign_corporation within the meaning of sec_957 a passive_foreign_investment_company or a foreign_corporation for which an election under sec_1295 is in effect a foreign_investment_company or a foreign_corporation the stock ownership of which is described in sec_552 a united_states_real_property_holding_corporation or required under sec_1_6012-2 to file a u s income_tax return additionally it is represented that sellers are not subject_to a tax on the sale of their respective shares of target under sec_871 on date a pursuant to a stock purchase agreement with sellers purchaser acquired the stock of target for cash in a fully taxable transaction on date d the election was due on date b however for various reasons the election was not filed on date c which is after the due_date for the election tax professional discovered that the election had not been filed plr-106718-00 it is represented that purchaser was not related to sellers within the meaning of sec_338 and the acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 the period of limitations on assessments under sec_6501 has not expired for group parent’s or target’s taxable_year s in which the acquisition occurred the taxable years in which the election should have been filed or any taxable_year s that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset purchases if the purchasing_corporation makes or is treated as having made a sec_338 election under sec_338 and the acquisition is a qualified_stock_purchase sec_338 defines a qualified_stock_purchase as any transaction or series of transactions in which stock meeting the requirements of sec_1504 of one corporation is acquired by another corporation by purchase during the 12-month_acquisition_period sec_1_338-1 and v provide inter alia that a foreign purchasing_corporation or deemed foreign purchasing_corporation is not eligible for the special rule under sec_1_338-1 ie which specifies a filing_date for the election that is later than the filing_date required by sec_338 and sec_1_338-1 if such corporation is considered subject_to united_states tax eg is a controlled_foreign_corporation cfc or is required to file a united_states income_tax return sec_338 provides that the term purchase means any acquisition of stock but only if i the basis of the stock in the hands of the purchasing_corporation is not determined in whole or in part by reference to the adjusted_basis of such stock in the hands of the person from whom acquired or under sec_1014 relating to property_acquired_from_a_decedent ii the stock is not acquired in an exchange to which sec_351 sec_354 sec_355 or sec_356 applies and is not acquired in any other transaction described in the regulations in which the transferor does not recognize the entire amount of the gain_or_loss realized on the transaction and iii the stock is not acquired from a person the ownership of whose stock would under sec_318 be attributed to the person acquiring such stock sec_1_338-1 provides that a purchasing_corporation makes a sec_338 election for target by filing a statement of sec_338 election on form_8023 in accordance with the instructions on the form the sec_338 election must be filed not later than the 15th day of the ninth month beginning after the month in which the acquisition_date occurs a sec_338 election is irrevocable sec_1_338-1 provides that the united_states_shareholders as defined in sec_951 of a foreign purchasing_corporation that is a cfc as defined in sec_957 taking into account sec_953 may file a statement of sec_338 election on behalf of the purchasing_corporation if the purchasing plr-106718-00 corporation is not required under sec_1_6012-2 other than sec_1_6012-2 to file a united_states income_tax return for its taxable_year that includes the acquisition_date form_8023 must be filed in accordance with the instructions to the form and a copy of the form must be attached to form_5471 information_return with respect to foreign_corporation and filed with respect to the purchasing_corporation by each united_states_shareholder for the purchasing_corporation sec_1_338-2 provides that if an election under sec_338 is made for target old target is deemed to sell target’s assets and new target is deemed to acquire those assets sec_1_1502-77 provides that the common parent for all purposes other than for several purposes not relevant here shall be the sole agent for each subsidiary in the group duly authorized to act in its own name in all matters relating to the tax_liability for the consolidated_return_year see also form_8023 and the instructions thereto under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338-1 and sec_1_338-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for group parent to file the election provided group parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by company official and tax professional explain the circumstances that resulted in the failure_to_file a valid plr-106718-00 election the information establishes that a tax professional was responsible for the election that group parent relied on the tax professional to timely make or advise the taxpayer to make the election and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations that have been made we conclude that group parent has established that it acted reasonably and in good_faith in failing to timely file the election the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-1 until days from the date_of_issuance of this letter for group parent to file the election with respect the acquisition of the stock of target as described above the above extension of time is conditioned on the taxpayers’ group parent’s consolidated group’s tax_liability being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayer’s tax_liability for the years involved a determination thereof will be made by the district director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' tax_liability is lower sec_301_9100-3 group parent should file the election in accordance with sec_1_338-1 and sec_1_338-1 that is a new election on form sec_8023 must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions on the election form a copy of this letter should be attached to the election forms group parent and target must file or amend if and as applicable its applicable returns to report the acquisition as a sec_338 transaction and to attach a copy of the form_8023 and a copy of this letter see sec_1_338-1 and1 g no opinion is expressed as to whether the acquisition of the target’s stock qualifies as a qualified_stock_purchase whether the acquisition of the target’s stock qualifies for sec_338 treatment and if the acquisition of the target’s stock qualifies for sec_338 treatment as to the amount of gain_or_loss recognized if any by such target_corporation on its deemed asset sale no opinion is expressed with regard to the application of sec_304 or sec_951 or any other section of the code or regulations to the sale of target by purchaser to fholdco in addition no opinion is expressed as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain plr-106718-00 statements and representations made by the taxpayer its employees and representatives however the district_director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours philip j levine deputy associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc ita plr-125772-02 date date legend entity state a historical event year a year b year c number a office a office b dear this is in response to your letter dated date requesting a ruling on behalf of entity concerning the deductibility of contributions to entity under sec_170 of the internal_revenue_code code you have supplemented the ruling_request with correspondence dated date issue you have requested a ruling that entity is an integral part of state a and contributions to entity will be deductible under sec_170 because entity is described in sec_170 and sec_170 conclusion based on the facts stated below we conclude that entity is an integral part of state a and contributions to entity will be deductible under sec_170 of the code because entity is described in sec_170 and sec_170 facts the entity was originally established in year a through an executive_order of the governor of state a and was reestablished in year b by a subsequent governor in year c legislation enacted by state a made the entity a part of the executive branch of state a’s government under the law of state a the entity’s purpose is to educate the citizens of state a about the historical event state a legislation created the entity as a permanent state organization to survey design encourage and promote implementation of historical event education and awareness programs in state a and to be responsible for organizing and promoting the memorialization of the historical event on a regular basis throughout the state a the entity’s activities as set forth in the law of state a include providing assistance to public and private_schools colleges and universities on implementing historical event education and awareness programs assisting education officials and organizations with the development of courses of study on the historical event surveying and cataloguing the extent of historical event education in state a’s current educational curricula and inventorying historical event memorials exhibits and other educational resources the entity also has statutory authority to compile rosters of volunteers to present educational programs coordinate historical event commemoration events appoint advisory committees and provide reports to the state a elected officials regarding the entity’s findings and recommendations for facilitating inclusion of historical event studies and programs in the educational systems of the state a the entity has number a voting members comprised of individuals from the public appointed by various elected officials of state a these entity members are appointed for five year terms and are required to be state residents the entity also has several ex-officio members including other state a officials who work in state a public offices or their designees ex-officio members do not vote on matters before the entity further other state a legislative officials also appoint an advisor to the entity the legislature of state a provides the entity with an annual appropriation of state a funds these funds cover the operating costs of the entity including but not limited to salaries and benefits for its employees supplies printing and publication repairs and maintenance of equipment travel_expenses insurance and general overhead expenses in addition the laws of state a authorizes the entity to solicit and accept donations contributions grants bequests gifts of money and property facilities or services all property contributed to the entity is owned by state a the entity’s budget and appropriations are a sub-part of the office of state a’s office a to which the entity is assigned for administrative purposes state a exercises financial control_over the entity through the state a’s office b which audits the entity to ensure compliance with its budget as required under the laws of state a law and analysis integral part revrul_87_2 1987_1_cb_18 holds that a_trust fund created by a state supreme court to hold amounts advanced to lawyers in the state by their clients is an integral part of the state and not subject_to tax in arriving at this holding the ruling reasons that the state court’s creation of the fund and its ability to select and remove the fund’s governing body to control the fund’s investments and expenditures to monitor the fund’s daily operation and to abolish the fund indicate that the fund is not an independent entity but rather is an integral part of the state see also sec_511 revrul_87_2 1987_1_cb_18 rev_rul 1971_1_cb_28 revrul_71_132 1971_1_cb_29 in 308_fsupp_761 rev'd on other grounds 400_us_4 mssic the state of maryland formed a corporation to insure the customer accounts of state chartered savings and loan associations under mssic's charter the full faith and credit of the state was not pledged for mssic's obligations only three of eleven directors were selected by state officials the district_court rejected mssic's claim of intergovernmental tax immunity because the state made no financial contribution to mssic and had no present_interest in the income of mssic thus the imposition of an income_tax on mssic would not burden the state of maryland although the supreme court reversed the lower court on other grounds it agreed with the lower court's analysis of the instrumentality and sec_115 issues in state of michigan and 40_f3d_817 6th cir rev'g 802_fsupp_120 w d mich the court held that the investment_income of the michigan education trust met was not subject_to current taxation under sec_11 the court's opinion is internally inconsistent because it concludes that met qualifies as a political_subdivision of the state of michigan id pincite that met is in a broad sense a municipal corporation id pincite and that met is in any event an integral part of the state of michigan id pincite moreover the court's reliance on the factors listed in revrul_57_128 1957_1_cb_311 to reach its conclusion is misplaced the revenue_ruling applies to entities that are separate from a state the factors in the revenue_ruling do not determine whether an enterprise is considered to be a separate_entity or an integral part of a state nevertheless in determining whether an enterprise is an integral part of a state it is necessary to consider all of the facts and circumstances including state a's degree of control_over the enterprise and state a's financial commitment to the enterprise if an enterprise is deemed to be an integral part of a state or political_subdivision of a state that enterprise will not be treated as a separate_entity for federal tax purposes see sec_301_7701-1 of the income_tax regulations the facts indicate that the entity is not independent from the state a the entity was established by executive_order of the governor of state a and made a part of the executive branch of the state a government through legislation enacted by the state a legislature voting and ex-officio members and advisors of the entity are appointed by the governor and other state a officials the entity is required to report to state a on its plans to implement historical event educational programs further state a controls the entity’s budget through the appropriations process and through regular audits by office b of state a these facts demonstrate that the state a exerts significant control_over the entity the facts also show that the state a has made and continues to make a substantial financial commitment to the entity a substantial portion of the annual funding for the entity derives from appropriations from the state a legislature because it has been demonstrated that the state a exercises control_over and has made a financial commitment to the entity we conclude that the entity is an integral part of the state because we have determined that the entity is an integral part of the state a we need not address whether the entity is an instrumentality of the state a sec_170 deduction sec_170 of the code provides subject_to certain limitations a deduction for contributions or gifts to or for_the_use_of organizations described in sec_170 payment of which is made within the taxable_year sec_170 of the code states that the term charitable_contribution includes a contribution or gift to or for_the_use_of a state a possession_of_the_united_states any political_subdivision of a state or any possession_of_the_united_states the united_states or the district of columbia but only if the contribution is made for exclusively public purposes see eg rev_rul c b holding that amounts contributed to an industrial commission established by a state legislature for exclusively public purposes are deductible under sec_170 entity was formed to survey design encourage and promote implementation of historical event education and awareness programs in state a and to be responsible for organizing and promoting the memorialization of the historical event on a regular basis throughout the state a this purpose is an exclusively public purpose required by sec_170 for contributions to a state or a political_subdivision of a state since we have concluded that entity is an integral part of state a contributions or gifts to or for_the_use_of entity are contributions or gifts to or for_the_use_of an entity described in sec_170 of the code accordingly contributions or gifts to or for_the_use_of entity are to or for_the_use_of state a and are for exclusively public purposes and are therefore generally deductible under sec_170 to the extent otherwise provided under sec_170 further sec_170 of the code provides limitations on the amount that an individual can deduct for charitable_contributions in a taxable_year sec_170 provides that any charitable_contribution to a governmental_unit referred to in sec_170 is allowed to the extent that the aggregate of such contributions does not exceed percent of the taxpayer's contribution_base for the taxable_year since entity is an integral part of state a entity is a governmental_unit described in sec_170 of the code therefore charitable_contributions to entity are deductible under sec_170 as contributions to an entity described in sec_170 caveats a copy of this letter must be attached to any income_tax return to which it is relevant we enclose a copy of the letter for this purpose also enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely thomas d moffitt chief branch office of associate chief_counsel income_tax accounting enclosures copy of 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 br01 plr-133071-06 date date z x y country ----------------------------------------------- ------------------------ ----------------- ------------------------ ------------------------------ ------------------------ legend dear --------------- requesting that the service grant x an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code this letter responds to your request dated date on behalf of x --------------------- ------------------ ---------- date date facts the information submitted states that x is a partnership formed in accordance plr-133071-06 with the laws of country x commenced operations on date on date y acquired the stock of z and made a sec_338 election consistent with that sec_338 election y was treated as purchasing an interest in x for federal_income_tax purposes x inadvertently failed to file a timely sec_754 election to properly adjust the basis of partnership property law and analysis under sec_754 a partnership may elect to adjust the basis of partnership property where there is a distribution_of_property or a transfer of a partnership_interest the election applies 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 years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 is 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 no later than the time for filing for the taxable_year including extensions 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 defines the term aregulatory election as including an election whose deadline is prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through -3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions for time for making elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusions based on the information 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 sixty days following the date of this letter plr-133071-06 to make a sec_754 election the election should be made in a written_statement filed with the applicable service_center a copy of this letter should be attached to the statement filed a copy of this letter is enclosed for that purpose except as specifically set forth above we express no opinion concerning the this ruling is directed only to the taxpayer requesting it sec_6110 of federal_income_tax consequences of the transactions described above under any other provision of the code specifically we express no opinion as to whether x is a partnership for federal tax purposes the code provides that it may not be used or cited as precedent be sent to the taxpayer’s representatives pursuant to the power_of_attorney on file with this office a copy of this ruling will sincerely william p o'shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ----------------------------------------------- -------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number -------------------- refer reply to cc intl b02 plr-119171-09 date october tys -------- ----- ------- tys -------- ----- ------- legend trust corporation fc1 state a state b advisor a individual accounting firm x date date date dear -------------- ------------------------------------------------ ---------------------- -------------------------------- ----------------------------- ------------- ------------ ----------------------------------------------------------------- ------------------- -------------------------- ----------------------- ----------------------- -------------------------- this is in response to a letter received by our office on date submitted on behalf of trust by trust 1’s authorized representative requesting extensions of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make a mark to market election under section and an election under sec_855 with respect to each taxable_year in which any income is recognized as a result of the mark to market election the rulings contained in this letter are based upon information and representation sec_1 unless otherwise indicated all section references are to the internal_revenue_code in effect as of the date of this ruling or to treasury regulations promulgated thereunder plr-119171-09 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 facts trust is a state a_trust that is a non-diversified series of corporation corporation is currently and for all times during the years at issue has been organized as a state b corporation and registered as an open-end management investment_company under the investment_company act of as amended trust is taxed as a regulated_investment_company ric under subchapter_m of the internal_revenue_code advisor a is currently and for all times during the years at issue has been the investment_advisor of trust a as investment_advisor and provider of administrative services advisor a is responsible for among other things assisting in the preparation of trust 1’s filings required to maintain trust 1’s qualifications and to satisfy applicable federal and state tax requirements accordingly trust relied upon advisor a to identify the holdings of trust that qualify as pfics accounting firm x served as the tax_return_preparer of the federal and state income and excise_tax returns of certain rics that advisor a manages including the returns of trust accounting firm x is responsible for preparing the sec_1296 pfic mark to market calculations for the foreign investment companies held by trust that are identified by advisor a as pfics at the time trust filed its form 1120-ric for its taxable years ending on date and date advisor a had not identified fc1 as a pfic on or about date advisor a determined that fc1 was a pfic during its ongoing due diligence with respect to pfic identification advisor a immediately notified accounting firm x that a mark to market election under sec_1296 was not made for fc1 in accordance with corporation 1’s policy of making a mark to market election for all identified pfics held by its funds upon discovering its inadvertent failure to make the elections trust sought the relief requested in this ruling for the years at issue trust relied on advisor a and accounting firm x for tax_advice advisor a failed to identify fc1 as a pfic and failed to advise trust of the possibility of making or the consequences of failing to make a qef election with respect to fc1 advisor a also failed to advise trust of the consequences of making or failing to make a mark to market election under sec_1296 with respect to fc1 trust paid dividends during the taxable years ending on date and date and made an election under sec_855 for both taxable years with respect to such plr-119171-09 dividends the purpose for the dividends and corresponding sec_855 elections was to eliminate trust 1’s investment_company_taxable_income and net_capital_gain for each taxable_year as well as eliminate any liability for the excise_tax required by sec_4982 with respect to investment_company_taxable_income after the close of each taxable_year however because trust was not aware that it may have had additional undistributed_income due to a potential mark to market election trust did not make the election under sec_855 with respect to the additional income trust has submitted an affidavit from individual who serves as trust 1’s treasurer and cfo and a’s managing director in support of this ruling_request individual on behalf of trust and a has made the following additional representations trust is not aware of any knowledge on the part of the service of trust 1’s failure to make the mark to market elections discussed herein granting the relief will not result in trust having a lower tax_liability in the aggregate for all years to which the regulatory election applies than trust would have had if the election had been made timely taking into account the time_value_of_money trust is not seeking to alter a return position for which an accuracy-related penalty has been or could have been imposed under sec_6662 of the code if trust had been informed of fc1’s status as a pfic trust would have made a timely mark to market election under sec_1296 for the taxable years at issue and would have paid additional dividends and included the resultant increased income for those years in the amount for which sec_855 elections were made the proposed elections will not affect any closed tax_year trust is not using hindsight in requesting relief under sec_301_9100-3 and no specific facts have changed since the due_date for making the elections which would make the elections advantageous to trust law sec_855 provides in part that if a ric declares a dividend prior to the time prescribed by law for the filing of its return for a tax_year including the period of any extension of time granted for filing such return and distributes the amount of the dividend to shareholders in the 12-month_period following the close of such tax_year and not later than the date of the first regular dividend payment made after the declaration the amount so declared and distributed shall to the extent the ric elects in such return in accordance with regulations prescribed by the secretary be plr-119171-09 considered as having been paid during such taxable_year except as provided otherwise by sec_855 sec_1_855-1 provides that a sec_855 election must be made in the return filed by the ric for the taxable_year the election shall be made by the taxpayer by treating the dividend or portion thereof to which such election applies as a dividend paid during the taxable_year in computing its investment_company_taxable_income or if the dividend or portion thereof to which such election applies is to be designated by the company as a capital_gain dividend in computing the amount of capital_gain dividends_paid during such taxable_year sec_1296 provides that in the case of marketable_stock in a passive_foreign_investment_company that is owned by a united_states_person at the close of any taxable_year the person may elect to include in gross_income the excess of the fair_market_value of the stock over its adjusted_basis sec_1_1296-1 provides that an election under sec_1296 for a taxable_year must be made on or before the due_date including extensions of the person’s u s income_tax return for that year sec_301_9100-1 provides that the commissioner has the discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief 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 sec_301_9100-3 provides that a taxpayer is deemed to have acted responsibly and in good_faith if the taxpayer i ii iii requests relief before the failure to make the regulatory election is discovered by the irs failed to make the election because of intervening events beyond the taxpayer’s control failed to make the election because after exercising reasonable plr-119171-09 iv v diligence the taxpayer was unaware of the necessity for the election reasonably relied on the written advice of the irs or reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides that a taxpayer will not be deemed to have acted reasonably and in good_faith if the taxpayer i ii iii seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested was informed in all material respects of the required election and related tax consequences but chose not to file the election or uses hindsight in requesting relief if specific facts have changed since the due_date for making the election that make the election advantageous to a taxpayer the irs will not ordinarily grant relief sec_301_9100-3 provides that the granting of relief may prejudice the interests of the government if i ii granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money or the taxpayer year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion based on the facts and representations submitted we conclude that the requirements are satisfied for granting a reasonable extension of time to make the election under sec_1296 for trust accordingly an extension of time of make the election under sec_1296 is granted with respect to trust 1’s federal_income_tax return for taxable years ending date and date further the requirements are satisfied for granting a reasonable extension of time to make the election under sec_855 on trust 1’s federal_income_tax returns for the taxable years ending date and date this ruling is limited to the timeliness of filing elections under sec_855 and sec_1296 except as specifically ruled upon herein we express no opinion concerning plr-119171-09 any federal excise or income_tax consequences relating to the facts herein under any other section of the code for example we express no opinion as to whether trust has in fact satisfied all of the requirements of sec_855 and sec_1296 and the regulations thereunder we also express no opinion as to whether trust qualifies as a ric under subchapter_m part i of chapter of the code further no opinion is expressed as to whether trust 1’s tax_liability is not lower in the aggregate for the year to which the regulatory election applies than trust 1’s liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax return involved the district director’s office will determine trust 1’s tax_liability for the years involved if the district director’s office determines that trust 1’s tax_liability is lower that office will determine the federal_income_tax effect this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s first and second representatives sincerely ethan a atticks senior technical reviewer branch international cc


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 -------------------------- id no ---------------- ----------------- telephone number --------------------- refer reply to cc intl b06 plr-135677-16 date date legend ty ------ ---------------------------------------------------------------------- taxpayer accounting firm ---------------------- law firm -------------------------- parent date ---------------------------------------------------- ------------------- dear ------------------ this responds to a letter dated date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by penalties of perjury statements executed by the appropriate parties this office has not verified any of the materials submitted in support of the request for rulings they are subject_to verification on examination facts taxpayer is a domestic_corporation wholly owned by parent taxpayer was incorporated on date and taxpayer intended to be treated as an interest charge domestic_international_sales_corporation ic-disc beginning on date parent relied on accounting firm for advice and assistance with arranging for taxpayer to qualify as plr-135677-16 an ic-disc including preparation and filing of form 4876-a parent also engaged law firm to handle corporate formation documentation due to a miscommunication between accounting firm and law firm regarding the ownership of taxpayer form 4876-a listed the wrong entity as the owner of the ic-disc this incorrectly-filed form 4876-a was accepted by the irs taxpayer filed form 1120-ic-disc interest charge domestic_international_sales_corporation return for its first taxable_year based on discrepancies in the advice that they were providing to taxpayer accounting firm and law firm later discovered that form 4876-a incorrectly identified the owner of taxpayer accounting firm submitted this request for relief on behalf of taxpayer under sec_301_9100-3 for an extension of time to file a correct form 4876-a law and analysis sec_992 of the internal_revenue_code code provides that an election by a corporation to be treated as a disc1 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 of the code provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temp sec_1_921-1t provides in part that a corporation electing ic- disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for this purpose an election includes an application_for relief in respect of tax as used in this letter the terms ic-disc and disc have the same meaning plr-135677-16 sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government in the present situation the election described in temp sec_1_921-1t is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief set forth in sec_301_9100-3 based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is in fact eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 taxpayer should attach a copy of this ruling letter to its form 4876-a and federal_income_tax return for the taxable years to which this letter applies 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 except as expressly provided herein this letter does not express or imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely _____________________________________ christopher j bello branch chief branch office of associate chief_counsel international enclosures copy of this letter copy for sec_6110 purposes


o f f i c e o f c h i e f c o u n se l department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date cc ita b01 conex-135179-10 number release date uil the honorable michael capuano member u s house of representative sec_110 first street cambridge ma attention ---------------- dear congressman capuano thank you for your letter dated date you asked for clarification on the federal historic preservation tax incentives program the enclosed booklet prepared by the national park service nps explains that the nps administers a program providing information about certain incentives designed to encourage taxpayers to rehabilitate certified_historic_structures these incentives include certain state and local benefits and a federal_income_tax credit for expenditures that taxpayers incur to rehabilitate historic properties see sec_47 of the internal_revenue_code the code the booklet briefly mentions charitable_contributions for the preservation of historic façades however deductions for these contributions are not part of the nps informational program for rehabilitating historic structures rather completely separate statutory and regulatory provisions under sec_170 of the code govern charitable_contribution deductions the amounts of those deductions generally are equal to the fair_market_value of the property contributed not the amounts expended to rehabilitate the structures rules for deductibility under sec_170 of the code your inquiry includes questions about historic preservation easements which are also called façade easements a façade easement generally is an agreement between a taxpayer and a charitable_organization to limit the development of or changes to the exterior of a certified_historic_structure as such a façade easement is a contribution of a partial interest_in_real_property generally the law does not permit a deduction for a contribution of a partial interest in property sec_170 of the code however in the congress temporarily allowed a deduction for the contribution of an easement of not less than 30-years duration section e of the tax reform act of pub_l_no 90_stat_1520 in the congress extended the effective conex-135179-10 dates of this temporary deduction and also required that the taxpayer grant the easement in perpetuity section a of the tax reduction and simplification act of pub_l_no finally in the congress made permanent the statutory allowance of a deduction for a qualified_conservation_contribution section a of pub_l_no 94_stat_3204 see sec_170 and sec_170 of the code and sec_1_170a-14 of the treasury regulations the regulations also in the congress imposed many requirements taxpayers must meet to satisfy the definition of a qualified_conservation_contribution a qualified_conservation_contribution is a contribution of a qualified_real_property_interest to a qualified_organization exclusively for conservation purposes sec_170 of the code one permissible conservation_purpose is the preservation of a certified_historic_structure sec_170 of the code see sec_1_170a-14 of the regulations to meet the exclusively for conservation purposes requirement the conservation_purpose must among other things be enforceable in perpetuity and the easement generally may not permit a use that is destructive of other significant conservation interests sec_170 of the code see sec_1_170a-14 and g of the regulations in the congress enacted legislation that imposed even more stringent rules for a taxpayer to deduct a charitable_contribution of an easement on the exterior of a building in a registered_historic_district section of the pension_protection_act of pub_l_no 120_stat_780 the secretary of the interior must first certify the building as being of historic significance to the district see sec_170 of the code in addition the easement must preserve the entire exterior of the building and it must prohibit any change in the exterior of the building which is inconsistent with the historical character of the exterior of the building the taxpayer also must attach to the return a qualified_appraisal photographs of the entire exterior of the building and a description of all restrictions on development of the building see sec_170 of the code substantiation in addition to the above requirements taxpayers must adequately substantiate their deductions in the congress required taxpayers claiming deductions for noncash charitable_contributions in excess of dollar_figure to satisfy several detailed requirements to substantiate their contributions by obtaining qualified appraisals section a of the deficit_reduction_act_of_1984 defra pub_l_no 98_stat_691 section a of defra required the secretary to prescribe regulations implementing these requirements under this legislative mandate the irs and the treasury_department promulgated regulations providing that a taxpayer cannot take a deduction for a noncash contribution in excess of dollar_figure unless the taxpayer obtains a qualified_appraisal prepared by a qualified_appraiser and attaches a fully-completed appraisal_summary to the tax_return on which the taxpayer first claims a deduction for the contribution sec_1_170a-13 of the regulations conex-135179-10 in the congress added an additional substantiation requirement under sec_170 a taxpayer cannot take a deduction for contributions of dollar_figure or more unless the taxpayer obtains a contemporaneous written acknowledgment see sec_1 170a- f in the congress added sec_170 to the internal_revenue_code effective for contributions made after date sec_883 of the american_jobs_creation_act_of_2004 pub_l_no 118_stat_1418 this legislation restated certain requirements of section a of defra and also added new requirements see sec_170 in the congress again added significant new requirements to the substantiation rules for appraisals prepared for returns filed after date see section of the pension_protection_act of in the irs and the treasury_department issued proposed_regulations implementing all of the substantiation and reporting rules substantiation and reporting requirements for cash and noncash charitable_contribution deductions federal_register proposed date notice_2006_96 2006_2_cb_902 copy enclosed gives transitional guidance that applies until the regulations are finalized and effective easement valuation as stated in the report of the senate_finance_committee in and later reflected in the treasury regulations the deduction for a gift of a facade easement generally is equal to the fair_market_value of the easement at the time of the contribution s rep pincite reprinted in u s c c a n and sec_1_170a-14 of the regulations if a substantial record of sales of comparable easements exists the fair_market_value of the donated easement is based on those sale prices if no record of easement sales is available then as a general_rule the fair_market_value equals the difference between the fair_market_value of the underlying property before the granting of the easement and the fair_market_value of the underlying property after the granting of the easement this is generally referred to as before and after valuation if a taxpayer’s appraisal employs a before and after valuation the fair_market_value of the property before contribution of a façade easement must take into account not only the current use of the property but also an objective assessment of how immediate or remote the likelihood is that the property absent the restriction would in fact be developed as well as any effect from zoning conservation or historic preservation laws that already restrict the property’s highest_and_best_use s rep pincite and sec_1_170a-14 of the regulations after valuation must take into account the amount of access the terms of the easement permit and the effect that the particular restrictions in the easement will have on the value of the property subject_to the easement sec_1_170a-14 of the regulations the regulations on conservation_easement valuation echo the legislative_history of sec_170 they provide that because each property is unique the specific individual attributes of the property both before and after the granting of the easement conex-135179-10 must be examined where the before and after method is used a mechanical application of any valuation methodology is unacceptable thus the value of each easement is based on the particular facts and circumstances of each property on which the façade is located and the particular restrictions imposed see s rep pincite- and sec_1_170a-14 and of the regulations as you suggest in your letter valuation of easements is complicated in some cases the service has found that taxpayers are overvaluing their easement contributions during an audit the service carefully examines the easement documents and other factors to determine deductibility the service employs appraisers to review taxpayers’ appraisals as appropriate the service hires outside appraisers to perform appraisal reviews as well as independent appraisals some have suggested that the service should allow tax deductions of approximately to percent of the fair_market_value of the underlying property there is no safe_harbor percentage by which an easement reduces the value of property the specific facts and circumstances of each easement contribution determine the value of a particular contribution i hope this information is helpful i also have enclosed publication charitable_contributions and publication determining the value of donated property please contact me ------------------- or -------------------at ---------------------if we can be of further assistance this letter provides certain general principles of the law and is intended for informational purposes only it does not constitute a ruling sincerely john p moriarty branch chief branch income_tax and accounting enclosures


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 corp plr-124914-07 date date ------------- -------------- -------------------------------- ----------------------------------- legend legend parent ---------------------------------------------------------- --------------------------------------------------- sub ---------------------------------------------------------- --------------------------------------------------- llc --------------------------------------------------------------------------- ------------------------------------------------------ state x date date date date date date date date --------------------------- -------------------------- -------------------------- ------------------------- ---------------------- --------------------- --------------------- ------------------- ---------------- -------------- -------------- plr-124914-07 dollar_figurea dollar_figureb dollar_figurec z --------------------------- -------------------------------------------------- this letter responds to your letter dated date requesting rulings as to the federal_income_tax consequences of a proposed transaction additional information was received on date the material information submitted for consideration is summarized below summary of facts parent a state x corporation is the common parent of a group of corporations that join in filing a consolidated federal_income_tax return the parent group sub a state x corporation is wholly owned directly and indirectly by parent and has been a member of the parent group since date llc a state x limited_liability_company whose membership interests have always been owned entirely by sub has been disregarded as an entity separate from sub for federal_income_tax purposes since the date of its organization date between date and date sub made multiple loans to parent in the aggregate amount of dollar_figurea for parent’s general corporate purposes following sub’s organization of llc sub contributed the sub loans to llc together with an interest receivable account of approximately dollar_figureb the interest receivable account which represented accrued but unpaid interest on the loans this contribution occurred on date on date i parent paid cash of approximately dollar_figurec the cash to llc in full settlement of the interest receivable account and ii the outstanding multiple loans were consolidated into a single loan from llc to parent with a principal_amount of dollar_figurea the consolidation was made effective as of date the consolidated indebtedness is represented by a note with a date maturity_date the parent note the parent note bears interest at a rate equal to z which is considered by the parties to be an arm’s-length rate that rate is reset every three months and accrued interest for each calendar_quarter is due and payable within three business days following the end of the quarter for what have been represented to be valid business purposes llc intends to become a state x corporation llc will make an election under treas reg plr-124914-07 sec_301_7701-3 to become classified as an association and thus as a corporation under sec_301_7701-2 for federal_income_tax purposes representations parent has made the following representations llc is an entity that is eligible to make an entity classification election under sec_301_7701-3 following llc’s entity classification election llc will be treated as an association for federal_income_tax purposes and will become a member of the parent group under sec_301_7701-3 the election by llc to be treated as an association will result in sub being treated as transferring the parent note and cash to llc in constructive exchange for shares of llc stock this deemed exchange transaction resulting from the entity classification election is referred to herein as the proposed transaction the proposed transaction is an intercompany_transaction under sec_1_1502-13 that is described in sec_351 of the internal_revenue_code the code the parent note constitutes indebtedness of parent to sub under general principles of federal_income_tax law and an intercompany obligation under sec_1_1502-13 law and analysis sec_1_1502-13 the current regulation provides rules for taking into account items of income gain deduction and loss of members of a consolidated_group from intercompany obligations the current regulation provides that if a member of a consolidated_group realizes an amount other than zero of income gain deduction or loss directly or indirectly from the assignment or extinguishment of all or part of its remaining rights or obligations under an intercompany obligation then the intercompany obligation is treated for all federal_income_tax purposes as satisfied under paragraph sec_1_1502-13 and if it remains outstanding reissued under paragraph sec_1 g iii on date the irs and treasury issued a proposed regulation under sec_1_1502-13 the proposed regulation see prop sec_1 g fed reg date 1999_1_cb_810 the preamble to the proposed regulation provides in pertinent part as follows plr-124914-07 the proposed regulation clarifies the form and timing of the recast applied to transactions subject_to the regulation in particular it clarifies that the deemed satisfaction proceeds rather than the obligation are treated as transferred by the initial creditor in the actual transaction and then advanced by the transferee to the debtor in the deemed reissuance of the obligation the proposed regulation includes an example to illustrate clearly the mechanics of the proposed regulation it also includes certain conforming adjustments proposed effective date the regulation is proposed to be effective on the date that the final_regulation is published in the federal_register for purposes of determining the tax treatment of transactions undertaken prior to such effective date taxpayers may rely on the form and timing of the recast transaction as clarified by these proposed_regulations no inference is intended however as to the correct interpretation of the existing regulation rulings based solely on the information submitted and the representations set forth above we rule as follows a sub’s deemed exchange of the parent note for llc stock is a realization event described in sec_1_1502-13 the taxpayer may rely on the form and timing of the recast transaction as described in the proposed regulation accordingly the consequences of the deemed satisfaction and reissuance will be as set forth in rulings b through f below b immediately before it’s deemed exchange by sub the parent note will be treated as satisfied by parent c sub will be treated as transferring the proceeds of the deemed satisfaction to llc in exchange for stock of llc in an intercompany_transaction d parent will be treated as issuing a new note the reissued note to llc in exchange for the proceeds of the deemed satisfaction e the reissued note will be deemed to have a new holding_period and an issue_price equal to the amount of the deemed satisfaction proceeds but otherwise will be treated as having terms identical to those of the parent note f llc’s initial tax basis in the reissued note will equal the amount of the deemed satisfaction proceeds plr-124914-07 caveats the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or 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 letter is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively any taxpayer filing its return electronically may satisfy this requirement by attaching a statement to the return that provides the date and control number of this letter_ruling in accordance with the power_of_attorney on file in this office a copy of this ruling letter will be sent to your authorized representative sincerely ___________________ michael j wilder senior technician reviewer branch office of associate chief_counsel corporate


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 no ------------------- --------------------------------------------------- telephone number -------------------- refer reply to cc psi b3 plr-104639-16 date date x ------------------------------------------------------- ------------------------------------- legend y -------------------- a ------------------------ --------------------------------------- ---------------------- b --------------------------------------- ------------------- c --------------------------------------- state -------------- date ----------------------- date ----------------------- date --------------------------- date ------------------- plr-104639-16 dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representatives requesting a ruling under sec_1362 of the internal_revenue_code code facts the information submitted states that x was incorporated under the laws of state on date x elected to be an s_corporation effective date on date shares of x were sold to y an ineligible shareholder under sec_1361 the members of y are a b and c eligible shareholders under sec_1361 on date y a b and c entered into a nominee agreement to treat a b and c as the beneficial owners of the shares of x nominally held by y effective date x represents that there was no tax_avoidance or retroactive tax planning involved in the transfer of shares of x to y in addition x and its shareholders agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary x also represents that x and all its shareholders have filed consistently with x being treated as an s_corporation in addition x represents that all items allocable to the shares originally purchased by y were allocated to and reported by a b and c eligible shareholders law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not among other requirements have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 is terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business plr-104639-16 corporation sec_1362 provides that any termination under sec_1362 is effective on and after the date of cessation sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agree to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to this period then notwithstanding the circumstances resulting in such termination the corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 provides that the determination of whether a termination was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination was inadvertent the fact that the termination event was not reasonably within the control of the corporation and was not part of a plan to terminate the election or the fact that the terminating event or circumstance took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event or circumstance tends to establish that the termination of the election was inadvertent conclusion based solely on the facts submitted and representations made we conclude that x’s s_corporation_election was terminated on date and that the termination was inadvertent within the meaning of sec_1362 consequently we rule that x will be treated as an s_corporation from date and thereafter provided that x’s s_corporation_election was otherwise valid and not otherwise terminated under sec_1362 except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was otherwise a valid s_corporation and whether the nominee agreement between y a b and c is a valid nominee agreement this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited for precedent pursuant to a power_of_attorney on file we are sending a copy of this letter to x’s authorized representatives plr-104639-16 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the rulings requested it is subject_to verification on examination sincerely james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes