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-121847-13 date date legend taxpayer pr sec_1 pr sec_2 sub sub sub sub sub sub sub sub sub ------------------------------- -------------------------- -------------------------- ------------------------------------------------- ---------------------------------------------------------------- ------------------------------------------ -------------------- --------------------------------- ---------------------------------------------------------------- ---------------------------------------------------- ---------------------- ---------------------------------- -------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ plr-121847-13 sub sub sub a b c d e year year year year date date date date country a exchange junior debt - ---------------------------------------------------------------------------------- ------------------------------------------------------------------------------------ ----------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- --------------------------------------------------------------------- ---- -------- -------------------------- --------------------------- -------- ------- ------- ------- ------- -------------------------- -------------------------- --------------------------- --------------------------- -------------- ------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ --------------------------------------------------------------------------------- plr-121847-13 senior debt sub loan sub intercompany debt merger ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ----------------- ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ -------------------------------------------------------------------------------- -------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ----- dear mr --------------- this letter responds to a date request for rulings on certain federal_income_tax consequences of a series of proposed transactions the proposed transaction the information submitted in that request and in later correspondence is summarized below 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 summary of facts unless otherwise indicated all entities referred to herein are organized in country a and are treated as corporations for federal_income_tax purposes taxpayer a united_states_person within the meaning of sec_7701 indirectly owns a of pr sec_1 an entity treated as a partnership for federal_income_tax plr-121847-13 purposes pr sec_1 owns all the outstanding interest in sub an entity that is disregarded from its owner for federal_income_tax purposes sub owns all the outstanding interests in sub sub owns all the outstanding interest in sub and sub both entities that are disregarded from its owner for federal_income_tax purpose sub also owns certain assets and b of pr sec_2 an entity treated as a partnership for federal_income_tax purposes together the additional assets sub owns all the equity interests in sub and sub a newly formed entity that is disregarded from its owner for federal_income_tax purposes sub and sub own c and d respectively of sub the remainder of the outstanding sub stock is widely held and traded on the exchange sub owns all the outstanding_stock of sub and sub sub owns the remaining interest in pr sec_2 sub is the obligor on junior debt due to third party lenders sub is the obligor on senior debt due to third party lenders sub sub sub and sub are parties to an internal financing_arrangement for which sub is the obligor on the sub intercompany debt due to sub and prior to the proposed transaction sub was the obligor on the sub loan due to sub prior to the proposed transaction each of sub sub sub and sub is a controlled_foreign_corporation within the meaning of sec_957 during year year year and year sub sub sub and sub were involved in transactions subject_to sec_367 in connection with these transactions taxpayer filed or in the case of year will file gain recognition agreements under sec_367 and sec_1_367_a_-8 the historic gras proposed transaction the following steps have occurred or will occur together the proposed transaction effective on date the effective date sub and sub each elected under sec_301_7701-3 the check the box elections to be classified as an entity disregarded from its sole owner for federal_income_tax purposes the liquidations on date sub formed sub an entity that elected to be treated as disregarded from its owner for federal_income_tax purposes sub transferred assets to sub including an e interest in pr sec_2 on date sub formed sub and sub and each elected to be treated as disregarded from its owner for federal_income_tax purposes sub transferred assets to sub and sub on date sub transferred the additional assets to sub and sub assumed the senior debt and a portion of the sub loan sub will assume the balance of the sub loan prior to step plr-121847-13 for federal_income_tax purposes steps and are transactions between the sole owner and an entity that is disregarded sub will make an election under sec_301_7701-3 to change its classification to a corporation for federal_income_tax purposes the sub election as of the effective date of the sub election i sub will be deemed to assume the sub loan and senior debt collectively the debt assumption from sub and ii sub will be deemed to transfer the additional assets to sub the amount of the debt assumption is greater than the fair_market_value of the additional assets sub and sub will engage in the merger with the sub election the reorganization the sub election will be effective no more than one day before the merger depending on market conditions sub may transfer some or all of its sub stock to sub in exchange for a note the sub note equal to the fair_market_value of the sub stock transferred the sub stock transfer depending on market conditions sub may transfer the sub note to sub in exchange for sub stock debt or other_securities the sub note exchange representations the following representation has been made in connection with the proposed transaction a with respect to any existing gras entered into by taxpayer in connection with a prior transfer of stock_or_securities taxpayer will to the extent required under sec_1_367_a_-8 as a result of the proposed transaction enter into new gras as described in sec_1_367_a_-8 and will comply with the notification requirements thereunder the following representations have been made regarding the liquidations b on date and at all times until the final liquidating_distribution is deemed completed sub was the owner of all the outstanding_stock of sub and sub c no shares of sub or sub have been redeemed during the three years preceding date d all deemed distributions from sub to sub and from sub to sub pursuant to the deemed plan of complete_liquidation were made within a single taxable_year plr-121847-13 e as of date as a result of the check the box elections sub and sub ceased to be a going concern for federal_income_tax purposes f sub and sub were deemed for federal_income_tax purposes to retain no assets following the check the box elections g except for a contribution of shares by pr sec_1 to sub on date in the three years prior to date other than through deemed or actual liquidations of wholly-owned direct subsidiaries neither sub nor sub acquired assets in a nontaxable_transaction h prior to date no assets of sub or sub were disposed of by either sub or sub except for i dispositions in the ordinary course of business and ii dispositions occurring more than three years prior to date with the exception of a sale by sub of its shares in an entity to a disregarded_entity of pr sec_1 in year i except for the reorganization the liquidations were not preceded or followed by the reincorporation in or transfer or sale to a recipient corporation of any of the assets of sub or sub if persons holding directly or indirectly more than twenty percent in value of the sub or sub stock were also holding directly or indirectly more than twenty percent in value of the stock in the recipient corporation for purposes of this representation ownership was determined by the application of the constructive_ownership rules of sec_318 as modified by sec_304 j prior to date no assets of either sub or sub were distributed in-kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to date k prior to date sub and sub reported all earned_income represented by assets that were deemed distributed to sub such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc l the fair_market_value of the assets of each of sub and sub exceeded each of their respective liabilities on date m except for the sub intercompany debt there was no intercorporate debt existing between sub and sub or sub and sub and no debt has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to date n there is no plan or intention to undertake any_action eg an election to treat sub or sub as an association_taxable_as_a_corporation for federal_income_tax purposes under sec_301 or to convert sub or sub to a per se entity as defined in those regulations and no other circumstances exist eg the existence of a second regarded_owner that prevents either sub or sub from being treated as an plr-121847-13 entity disregarded from the owner of its stock for federal_income_tax purposes under sec_301_7701-2 and sec_301_7701-3 o sub is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code p neither sub nor sub engaged in a us trade_or_business on or prior to the liquidations q all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the liquidations have been fully disclosed r neither sub nor sub distributed any us real_property interest as defined in sec_1_897-1 in the liquidations s the notice requirements of sec_1_367_b_-1 will be met with respect to the liquidations the following representations have been made regarding the reorganization t the fair_market_value of the sub stock deemed to be received by sub in the reorganization will be approximately equal to the fair_market_value of the sub stock deemed surrendered u immediately following the reorganization sub will own all of the outstanding sub stock and will own such stock by reason of its ownership of sub stock immediately prior to the reorganization v sub or any person related to sub has no plan or intention to reacquire any of its stock deemed issued in the reorganization w all of the proprietary interest in sub will be deemed exchanged for sub stock and will be preserved within the meaning of sec_1_368-1 x as a result of the reorganization sub will be deemed to receive all of the sub stock in the reorganization and no payment of cash in lieu of any of the outstanding sub stock fractional or otherwise will occur y at the time of the reorganization sub will not have outstanding any warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in sub z throughout the 12-month_period ending immediately before the reorganization is effective sub will not have acquired any asset in any actual or deemed transaction that was nontaxable for federal_income_tax purposes eg a reorganization described in sec_368 other than in the liquidations described above plr-121847-13 aa throughout the 12-month_period ending immediately before the reorganization is effective sub will not have disposed of any of its assets except for dispositions in the ordinary course of business bb sub is not and will not be at the time of the proposed transaction under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 cc once the sub election is effective sub will be validly organized and in good standing under applicable country a law and classified as a corporation for federal_income_tax purposes in accordance with sec_301_7701-2 dd except for the sub note exchange there is no plan or intention in connection with the reorganization for sub to issue any additional sub stock or to redeem or reacquire any sub stock ee immediately following the reorganization and except for the additional assets and the debt assumption sub will be deemed to possess the same assets and liabilities as those possessed by sub immediately before the reorganization is effective ff the liabilities of sub deemed assumed by sub in the reorganization plus the liabilities if any to which the transferred assets are subject were incurred by sub in the ordinary course of business and will have been associated with the assets deemed transferred gg sub has no plan or intention to sell or otherwise dispose_of any of the assets of sub deemed to be acquired in the reorganization except for dispositions made in the ordinary course of business or transfers allowed under sec_368 and the regulations thereunder hh in the reorganization sub will be deemed to acquire substantially_all of the assets held by sub immediately prior to the reorganization for purposes of this representation amounts paid_by sub to shareholders who receive cash or other_property amounts used by sub to pay its reorganization expenses and all redemptions and distributions except for regular normal dividends made by sub immediately preceding the reorganization were included as assets of sub held immediately prior to the reorganization ii following the reorganization sub or members of its qualified_group as defined in sec_1_368-1 will continue the historic_business of sub or will use a significant portion of sub 5's historic_business_assets in a business jj there is no plan or intention to undertake any_action eg an election to treat sub as an association_taxable_as_a_corporation for federal_income_tax purposes under plr-121847-13 sec_301 or to convert sub to a per se entity as defined in those regulations and no other circumstances exist eg the existence of a second regarded_owner that prevents sub from being treated as an entity disregarded from the owner of its stock for federal_income_tax purposes under sec_301_7701-2 and sec_301_7701-3 kk the fair_market_value of the assets of sub will exceed the amount of its liabilities immediately before the reorganization including any liabilities that are cancelled extinguished or assumed as determined under sec_357 in connection with the reorganization the fair_market_value of the assets of sub will equal or exceed the amount of its liabilities immediately after the reorganization ll there will be no intercorporate indebtedness existing between sub and sub that was or will be issued acquired or to be settled at a discount in connection with the reorganization mm sub and sub intend to each pay their respective expenses if any incurred in connection with the reorganization nn no two parties to the reorganization are investment companies as defined in sec_368 and iv oo none of the assets held by sub constituted a united_states_real_property_interest as defined under sec_897 pp except for the historic gras the outstanding equity_interest of any subsidiary stock or assets of sub were not subject_to any other gain recognition agreements under sec_367 immediately before the reorganization is effective qq immediately before the reorganization sub was a controlled_foreign_corporation within the meaning of sec_957 rr immediately after the reorganization sub will be a controlled_foreign_corporation within the meaning of sec_957 ss each person that was a sec_1248 shareholder within the meaning of sec_1_367_b_-2 of sub immediately before the reorganization will be a sec_1248 shareholder of sub immediately after the reorganization tt the reorganization will not be an exchange described in sec_1_367_b_-4 b i or b uu at the time of the reorganization the foreign transferor of the assets treated as sub will not have effectively_connected_earnings_and_profits within the meaning of sec_884 or d plr-121847-13 vv all requirements under sec_367 will be complied with respect to the reorganization including filing any applicable sec_367 notices under sec_1_367_b_-1 and certifications under sec_1_367_a_-8 ww before the reorganization sub was not a passive_foreign_investment_company a pfic within the meaning of sec_1297 immediately after the reorganization sub will not be a pfic within the meaning of sec_1297 the following representations have been made regarding the deemed transfer of the additional assets to sub and the debt assumption as a result of the sub election xx the senior debt and the sub loan are treated as debt for federal_income_tax purposes yy except for the debt assumption sub will not issue any consideration to sub in exchange for the additional assets zz the debt assumption in excess of the value of the additional assets will be assumed by sub in recognition of sub 2’s capacity as a shareholder of sub aaa sub will recognize any gain realized with respect to the additional assets exchanged with sub under sec_1001 and any loss will be deferred under sec_267 bbb a pro_rata share of any subpart_f_income within the meaning of sec_952 resulting from the deemed transfer of the additional assets will be included in the gross_income of each us shareholder of sub within the meaning of sec_951 the following representations have been made regarding the sub stock transfer ccc at the time of the sub stock transfer the value of the sub shares transferred by sub to sub will be equal to the sub note received therefor ddd the sub note will be treated as debt for federal_income_tax purposes eee at the time of the sub stock transfer there is no plan or intention for pr sec_1 or any other related_person to own or acquire sufficient stock in an amount equal to or greater of the vote or value of sub within the meaning of sec_304 based solely on the information submitted and representations made above we rule as follows rulings the liquidations plr-121847-13 for federal_income_tax purposes the check the box elections was treated as if sub and sub each distributed its respective assets and liabilities to sub in complete_liquidation of sub and sub under sec_332 no gain_or_loss was recognized by sub on the deemed receipt of the assets and assumption of the liabilities of sub and sub in the liquidations sec_332 no gain_or_loss was recognized by either sub or sub on the deemed_distribution of their respective assets and assumption of their respective liabilities in the liquidations sec_337 the basis of each asset of sub and sub deemed received by sub was the same as the basis of that asset in the hands of sub and sub respectively immediately before the liquidations sec_334 the holding_period of each asset in the hands of sub included the period during which sub and sub held each asset as applicable sec_1223 sub succeeded to and took into account the items of sub and sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1 a sub will succeed to and take into account the earnings an profits of sub and sub as of the date of the liquidations sec_382 and sec_1_381_c_2_-1 the reorganization for federal_income_tax purposes the sub election and the merger will be treated as a transfer by sub of all of its assets to and the assumption of its liabilities by sub solely in exchange for all of the stock of sub the reorganization will constitute a reorganization within the meaning of sec_368 sub and sub will each be a party to the reorganization under sec_368 the deemed transfer of the additional assets and the debt assumptions will not prevent the reorganization from constituting a reorganization within the meaning of sec_368 no gain_or_loss will be recognized by sub upon the deemed transfer of its assets to sub in the reorganization in exchange for all the stock of sub and the deemed assumption by sub of the liabilities of sub in the reorganization sec_361 and sec_357 plr-121847-13 no gain_or_loss will be recognized by sub upon the deemed receipt of sub 5’s assets in exchange for all of the stock of sub in the reorganization sec_1032 the basis of the sub assets held by sub will be the same as the basis of such assets in the hands of sub immediately prior to the reorganization b the holding_period of the sub assets held by sub will include the period during which such assets were held by sub sec_1223 no gain_or_loss will be recognized by sub on the deemed exchange of its shares of sub for sub stock pursuant to the reorganization sec_354 sub 2’s basis in the sub stock deemed received in the reorganization will be the same as sub 2’s basis in the sub stock deemed exchanged in the reorganization sec_358 sub will succeed to and take into account the tax_attributes of sub described in sec_381 sec_381 these items will be taken into account by sub subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sub will be deemed to sell the additional assets to sub equal to the lesser_of the fair_market_value of the additional assets or the amount of the debt assumption sec_1001 and sec_1_301-1 the excess of the debt assumption over the fair_market_value of the additional assets will be treated as a distribution_of_property from sub to sub that is separate from the reorganization the distribution sec_1 -1 j and l sub will treat the distribution as i a dividend with respect to each outstanding share of sub stock to the extent of sub 3’s earnings_and_profits which includes sub 5’s earnings_and_profits the combined e_p sec_301 and sec_316 ii the portion of the distribution in excess of the combined e_p will be applied against and reduce but not below zero sub 2’s basis in each share of sub stock which includes sub 2’s basis in the sub stock sec_301 and iii as gain from the sale_or_exchange of property to the extent of any portion remaining sec_301 revrul_70_240 1970_1_cb_81 and 366_f2d_874 5th cir the sub stock transfer the sub stock transfer will qualify as a taxable_exchange under sec_1001 plr-121847-13 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the proposed transaction under other provisions of the code or the regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding the tax consequences of the sub note exchange further this office has not reviewed any information pertaining to and has made no determination concerning whether any gain recognized as a result of the sub stock transfer or any gain recognized under sec_301 as a result of the deemed transfer of the additional assets in exchange for the debt assumption is recharacterized as a dividend pursuant to sec_964 and sec_1248 procedural statements this ruling letter is directed only to the taxpayer requesting 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_ruling is being sent to your authorized representative a copy of this letter_ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely isaac w zimbalist senior technician reviewer branch associate chief_counsel corporate cc


internal_revenue_service department of the treasury number release date index no p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si plr-105124-99 date re ein- legend trust trust trust a beneficiary trustee grandparent grandparent date date x y corporation charity a charity b charity c dear this is in response to your letter dated date in which you requested a ruling regarding the application of the generation-skipping_transfer gst tax provisions of chapter of the internal_revenue_code specifically you requested a ruling that the exempt status of trust a for gst tax purposes would not be affected by the following i the trustee’s consent to corporation’s s election on behalf of trust a ii the trustee’s execution of an electing_small_business_trust election on behalf of trust a and iii the trustee’s execution of the shareholder agreement on behalf of trust a according to your submission on date grandparent transferred x shares of corporation common_stock to trust an irrevocable_trust on the same date grandparent transferred y shares of corporation common_stock to trust an irrevocable_trust pursuant to the terms of both trust agreements from date plr-105124-99 until date the net_income from these trusts was distributed annually in equal amounts to charity a and charity b on date pursuant to the terms of article e of trust the trustee divided trust into equal shares one share for each grandchild of grandparent then living and one share for each deceased grandchild leaving one or more descendants then living twelve such shares were created and held as separate trusts in the names of the living and deceased grandchildren of grandparent trust a was established under the terms of article e for the benefit of beneficiary and her issue also on date pursuant to the terms of trust the trust estate of trust was transferred to the then acting trustee of trust added equally to the shares created under that agreement and held administered and disposed of in accordance with the provisions of trust governing such shares article g of trust provides that after date and during the lifetime of each living grandchild the trustee shall pay to or expend for the benefit of such grandchild so much or all of the net_income and principal of the share designated by the grandchild’s name as the trustee in its discretion deems to be for the grandchild’s best interests and welfare subject_to this provision in favor of each living grandchild so much or all of the net_income and principal of the share designated by the name of the grandchild shall be paid to or expended for the benefit of the descendants of the grandchild as shall be living from time to time at such times in such equal or unequal proportions among them and in such manner as the trustee in its discretion deems to be for the best interests and welfare of such descendants individually and as a group article h states that upon the death of a grandchild after division of the trust estate into shares or upon division of the trust estate into shares if a grandchild is then deceased the share designated by the name of such grandchild is to be held in trust or distributed to or in trust for the benefit of any one or more of such grandchild’s spouse and descendants and the spouses of such descendants in such amount and in such manner and upon such terms and conditions as such grandchild shall appoint by his or her last will specifically referring to the power_of_appointment conferred upon him or her in default of the exercise of the power_of_appointment by such grandchild and upon the death of such grandchild or upon division of the trust estate into shares as the case may be the grandchild’s share of the trust estate or the part not effectively appointed shall be distributed per stirpes to his or her then living descendants if any if there are no living descendants the trust estate or the part not effectively appointed shall be distributed equally to such of grandparent 1's other grandchildren who are then plr-105124-99 living per capita however the then living descendants of any other deceased grandchild shall take per stirpes the share which the deceased grandchild would have received if living each portion otherwise distributable to a grandchild or descendant of a grandchild for whom a share of the trust estate is then being held is to be added to such share and if at such time there is no other grandchild or descendant of a deceased grandchild then living the corpus is to be distributed to charity c article l of trust states that notwithstanding any provision in the trust agreement to the contrary the trusts created under the instrument or pursuant to the exercise of any power_of_appointment under the instrument are to terminate not later than twenty-one years after the death of the last survivor of grandparent 1’s descendants living on date if the trusts created have not sooner terminated the trustee is to pay over transfer and deliver the trust estate to the persons then entitled to receive the income therefrom in the same shares or portions in which such income is then being paid to them the primary asset of trust a is stock in corporation a c_corporation the corporation’s board_of directors proposes to elect to treat corporation as a small_business_corporation an s_corporation trustee proposes to consent to the s election in order to convert corporation to an s_corporation each of its shareholders must be eligible to hold s_corporation stock as of the first day of the year for which the election is to take effect trustee proposes to make an election under sec_1361 to treat trust a as an electing_small_business_trust so that it can qualify as an eligible s_corporation shareholder in an effort to ensure the continuing qualification of corporation as an s_corporation trustee intends to enter into a shareholder agreement with corporation and corporation’s other shareholders to protect the s election under the sec_3 of the proposed shareholder agreement no shareholder may transfer and no person may acquire the legal or beneficial_ownership of any share if such transfer or acquisition would cause the s status of the corporation to terminate specifically no transfer may be made to any person that is not eligible to be a shareholder of an s_corporation under the applicable provisions of the code as in effect at the time of the purported transfer in addition no shareholder may affirmatively transfer shares to a person if the transfer would cause the corporation to exceed the maximum number of persons who are allowable s_corporation shareholders sec_3 of the proposed shareholder agreement provides that no shareholder shall make any transfer of shares to any trust having multiple beneficiaries or amend any trust that owns plr-105124-99 shares to increase the number of beneficiaries unless all such beneficiaries are persons eligible to be transferees pursuant to sec_3 and immediately after such transfer or amendment the number of shareholders the corporation is deemed to have for purposes of sec_1361 would not exceed the maximum number of persons who are allowable s_corporation shareholders pursuant to that section notwithstanding any other provision of the shareholder agreement the shareholders and the corporation acknowledge and agree in sec_3 that none of the following shall be prohibited by the terms of this shareholder agreement i the addition of a_trust beneficiary due to the birth of an additional descendant of grandparent ii the exercise of a power_of_appointment granted to a beneficiary pursuant to the terms of any irrevocable_trust that is in existence on the date of the agreement and that owns shares iii the transfer of shares to any person in whose favor a power_of_appointment described in ii above is exercised or iv the distribution of shares to a a beneficiary of any irrevocable_trust that is in existence on the date of the agreement and that owns shares pursuant to the terms thereof or b to the beneficiary of any trust created pursuant to the exercise of a power_of_appointment described in ii above even if such addition exercise or distribution shall cause the termination of the corporation’s s election sec_3 provides that prior to any transfer or other_disposition of shares if the corporation in its discretion so requires an opinion of counsel to the corporation must first be received by the corporation the cost of which shall be borne by the shareholder whose shares are to be transferred or disposed of that the transferee is i eligible to be a shareholder of an s_corporation in accordance with the applicable_requirements of the code or ii that the transfer otherwise is allowable pursuant to the provisions of the shareholder agreement in addition to the other requirements of sec_3 of the shareholder agreement sec_3 provides that no transfer of shares including without limitation transfers pursuant to sec_3 shall be permitted and no purported transfer shall be effective until a permitted transferee has executed a supplemental signature page to the shareholder agreement all parties agree that upon execution and acceptance of a supplemental signature page the shareholder agreement shall be amended and the transferee shall have the rights and obligations of a shareholder under the agreement sec_3 of the shareholder agreement provides that shareholders possessing of the total voting power of all outstanding shares may at any time and from time to time agree in writing to authorize or ratify any transfer of shares which would plr-105124-99 otherwise not be permitted by this agreement in which event the transfer shall be deemed for all purposes to comply with this agreement notwithstanding any other provision of this agreement under sec_3 if a transfer of shares is required to be made pursuant to sec_3 iii or iv to a transferee who is not already a shareholder and who has not previously executed or currently refuses to execute a supplemental signature page to the shareholder agreement a non- consenting transferee certain procedures will apply the shareholders may allow the transfer of shares to the non- consenting transferee pursuant to the procedure set forth in sec_3 otherwise the shares that otherwise would be transferred to the non-consenting transferee shall instead be redeemed by the corporation for a price equal to the fair_market_value of the shares as of the valuation_date pursuant to sec_5 of the proposed shareholder agreement any purported transfer in violation of the shareholder agreement shall not affect the beneficial or legal ownership of shares section of the agreement states that subject_to any limitations on dividends or other distributions imposed by statute the corporation shall make pro_rata dividend distributions of money based on ownership of shares to pay the federal state and local income_tax on the income and gain of the corporation net of any_tax benefits produced for the shareholders by the corporation’s losses deductions and credits for the current_year and for each prior year during which the corporation’s s election was in effect that passes through to the shareholders under the applicable provisions of the code in respect of each taxable_year or portion thereof of the corporation for which its s election is in effect section of the proposed shareholder agreement provides that the corporation shall a not issue more than one class of shares b use its best efforts to avoid a termination of its s election and c in the event of a termination of the s election use its best efforts to distribute to each shareholder such shareholder’s net share of the corporation’s undistributed_taxable_income for all taxable years for which the s election was in effect to the extent permitted by law and consistent with the obligations of the corporation to creditors agreements to which the corporation is a party and other business considerations within the period when such a distribution will be considered a non-dividend distribution under sec_1371 section of the proposed shareholder agreement states that if the corporation’s status as an s_corporation is terminated inadvertently and the corporation wishes to obtain a ruling under sec_1362 each shareholder agrees to make any adjustments plr-105124-99 required pursuant to sec_1362 and approved by the corporation’s board_of directors a shareholder’s obligation to make such adjustments shall continue after the shareholder has ceased to own shares in the corporation and after this agreement has terminated except as directed by the shareholder agreement the existing trustee will continue to serve in the same manner as it previously served in addition trust a will continue to be administered in accordance with the terms and conditions set forth in trust sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the gst tax applies to any generation-skipping_transfer made after date sec_26_2601-1 provides an exception to this rule for any distributions from a_trust that was irrevocable on date however this exception does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust where additions were made to the trust after date in addition a modification to a_trust that results in a change in the quality value or timing of any beneficial_interest provided for under the trust instrument will cause the trust to lose its exempt status sec_26_2601-1 provides that except as provided under sec_26_2601-1 where any portion of a_trust remains in the trust after the post-date release exercise or lapse of a power_of_appointment over that portion of the trust and the release exercise or lapse is treated to any extent as a taxable transfer under chapter or chapter the value of the entire portion of the trust subject_to the power that was released exercised or lapsed is treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse sec_26_2601-1 provides a special rule for certain powers of appointment this section provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 will not be treated as an addition to a_trust if- such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise such power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust plr-105124-99 extending beyond any life in being at the date of creation of the trust plus a period of years sec_2041 provides that the term general_power_of_appointment means a power that is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate in the present case it has been represented that trust a was irrevocable on date and that there have been no additions constructive or otherwise to trust a after that date based on the representations made and the facts submitted we conclude that there is no change in the quality value or timing of any beneficial_interest in trust a resulting from the following i the trustee’s consent to corporation’s proposed s election ii the trustee’s election to treat trust a as an electing_small_business_trust and iii the trustee’s execution of the proposed shareholder agreement therefore items i - iii above will not cause trust a to lose its exempt status with respect to the gst tax provided that there are no additions constructive or otherwise to trust a after date distributions from trust a to skip persons will not be subject_to the gst tax except as specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions of the code or under any other provisions of the code specifically we express no opinion on whether trust a will qualify as an electing_small_business_trust within the meaning of sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel passthroughs and special industries by george masnik chief branch enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------------- ----------------------------------------- -------------------- ------------------------ legend x 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 b01 plr-123960-05 date date ----------------------------------------- ----------------------- ---------- ---------------------- ----------------------- d1 state d2 dear -------------- this responds to the letter dated date and related correspondence submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated on d1 under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d2 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election plr-123960-05 is made if the election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to ' a or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under ' a effective d2 x has however established reasonable_cause for not making a timely election and is entitled to relief under ' b conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 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 mailed to your authorized representative sincerely enclosures copy of this letter copy for ' purposes dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries


pan s le - tax_exempt_and_government_entities_division department of the treasury internal_revenue_service te_ge eo examinations commerce street dallas tx date date release number release date legend org organization name address address xx date org address person to contact identification_number in reply refer to te_ge review staff ein last date for filing a petition with the tax_court april 20xx certified mail - return receipt requested dear is a final adverse determination_letter as ‘this to your exempt status under sec_501 of the internal_revenue_code your exemption from federal_income_tax under sec_501 of the code is hereby revoked effective july 20xx our adverse determination was made for the following reasons organizations described in lr c sec_501 and exempt under sec_501 must be both organized and operated exclusively for exempt purposes you have failed to produce documents or otherwise establish that you are operated exclusively for exempt purposes and that no part of your net_earnings inures to the benefit of private shareholders or individuals you failed to respond to repeated reasonable requests to allow the internal_revenue_service to examine your records regarding your receipts expenditures or activities as required by sec_6001 sec_6033 and the regulations thereunder contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending june 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance advocate from the site where the tax_deficiency was determined by calling tel or you can contact the taxpayer or write taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours douglas h shulman commissioner by nanette m downing acting director eo examinations enclosures publication publication notice ce p wet se tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation sincerely renee b wells acting director eo examinations enclosures publication publication report of examination letter catalog number 34809f form 886-a rev date schedule number or exhibit explanations of items tax identification_number year period ended name of taxpayer org december 20xx legend m2 g president organization name poa poa date ax dir-1 director state state president issues whether the org is liable for filing employment_tax forms and the payment of accompanying employment related taxes for all quarters for the tax period ending december 20xx and for the third quarter of 20xx whether the org’s exempt status under sec_501 of the internal_revenue_code irc as an organization described in sec_501 should be revoked effective july 20xx because it did not meet the filing and informational requirements of sec_6001 and sec_6033 and has ceased operations for c purposes issue facts the org org was incorporated under state state law as a non-profit organization on february 19xx the org was organized as to support to the public against big businesses such as insurance_companies and hospitals when attempting to receive compensation_for injury or financial loss as a result of negligence the original mission was to educate the public on legislation and to conduct fundraisers to provide educational materials and website support according to the former and final president of the org president the organization ceased operations approximately september 20xx president was the final officer in charge of closing the office the organization did not file a final form_990 nor did it file articles of dissolution in an attempt to terminate non-profit status president appointed a power_of_attorney poa poa to represent the entity during the examination the org’s largest contributor the examination process only provided the funds for poa’s representation for as the final president of the org president represented the dissolved organization along with the poa during the initial interview conducted may 20xx however he was unwilling to continue to provide information documentation or interviews as he was dissociated with the org since its closure no other former officer was willing to represent the entity the organization was created by the former executive director dir-1 dir-1 was the only employee and compensated officer of the organization in her position as executive director ldir-1 was in sole control of all financial information publication content and exempt_activities for the organization although she did receive assistance with some administrative duties dir-1 was the controlling member of all aspects of the org form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service form 886-a rev sanity schedule number or exhibit explanations of items name of taxpayer tax identification_number year period ended december 20xx org dir-1 was removed by the board_of directors for failing to execute her duties according to the org’s bylaws due to lack of funding and interest in the continuation of the org by the board_of directors the organization ceased to exist upon dir- ’s termination the org reported salaries paid in the amount of dollar_figuredollar_figure for the tax period ending june 20xx on form_990 the organization also reported dollar_figuredollar_figure in salaries paid for the tax period ending july 20xx on form_990 however irs records indicates the amount as dollar_figuredollar_figure from the organization’s reporting of form sec_941 and w- irs records reveal the organization reported all employment_tax information on form sec_941 and w-2 for all quarters for the tax period beginning january 20xx and ending december 20xx the organization also filed form_941 for the first and second quarters of 20xx in addition the org made one payment for tax period beginning july 20xx and ending september 20xx yet neglected to file form_w-2 filed for the 20xx tax_year in the information_document_request idr dated november 20xx the irs requested books_and_records to explain financial discrepancies ensure exempt status and to explain the inconsistencies in the filing of all tax information however the books_and_records for the organization were not stored in a central location and could not be located in the same idr the agent requested form sec_941 and w-2 for all quarters for the tax period ending december 20xx and for the third quarter of 20xx ending september 20xx poa poa provided written notification to the agent on december 20xx which maintained the board_of trustees requested he cease any and all work on the org as this entity does not have funds and can no longer pay him for services the agent followed up with the poa and received confirmation the requested documents and delinquent employment_taxes would not be received issue 1-law sec_3121 and sec_3401 define wages as all remuneration for employment including the cash_value of all remuneration including benefits paid in any medium other than cash sec_3121 and sec_31_3121_d_-1 state an officer of a corporation is an employee of the corporation however an officer of a corporation who as such does not perform any services or performs only minor services and who neither receives nor is entitled to receive directly or indirectly any remuneration is considered not to be an employee of the corporation a director of a corporation in his capacity as such is not an employee of the corporation according to sec_3101 in addition to other taxes there is hereby imposed on the income of every individual a tax equal to percent of the wages for social_security and dollar_figure percent form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service form 886-a schedule number or exhibit - re veskamuige sec_1 explanations of items name of taxpayer tax identification_number year period ended december 20xx org of wages for medicare as defined in sec_3121 received by him with respect to employment in addition sec_3111 maintains in addition to other taxes there is hereby imposed on every employer an excise_tax with respect to having individuals in his employ equal to the same percentages above sec_3402 states that every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables of computational procedures prescribed by the secretary according to sec_31_3121_a_-2 in general wages are received by an employee at the time that they are paid_by the employer to the employee wages are paid_by an employer al the time that they are actually or constructively paid unless under paragraph c of this section they are deemed to be subsequently paid under sec_6656 in the case of any failure by any person to deposit on the date prescribed therefore any amount of tax imposed by this title in such government depository as is authorized under sec_6302 to receive such deposit unless it is shown that such failure is due to reasonable_cause and not due to willful neglect there shall be imposed upon such person a penalty equal to the applicable_percentage of the amount of the underpayment sec_6656 assesses percent if the failure is for more than days irc sdollar_figure a states that in the case of failure_to_file tax_return or to pay tax that there will be in addition to the tax unless it is shown that such failure is due to reasonable_cause and not due to willful neglect there shall be added to the amount_required_to_be_shown_as_tax on such return percent of the amount of such tax if the failure is for not more than month with an additional percent for each additional month or fraction thereof during which such failure continues not exceeding percent in the aggregate issue 1-taxpayer’s position fhe org’s representative acknowledges the requirement for the filing of the form_941 and for the payment of employment_taxes however the organization has ceased operations leaving no funds for the preparation and payment of such items poa was informed by the board_of trustees he is to take no further actions on behalf of the organization no former officer or board member is associated with the dissolved organization and willing to supply the necessary forms or tax_payments issue 1-government’s position the organization’s payment of the salary of dollar_figuredollar_figure to the executive director for 20xx meets the definition of wages according to sec_3121 there are some discrepancies in the reporting of the wages reported on form_990 and information returns w-2 and 941’s issued to the irs form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service form 886-a trevecddnuary name of taxpayer org schedule number or exhibit explanations of items tax identification_number year period ended december 20xx however the wages paid to the executive director was determined to be dollar_figuredollar_figure per quarter for an aggregate of dollar_figuredollar_figure in the 20xx and 20xx tax periods and for dollar_figuredollar_figure for the three quarters ending september 20xx based upon information supplied to the irs and from existing books_and_records the executive director dir-1 primarily performed all functions of the organization and as such is considered an officer of the organization subject_to the provision of sec_3121 and is considered an employee and subject_to social_security medicare and income_tax and withholding as mandated by sec_3101 sec_3111 and sec_3402 dir-1’s wages were actually or constructively paid during all quarters of tax_year ending december 20xx and for the third quarter ending september 20xx according to the requirements of sec_31_3121_a_-2 thus the obligation for employment_taxes remain although the org 1s currently dissolved the organization has not supplied records to make an accurate determination of the correct wages paid for 20xx however the wages reported was substantially correct no wages were reported for the third quarter of 20xx yet the review of form_990 for tax periods ending june 20xx and june determined the organization paid dollar_figuredollar_figure per quarter for every quarter from 20xx and the first two quarters of 20xx this amount was determined as accurate for the tax period ending september 20xx ‘the organization has not established reasonable_cause for the lack of filing or payment of required employment_taxes therefore the org is subject_to the penalties as provided under sec_6656 and sec_6651 issue 1-conclusion the org is liable for the social_security medicare income_tax_withholding and penalties on wages paid to the executive director for the following - withholding penalties tax period _ ending social_security and medicare march 20xx june 20xx september 20xx december 20xx_ september 20xx dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure total dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure issue 2-facts form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service orm 886-a crem caras isp schedule number or exhibit explanations of items name of taxpayer tax identification_number year period ended december 20xx - org the organization ceased business functions by approximately september 20xx the officers in charge of closing the organization obtained the services of poa poa who was authorized to represent them during the course of the examination an associated non-profit organization was willing to pay for his services for the examination only in an idr dated november 20xx the irs requested articles of dissolution and a final form_990 in order to show termination of the organization this idr also requested the org supply books_and_records to prove exempt_function activities and to explain discrepancies in the records received from the initial examination poa provided written notification to the irs on december 20xx which maintained the board_of trustees requested he cease any and all work on the org as this entity does not have funds and can no longer pay him for services the requested records were not supplied by the org based on this information issue 2-law sec_6001 provides that every person liable for any_tax imposed by the irs or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law form 886-a -1994 catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rey ranbary l298 explanations of items tax identification_number year period ended name of taxpayer org _ december 20xx ‘ sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 rul 1959_1_cb_627 concerns an exempt_organization that was requested to rev produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records suflicient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax issue 2-taxpayer position the organization maintains the organization was an exempt_organization until approximately september 20xx the organization was then dissolved and all debts were paid with no remaining funds as the organization is no longer a continuing operation and there are no funds to pay revocation for the preparation filing final termination documents the organization agrees to issue 2-government’s position sec_6033 sets out an affirmative duty on the part of the organization to furnish annual information in such a manner as the secretary may prescribe via forms or regulations the organization has failed to provide the requested information despite adequate notice thus the org has failed to show that it is observing the conditions required for the continuation of its exempt status issue 2-conclusion is the internal revenue service's position that the organization failed to meet the reporting it requirements under sec_6001 and sec_6033 to be recognized as exempt from federal income form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer org tax identification_number year period ended december 20xx tax under sec_501 accordingly the organization's exempt status is revoked effective july 20xx form_1120 returns should be filed for the tax periods ending on or after june 20xkx form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service


internal_revenue_service department of the treasury number info release date index no washington dc person to contact telephone number refer reply to cc ita - genin-155125-01 date date dear this letter responds to your request for information regarding the deductibility of expenses for employee business meals you inquired whether the costs of meals consumed by air traffic controllers during their shift at their regular post of duty are deductible under sec_162 of the internal_revenue_code you have also enclosed an article by martin a kapp c p a tax_advice for controllers the air traffic controller jan date pincite which relates to your inquiry i am pleased to provide the following general information regarding the deductibility of business meal expenses sec_162 allows a deduction for all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business under sec_162 an employee may deduct expenses paid_or_incurred while traveling away from home in pursuit of a trade_or_business meal expenses_incurred while not traveling away from home might also be deductible as entertainment_expenses if they relate closely enough to business activities to escape the disallowance under sec_274 sec_274 provides that no deduction shall be allowed for entertainment_expenses unless the taxpayer establishes that the item was directly related to a substantial_and_bona_fide_business_discussion or that such item was associated with the active_conduct of the taxpayer’s trade_or_business sec_274 generally limits the amount allowable as a deduction under sec_162 for any expense for food beverages or entertainment to percent of the amount that otherwise would be allowable as a deduction under sec_274 the limit is higher in the case of any expense for food or beverages consumed while away from home by an individual during or incident to the period of duty subject_to the hours_of_service limitations of the department of transportation such as a control tower operator sec_274 gradually increases the deductible percentage to percent for taxable years beginning in for taxable years beginning in the deductible percentage for these expenses is percent sec_274 however provides no authority for deducting any meal expense not otherwise deductible under sec_162 sec_1_274-5 of the income_tax regulations provides in part that documentary_evidence such as receipts paid bills or similar evidence sufficient to support an expenditure is required for any expenditure for lodging while traveling away from home and any other expenditure of dollar_figure or more genin-155125-01 sec_262 provides that personal living or family_expenses are not deductible sec_1_262-1 provides that the costs of a taxpayer’s meals not incurred while traveling away from home are personal expenses except as provided by sec_162 sec_212 expenses to produce income and moving_expenses generally the costs of meals at the taxpayer’s regular work location are not deductible under sec_162 the courts have held that daily meals are an inherently_personal expense see eg 80_tc_1073 aff’d 758_f2d_211 7th cir deductions for frequent lunch meetings taken by a law firm disallowed an expense for meals is allowable only if it meets the requirements of sec_162 described above thus the costs of meals can be deductible as a traveling expense while away from home or subject_to the requirements of sec_274 the costs of meals may be deductible as an entertainment expense i do not believe mr kapp’s article conflicts with this information however confusion may arise from the assertion that the taxpayer_relief_act_of_1997 publaw_105_34 greatly expanded travel tax deductions to include all individuals ‘subject to department of transportation hours_of_service limitations ’ martin a kapp c p a tax_advice for controllers the air traffic controller jan date pincite an employee may deduct expenses paid_or_incurred while traveling away from home in pursuit of any trade_or_business as provided by sec_162 the taxpayer_relief_act_of_1997 added sec_274 to the code which allows a deduction for a greater percentage of expenses for food or beverages consumed while away from home by an individual during or incident to the period of duty subject_to the department of transportation hours_of_service limitations than is allowed generally 1p l a genin-155125-01 i hope this information is helpful for your convenience i have enclosed publication travel entertainment gift and car expenses if you have any questions please call at the number above sincerely yours kimberly l koch assistant to branch chief branch office of associate chief_counsel income_tax accounting enclosure


cca_2017080109224553 id uilc number release date from sent tuesday august am to cc bcc subject fw counsel opinion ----- ---------- forwarded me your email and asked me to respond to you since i don’t know anything more about the case than what you have written below it might be easier to discuss this however based on irm tas generally has conversations with the irs office before issuing a tao it sounds like you have done that but i wasn’t sure how long it’s been or whether you and ------ had a settled response date if not i’d try to reach out to her again and explain that if you don’t hear from her by a certain date then you will issue a tao alternatively before issuing a tao you could issue an oar asking her to review the refund request otherwise if you want to issue a tao i don’t see any legal prohibition to ordering appeals to expedite review of the refund claim counsel’s opinion questions the merits of the refund claim but nonetheless agrees that appeals must consider it based on counsel’s advice below treas reg section c and irm it appears that you have the law supporting you if you decide to issue a tao you cannot order appeals to grant the refund claim a substantive determination but you could order appeals to expedite their review of the refund claim although you cannot order appeals to grant the refund claim in your tao you should advocate for the taxpayer and explain why the refund claim should be granted based on the law and facts of the case in particular you should focus on the issues counsel raised with respect to the merits of the claim if you’d like to discuss please let me know we should probably wait though until ------ returns unless this needs immediate attention best regards -------------- -------------------------------------------------------------- ---------- ------------------


internal_revenue_service number release date index number ------------------------------------ -------------------------------------------- --------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no -------------- telephone number ---------------------- refer reply to cc psi plr-141361-12 date legend x ----------------------------------------------------------------------------------------------------------------- ------------- sub1 ----------------------------------------------------------------------------------------------------------------- -------- sub2 ----------------------------------------------------------------------------------------------------------------- d1 d2 d3 --------------------------- ---------------------- --------------- trust ----------------------------------------------------------------------------------------------------------------- ------------- state ------- dear ----------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code code plr-141361-12 facts x was incorporated under the laws of state on d1 and elected to be an s_corporation effective d2 x wholly owns two state corporations sub1 and sub2 x made an election to treat sub1 and sub2 as qualified subchapter_s subsidiaries qsubs effective d2 on d2 trust owned shares of x stock x represents that trust satisfies the qualified_subchapter_s_trust qsst requirements under sec_1361 however x recently discovered in d3 that the income_beneficiary of trust failed to file an election to be a qsst effective d2 additionally the trustee of trust not the beneficiary of trust signed the consent for form_2553 election by a small_business_corporation therefore trust was not a permitted shareholder and x’s s_corporation_election was ineffective because x’s s_corporation_election was ineffective x’s elections to treat sub1 and sub2 as qsubs were also ineffective x represents that the ineffective elections were not motivated by tax_avoidance or retroactive tax planning x further represents that x and its shareholders have filed consistently with the treatment of x as an s_corporation since d2 x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation and sub1 and sub2 as qsubs law and analysis 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_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 which is not an ineligible_corporation and which does not a have more than shareholders b 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 c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that except as provided in regulations prescribed by the secretary for purposes of the code - i a corporation which is a qsub shall not be treated as a separate corporation and ii all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation plr-141361-12 sec_1361 provides that the term qsub means any domestic_corporation which is not an ineligible_corporation as defined in sec_1361 if i percent of the stock of such corporation is held by the s_corporation and ii the s_corporation elects to treat such corporation as a qsub sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that a qsst whose beneficiary makes an election under sec_1361 will be treated as a_trust described in sec_1361 and the beneficiary of such trust shall be treated as the owner for purposes of sec_678 of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a beneficiary of a qsst or his legal_representative may elect to have sec_1361 apply sec_1361 provides that an election under sec_1361 shall be effective up to days and months before the date of the election sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of the trust must make the election under sec_1361 by signing and filing with the service_center where the corporation files its income_tax return the applicable form or a statement including the information listed in sec_1_1361-1 sec_1362 provides that an election under sec_1362 will be 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_corporation sec_1362 provides that if an election under sec_1362 or sec_1361 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or or sec_1361 the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or a qsub as the case may be or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation or a qsub as the case may be as may be required by the secretary with plr-141361-12 respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation or a qsub as the case may be during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election and x’s elections to treat sub1 and sub2 as qsubs were ineffective for the taxable_year beginning d2 we also conclude that the circumstances resulting in such ineffectiveness were inadvertent within the meaning of sec_1362 accordingly under sec_1362 x will be treated as an s_corporation from d2 and thereafter provided x’s s_corporation_election was otherwise valid and has not otherwise terminated under sec_1361 and sub1 and sub2 will be treated as qsubs from d2 and thereafter provided that sub1’s and sub2’s qsub elections were otherwise valid and have not otherwise terminated under sec_1361 this ruling is conditioned on the beneficiary of trust filing a qsst election for trust effective d2 with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the qsst election furthermore as a condition to this ruling a consent to x’s s_corporation_election signed by trust's beneficiary must be filed with the appropriate service_center indicating that the consent is to be associated with the originally filed form_2553 within days of this letter a copy of this letter should be attached to the consent except as specifically ruled above we express no opinion concerning the federal tax consequences of the facts described above under any other provisions of the code specifically we express no opinion regarding x’s eligibility to be an s_corporation sub1’s and sub2’s eligibility to be qsubs or trust’s eligibility to be a qsst plr-141361-12 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely mary beth carchia acting branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes