department of the treasury internal_revenue_service washington d c y tax_exempt_and_government_entities_division uics apr rg dare 5e tp rat legend taxpayer a individual b individual c individual d individual e individual f individual g trust t subtrust u subtrust v date date date date date date page date date date date ira x ira y plan w account u company l company m rule q state o company n percentage percentage sec_4 paes _ this is in response to the sec_401 and sec_408 of the internal_revenue_code submitted on your behalf by your authorized representative as supplemented and revised by correspondence dated as further supplemented by correspondence dated and date and as revised by correspondence dated the request for letter rulings is based on the following facts and representations request for letter rulings under taxpayer a whose date of birth was date died on date at age a resident of state o as of her date of death taxpayer a owned ira x which was maintained with company l and was entitled to receive amounts under plan w which was maintained with company m taxpayer a was survived by her husband individual g and by five nieces and nephews individuals b through f individual b taxpayer a’s nephew was born on date individual c was born on date individuals d and e were born on date and individual f was born on date individual c individuals b through f individual g is older than individual c is the eldest of on or about date taxpayer a named trust t as the beneficiary of of her ira x and subtrust u created under the provisions of trust t as the beneficiary of the remaining of ira x consistent with the language of trust t and as required under the statutes of state o the of ira x payable to trust t as beneficiary thereof was allocated to subtrust v created thereunder in order to fully utilize taxpayer a’s federal estate_tax exemption said allocation was made prior to date the calendar_year following the calendar_year of taxpayer a’s death furthermore said allocation was reflected on the federal form_706 united_states estate and generation- skipping transfer_tax return filed with respect to taxpayer a’s estate on date the internal_revenue_service issued an acceptance letter with respect to the estate of taxpayer a with respect to the allocation of ira x your authorized representative has asserted that rule q found at sec_4 of the statutes of state o required the trustee of trust t to allocate i consequences of making distributions from ira x f urthermore your authorized representative has asserted that said allocation was made in order to comply with the trustee’s duty to manage trust t assets consistent with the trustee’s duty_of impartiality and the purposes of the trust as required under sec_4 of the statutes of state o of ira x to subtrust v in order to minimize the tax page on or about date taxpayer a named trust t as the beneficiary of her interest in plan w in accordance with article fourth of the second amendment of trust t percentage of taxpayer a’s interest in plan w was allocated to subtrust u and percentage of said interest was allocated to subtrust v trust t was created by taxpayer a as grantor and trustor on date trust -t has been subsequently amended and restated your authorized representative has asserted that trust t is valid under the laws of state o article ninth of trust t as amended provides that trust t became irrevocable at the death of taxpayer a individual b and company n are the co-trustees of trust t article fourth of the second amendment to trust t creates subtrust u for the benefit of individual g article fifth of the second amendment to trust t creates subtrust v to benefit individuals b through f article fifth sec_1 of the second amendment to trust t provides in relevant part that a beneficiary’s interest under subtrust v shall be distributed to said beneficiary when he or she reaches the age of individuals b through f had all attained age as of date the date of taxpayer a’s death pursuant to article fifth sec_1 of trust t the interests of the five beneficiaries named therein shall be equal it has been represented that copies of the amended trust t were provided to company l and company m within one month of the date of taxpayer a’s death subsequent to the death of taxpayer a the of ira x payable to trust t and allocated to subtrust v pursuant to the provisions of trust t and as required under the statutes of state o was transferred by means of a trustee to trustee transfer to ira y set up and maintained with company n in the name of taxpayer a with subtrust v as the beneficiary thereof additionally subsequent to the death of taxpayer a the percentage of plan w that was payable to subtrust v percentage was transferred by means of a direct trustee-to-trustee transfer to account u set up and maintained with company n in the name of taxpayer a with subtrust v as the beneficiary thereof individual b intends to accomplish trustee to trustee transfers of his interest in taxpayer a’s ira x now ira y and of his interest in taxpayer a’s plan w now account u such transfers will be into an ira maintained in the name of taxpayer a to benefit individual b and into a sec_403 b account set up and maintained in the name of taxpayer a to benefit individual b respectively page your authorized representative has asserted that with respect to calendar ye distributions intended to meet the requirements of code sec_401 have been made from ira x now ira y to trust with respect to calendar_year p distributions from plan w now account u intended to comply with the minimum_required_distribution rules have been made using the life expectancy of individual g er the life expectancy of individual c f urthermore based on the above facts and representations you through your authorized representative request the following letter rulings that for purposes of code sec_401 taxpayer a timely named individual b as a beneficiary of the interest in her ira x now ira y payable to trust t and allocated to subtrust v that for purposes of code sec_401 taxpayer a timely named individual b as a beneficiary of the percentage percentage of her interest in plan w now account u payable to trust t that individual b as a beneficiary of trust t’s subtrust v’s interest in taxpayer a’s ira x now ira y may transfer by means of a direct trustee to trustee transfer his interest in ira y into another ira described in code sec_408 set up and maintained in the name of taxpayer a for the benefit of subtrust v beneficiary thereof and payable to individual b beneficiary thereof and that individual b as a beneficiary of subtrust v’s interest percentage of taxpayer a’s interest in plan w now account u may transfer by a direct trustee to trustee transfer his interest in account u into another account described in code sec_403 set up and maintained in the name of taxpayer a deceased for the benefit of subtrust v beneficiary thereof and payable to individual b beneficiary thereof that individual b as a beneficiary of subtrust v the beneficiary offs of taxpayer a’s ira x now ira y may use the life expectancy of the eldest beneficiary of subtrust v individual c computed using the single life table which table is found at sec_1 a -9 of the final income_tax regulations question and answer-1 for computing the required_distribution with respect to his interest in ira x now ira y with respect to calendar_year calendar_year that elapses afte said life expectancy is reduced by one for each and nage that individual b as a beneficiary of trust t the beneficiary of taxpayer a’s plan w now account u may use the life expectancy of the eldest beneficiary of trust t individual g computed using the single life table which table is found at sec_1 a -9 of the final income_tax regulations question and answer-1 for computing the required distributions with respect to his interest in plan w now account u with respect to calendar_year said life expectancy is reduced by one for each calendar_year that elapses after with respect to your ruling requests code sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee- i will be distributed to such employee not later than the required_beginning_date or will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary code sec_401 provides in general that if a plan participant ira holder dies before the distribution of his interest has begun in accordance with subparagraph a ii prior to his required_beginning_date then his entire_interest must be distributed within years of his death code sec_401 provides in general that if any portion of the interest of a deceased plan participant ira holder is payable to or for the benefit of a designated_beneficiary such portion will be distributed beginning not later than year after the date of the deceased’s death or a later date as prescribed by the secretary under regulations in accordance with regulations over the life of the designated_beneficiary or a period not extending beyond the life expectancy of the beneficiary code sec_401 provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee attains age with respect to your ruling requests final income_tax regulations under code sec_401 and sec_408 were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite lr b date the preamble to the final regulations in relevant part page7 provide that the regulations apply calendar years beginning for calendar_year taxpayers may rely on the proposed_regulations the proposed_regulations or the final regulations for determjning required minimum distributions for il determining required distributions sec_1_401_a_9_-3 of the final regulations q a-3 a provides in general that with respect to the life expectancy exception to the 5-year rule described in code sec_401 and in a-1 distributions are required to begin to a non-spouse beneficiary on or before the end of the calendar_year immediately following the calendar_year in which the employee died sec_1_401_a_9_-3 of the final regulations q a-4 a provides in relevant part that in the absence of a plan provision to the contrary with respect to an individual who dies prior to reaching his required_beginning_date if said individual has designated a beneficiary distributions from his plan or ira are to be made in accordance with the life_expectancy_rule of code sec_401 and iv sec_1_401_a_9_-5 of the final regulations q a-5 b provides in general that if an employee dies before his required_beginning_date in order to satisfy the requirements of code sec_401 or iv and the life_expectancy_rule described in a-1 of sec_1_401_a_9_-3 the applicable distribution period for distribution calendar years after the distribution calendar_year containing the employee’s date of death is determined in accordance with paragraph c of this a-5 sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to a non-spouse beneficiary the applicable distribution period measured by the beneficiary’s remaining life expectancy is determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar_year immediately following the calendar_year of the employee’s death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee’s death sec_1_401_a_9_-4 of the final regulations q a-1 provides in relevant part that a designated_beneficiary is an individual who is designated as a beneficiary under a plan either by the terms of the plan or by an affirmative election by the employee q a-1 further provides that a person who takes under a will or otherwise under applicable state law will not be a designated_beneficiary unless that individual also takes under a plan sec_1_401_a_9_-5 of the final regulations q a-7 a provides in summary that except as otherwise provided in paragraph c of this a-7 not pertinent to this ruling_request if more than one individual is designated as a beneficiary with respect to an page employee as of the applicable_date for determining the designated_beneficiary the named beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the applicable distribution period sec_1_401_a_9_-4 of the final regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1_401_a_9_-4 of the final regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary however q a-5 of sec_1_401_a_9_-4 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact that there is no corpus the trust is irrevocable or the trust contains language to the effect it becomes irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable within the meaning of a-1 of this section from the trust instrument the documentation described in a-6 of this section has been provided to the plan_administrator sec_1_401_a_9_-4 of the final regulations q a-6 b provides generally with respect to required minimum distributions after the death of the employee that documentation described therein must be provided by the trustee of the trust_beneficiary to the plan_administrator by october of the calendar_year following the calendar_year in which the employee died sec_1_401_a_9_-4 of the final regulations q a-5 c provides in relevant part that the separate_account rules under a-2 of sec_1_401_a_9_-8 are not available to beneficiaries of a_trust with respect to the trust’s interest in the employee’s benefit page sec_1_401_a_9_-9 of the final regulations q a-1 sets forth the single life table used to compute the life expectancy of an individual as previously noted taxpayers must calendar years beginning with calendar_year regulations referenced above ute minimum required distributions for in accordance with the final code sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained code sec_403 provides in relevant part that the amount actually distributed to any distribute under an annuity_contract described herein is taxable to the distribute in the year so distributed under sec_72 relating to annuities code sec_403 provides that under regulations prescribed by the secretary this subsection shall not apply to any annuity_contract or any custodial_account described in paragraph or retirement_income_account described in paragraph unless requirements similar to the requirements of sec_401 and sec_401 are met requirements similar to the incidental death_benefit requirements of sec_401 are met with respect to such annuity_contract or custodial_account or retirement_income_account code sec_408 provides generally that in accordance with the rules of sec_72 amounts paid or distributed from an ira are included in the gross_income by the payee or distributee code sec_408 provides generally that amounts from an inherited ira cannot be rolled over into another ira in general an inherited ira is an ira maintained by an individual who acquired said ira by reason of the death of another if the acquiring individual is not the surviving_spouse of said other individual in this case as noted above taxpayer b is taxpayer a’s nephew code sec_402 provides in general that the rollover provisions of code sec_402 apply to a surviving_spouse of an employee who receives a distribution from a qualified_plan attributable to said employee code sec_403 provides in general that the rules of paragraphs through and of sec_402 and sec_402 apply for purposes of paragraph a relating to rollovers of distributions of code sec_403 annuities page revrul_78_406 c_b provides that the direct transfer of funds from one ira trustee to another ira trustee even if at the behest of the ira holder does not constitute a payment or distribution to a participant payee or distributee as those terms are used in code sec_408 furthermore such a transfer does not constitute a rollover_distribution additionally a trustee to trustee transfer as described in revrul_78_406 does not constitute a distribution or payment as those terms are defined for purposes of code sec_408 finally revrul_78_406 is applicable if the trustee to trustee transfer is directed by the beneficiary of an ira after the death of the ira owner as long as the transferee ira is set up and maintained in the name of the deceased ira owner for the benefit of the beneficiary revrul_90_24 1990_1_cb_97 provides that that there is no actual distribution within the meaning of code sec_403 where funds are transferred from one sec_403 investment to another sec_403 investment if the transferred funds continue after the transfer to be subject_to any distribution restrictions imposed on them prior to the transfer by sec_403 or sec_403 revrul_90_24 also provides that in determining whether any of the transfers referenced therein constitutes an actual distribution it is irrelevant whether a complete interest or partial interest is transferred and whether the transferring individual is a current employee a former employee or a beneficiary of a former employee with respect to your first two ruling requests lle of taxpayer a’s ira x now ira y was payable to trust t and allocated to subtrust v created thereunder percentage of taxpayer a’s interest in plan w now account u was allocated to subtrust v trust t and the subtrusts created thereunder became irrevocable at the death of taxpayer a_trust t and the subtrusts created thereunder are valid under the laws of stateo a copy of trust t was timely delivered to companies l and m f inally the identity of the beneficiaries of trust t and subtrust v can be determined by perusing their terms individual b is a named beneficiary of subtrust v thus trust t and the subtrusts created thereunder constitute see-through trusts within the meaning of sec_1_401_a_9_-4 of the final regulations q a-5 as a beneficiary of subtrust v the life expectancy of individual b must be scrutinized in order to determine the life expectancy to be used to compute required distributions from ira x now ira y and plan w now account u thus with respect to your first two tuling requests we conclude as follows page that for purposes of code sec_401 taxpayer a timely named individual b as a beneficiary of the interest in her ira x now ira y payable to trust t and allocated to subtrust vv that for purposes of code sec_401 taxpayer a timely named individual b as a beneficiary of the percentage percentage of her interest in plan w now account u payable to trust t with respect to your rn fourth ruling_request as noted above individual b is one of five beneficiaries of them of taxpayer a’s ira x now ira y allocated to subtrust v and one of five benefictaries of percentage of taxpayer a’s interest in plan w now account u allocated to subtrust v individual b is not taxpayer a’s surviving_spouse thus individual b is not eligible to receive a distribution of his interest in either ira x now ira y or plan w now account u and roll over either distribution into an ira or another sec_403 account even if the recipient ira or sec_403 account is set up in the name of taxpayer a to benefit individual b however a trustee-to-trustee transfer does not constitute a distribution thus such a transfer may be accomplished by a beneficiary who is not the surviving_spouse of either a deceased ira owner or a deceased sec_403 annuitant furthermore a trustee to trustee transfer from one ira to another or one b account to another may be accomplished after the date of death of an ira owner or sec_403 annuitant by a beneficiary of said ira owner or sec_403 annuitant as long as the transferee ira or sec_403 account remains in the name of the decedent for the benefit of a beneficiary in this case individual b intends to accomplish trustee to trustee transfers of his interest in taxpayer a’s ira x now ira y and also of his interest in taxpayer a’s plan w now account u such transfers will be into an ira maintained in the name of taxpayer a to benefit individual b and into a sec_403 account set up and maintained in the name of taxpayer a to benefit individual b respectively v’s interest in taxpayer a’s ira x now ira y may transfer by means of a direct trustee to trustee transfer his interest in ira y into another ira described in code sec_408 set up thus with respect to your third and fourth ruling requests we conclude a sec_3 that individual b as a beneficiary of trust t’s subtrust follows page and maintained in the name of taxpayer a for the benefit of subtrust v beneficiary thereof and payable to individual b beneficiary thereof and that individual b as a beneficiary of subtrust v’s interest percentage of taxpayer a’s interest in plan w now account u may transfer by a direct trustee to trustee transfer his interest in account u into another account described in code sec_403 set up and maintained in the name of taxpayer a deceased for the benefit of subtrust v beneficiary thereof and payable to individual b beneficiary of subtrust v thereof with respect to your fifth and sixth ruling requests as noted above if distributions are made to a_trust even if the trust is a see-through trust within the meaning of q a- sec_5 of sec_1 a -4 of the final regulations the separate_account rules of a-2 of sec_1_401_a_9_-8 of the final regulations are not available to the beneficiaries of the trust thus in general each beneficiary of a_trust must receive minimum required distributions over the life expectancy of the eldest beneficiary for purposes of determining which trust beneficiary’s life expectancy will be used to determine the minimum_required_distribution payout period the term beneficiary in general includes individuals or entities who are not eligible to be treated as designated beneficiaries within the meaning of code sec_401 the generic issue raised in your fifth and sixth ruling requests is which trust t beneficiaries must be considered in determining who is the designated_beneficiary of both ira x redesignated ira y and plan w redesignated account u i of said ira said as a general_rule if a_trust is named as the beneficiary of either a qualified_plan or the specific issue raised with respect to your fifth ruling_request is whether for purposes of code sec_401 the life expectancy of individual g eneficiary of subtrust u but not of subtrust v must be considered with respect to the of ira x now ira y allocated to subtrust v in this regard we note that although trust t was the named beneficiary of was allocated directly to subtrust v created under the provisions of trust t by the trustee of trust t an ira all of the beneficiaries of said trust must be considered for purposes of determining who if anyone is the designated_beneficiary for purposes of code sec_401 thus under the general_rule the beneficiaries of subtrust u would have to be considered to determine who is the code sec_401 designated_beneficiary with respect to the j of ira x now ira y that was bequeathed by taxpayer a to trust t page in this case it has been represented that thele of ira x payable to trust t was allocated to subtrust v in order to comply with the statutes of state o it has also been represented that said allocation occurred prior to date however said actions cannot negate the language of taxpayer a’s beneficiary designation pursuant to which trust t and not subtrust v was the named beneficiary of be of his ira x the allocation of said j of ira x to subtrust v was made in accordance with the laws of state o and not in accordance with the beneficiary designation of taxpayer a and thus falls within the limitations found in sec_1_401_a_9_-4 of the final regulations q a-1 therefore under this specific set of facts we will apply the general_rule set forth above and for purposes of determining who is the designated_beneficiary of the ie of ira x now ira y allocated to subtrust v we will consider the beneficiaries of subtrust v and of subtrust u individual g is the eldest of said beneficiaries thus with respect to your fifth ruling_request we conclude as follows that individual b as a beneficiary of subtrust v the beneficiary of a of taxpayer a’s ira x now ira y must use the life expectancy of the eldest beneficiary of subtrust u individual g computed using the single life table which table is found at sec_1 a -9 of the final income_tax regulations question and answer-1 for computing the required_distribution with respect to his interest in ira x now ira y with respect to calendar ye calendar_year that elapses after -_ said life expectancy is reduced by one for each with respect to your sixth letter_ruling request which refers to plan w now account u we note that percentage thereof was allocated to trust t and subsequently reallocated to subtrust v in order to benefit individuals b through f however such reallocation was accomplished by the trustee s of trust t and was not done by taxpayer a thus based on the specific facts and representations surrounding this ruling_request we conclude as follows with respect to your sixth ruling_request that individual b as a beneficiary of trust t the beneficiary of taxpayer a’s plan w now account u may use the life expectancy of the eldest beneficiary of trust t individual g computed using the single life table which table is found at sec_1 a -9 of the final income_tax regulations question and answer-1 for computing the required distributions with respect to his interest in plan w now account u with page qvuslouse respect to calendar_year calendar_year that elapses after j said life expectancy is reduced by one for each this ruling letter is based on the assumption that ira x and ira y either have met are meeting or will meet the requirements of code sec_408 at all times relevant thereto it also assumes that trust t and subtrusts u and v created thereunder are valid under the laws of state o as represented finally it assumes that plan w now account u constitutes an account described in code sec_403 pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative this letter is directed only to the taxpayer that requested it and is based solely on the representations made with respect thereto sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions concerning this letter_ruling please contact esquire at not a toll-free number or ef ax sincerely yours - enclosures veer mow frances v sloan manager employee_plans technical group deleted copy of ruling letter notice of intention to disclose


t c memo united_states tax_court joseph s king petitioner v commissioner of internal revenue respondent docket no filed date joseph s king pro_se margaret a martin for respondent memorandum opinion goldberg special_trial_judge this case was assigned pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 this matter is before the court on respondent’s motion for summary_judgment pursuant to rule all section references are to the internal_revenue_code in effect for the years in issue all rule references are to the tax_court rules_of_practice and procedure in the motion respondent contends that the court should sustain additions to tax for the taxable years and in the amounts of dollar_figure and dollar_figure respectively pursuant to sec_6651 background in two notices of deficiency both dated date respondent determined that there are additions to tax due from petitioner pursuant to sec_6651 for the taxable years and in the amounts of dollar_figure and dollar_figure respectively the sec_6651 late filing addition is the only issue in this case petitioner resided in kennewick washington when he filed his petition on date after several procedural matters were resolved by order dated date respondent filed a notice of proceeding in bankruptcy on date by order dated date pursuant to u s c sec_362 all proceedings before this court were automatically stayed in a status report filed date respondent informed the court that petitioner received a discharge in his bankruptcy case on date thereafter on date we issued an order lifting the stay of proceedings on date respondent filed the present motion we notified petitioner of the filing and requested that he file an objection with the basis therefor on or before date to date we have not received an objection from petitioner discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials 90_tc_678 it is appropriate if the pleadings and other acceptable materials show that there is no genuine issue as to any material fact and a decision may be rendered as a matter of law rule b 85_tc_527 the moving party bears the burden of proving that summary_judgment is warranted 477_us_317 78_tc_412 in deciding a motion for summary_judgment the court will construe factual inferences in a manner most favorable to the opposing party 85_tc_812 based on the exhibits attached to the motion the pleadings and declarations we find the following petitioner filed a joint income_tax return for the taxable_year which was received by respondent’s ogden utah service_center on date the return was due to be filed on or before date petitioner filed a joint income_tax return for the taxable_year which was received by respondent’s ogden utah service_center on date the return was due to be filed on or before date respondent reviewed the administrative file for each taxable_year in issue the files contain no extensions of time for filing of a federal_income_tax return nor are there any explanations from petitioner as to reasonable_cause for late filings respondent reviewed the transcripts of account for each taxable_year in issue the transcripts of account revealed that no extensions of time for filing of federal_income_tax returns were sought or granted in the preparation of this case for trial respondent requested in a letter dated date that petitioner provide respondent with a written_statement explaining why the addition_to_tax for late filing under sec_6651 would not be applicable if petitioner chose not to concede the issue petitioner did not answer respondent’s date letter sec_6651 imposes an addition_to_tax for failure_to_file a timely tax_return the addition_to_tax is equal to percent of the amount of the tax required to be shown on the return if the failure_to_file is not more than month an additional percent is imposed for each month or fraction thereof in which the failure_to_file continues to a maximum of percent of the tax the addition_to_tax is applicable unless petitioner establishes that the failure_to_file was due to reasonable_cause and not willful neglect here petitioner has not opposed respondent’s motion he has not offered any explanation to establish that the late filing of his and income_tax returns was due to reasonable_cause therefore there is no genuine issue as to any material fact accordingly respondent is entitled to a summary adjudication with respect to petitioner’s liability for the additions to tax as a matter of law to reflect the foregoing an appropriate order and decision will be entered for respondent


department of the treasury internal_revenue_service washington d c date number info release date uilc genin-130826-02 cc tege eoeg et1 memorandum for director internal_revenue_service center kansas city mo attn entity control from office of division counsel associate chief_counsel tax exempt and government entities subject railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective date we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that became an employer under the railroad_retirement_tax_act effective date please take the appropriate action regarding this business will e mcleod cc


internal_revenue_service index no number release date cc dom p si 7-plr-114300-98 legend a b d f g h1 h2 i k m r x z dear in a letter dated you requested rulings regarding your purchase of gas properties the transaction was later modified as described in a letter dated date you represented that a entered into agreements to purchase certain gas interests in i from b production from the subject interests includes gas produced from the devonian_shale which is a qualified_fuel under sec_29 of the internal_revenue_code_of_1986 as amended as consideration for the subject interests a will pay b cash equal to d a will also be obligated to pay a contingent promissory note a non-recourse promissory note and a volumetric production_payment retained by b the non-recourse promissory note is in the principal_amount of r and bears interest at the rate of z payments of principal and interest are made in accordance with a schedule the entire balance of the non- recourse promissory note including unpaid interest is due and payable in full on x prior to maturity and notwithstanding the payment schedule payments are to be made out of actual net_proceeds received from sale of minerals produced from the properties any amounts due but unpaid will be paid in succeeding months the payments required under the production_payment are m of the gross_proceeds from the sale of hydrocarbons from the subject interests during the payment period less amounts due under the non-recourse note and expenses listed in the purchase agreement the volumetric production_payment will terminate when the production from the subject interests equals f percent of the current at the time of creation of the production_payment estimate of the economically recoverable reserves in the subject interests it is anticipated that the non-recourse promissory note will terminate before the volumetric production_payment when the production_payment was created the estimated present_value of the production from the subject interests after the production_payment and the non-recourse promissory note terminate was greater than of the present_value of the entire production stream from all the subject interests following termination of the production_payment a will be entitled to of the income from production attributable to the subject interests as part of the assignment b reserved an interest the contingent_interest in any reserves that might exist after production of of the reserves currently estimated to exist the contingent promissory note for any payment period is defined as g multiplied by the dollar amount of the estimated sec_29 credits attributable to sales of qualified_fuels from the subject interests the payments are adjusted yearly to k of the actual credit earned b was granted an option to re-acquire the subject interests for fair_market_value the repurchase option is exercisable between h1 and h2 a has also entered into a management agreement with b the management agreement is typical of those within the industry the rulings requested are a has acquired the entire economic_interest of b in the transferred properties the volumetric production_payment is properly characterized as a purchase_money_mortgage loan under sec_636 of the code the contingent promissory note is not an economic_interest in the properties the non-recourse promissory note is not an economic_interest in the properties any sec_29 credit attributable to production from the properties after their sale to a is attributable to a sec_1_611-1 of the income_tax regulations provides that an economic_interest is possessed in every case in which the taxpayer has acquired by investment any interest in mineral in place and secures by any form of legal relationship income derived from the extraction of the mineral to which the taxpayer must look for a return of the taxpayer’s capital sec_1_614-1 provides that the term_interest means an economic_interest in a mineral deposit within the meaning of sec_1_611-1 the term includes working or operating interests royalties overriding royalties net profits interests and to the extent not treated as loans under sec_636 production payments in 310_us_404 the taxpayer received payments which could be satisfied out of any sale of the fee simple title of the land as well as production of the oil because the taxpayer was not looking solely to the oil production for a return on his investment the court found he did not have an economic_interest sec_636 and sec_1_636-1 provide that a production_payment created and retained upon the transfer of the mineral_property burdened by the production_payment is treated as a purchase_money_mortgage loan on the burdened mineral_property sec_1_636-3 defines the term production_payment to mean a right to a specified share of the production from mineral in place if as and when produced or the proceeds from the production the right must be an economic_interest in the mineral in place it may burden more than one mineral_property and the burdened mineral_property need not be an operating_mineral_interest the right must have an expected economic life at the time of its creation of shorter duration than the economic life of one or more of the burdened mineral properties a right to mineral in place that can be required to be satisfied by other than the production of mineral from the burdened mineral_property is not an economic_interest in mineral in place a production_payment must be limited by a dollar amount a quantum of mineral or a period of time a right to mineral in place has an economic life of shorter duration than the economic life of a mineral_property burdened thereby if the right may not reasonably be expected to extend in substantial amounts over the entire productive life of the mineral_property sec_1_636-1 of the regulations states that the payor and payee shall determine their allowable deductions as if the production_payment were a loan and refers to sec_483 of the code sec_483 in turn refers to sec_1272 through for the treatment of original_issue_discount instruments sec_29 provides a credit for qualified_fuel as defined in sec_29 sold by the taxpayer to an unrelated_person during the taxable_year the production of which is attributable to the taxpayer a transaction will be classified as a sale_or_exchange of a mineral_interest in cases in which the owner of a continuing property interest assigns that interest and retains a non- continuing interest in production economic_interest that is an interest that is not coterminous with the productive life of the transferred property in this case b will retain a production_payment that is limited to a specified number of units of mineral based on a stated percentage of the reserves currently known to exist at the time the transaction is consummated if additional reserves are found to exist after all reserves currently known to exist have been produced b will acquire a contingent_interest which is a specified percentage of any such additional reserves the production_payment is payable solely from production from the burdened properties and has an economic life of shorter duration than the economic life of the burdened properties because the interest b retained in any additional reserves does not come into being unless and until the additional reserves not at present believed to exist are determined to exist it is not a continuing interest accordingly based on the information submitted and the representations made the volumetric production_payment meets the requirements of sec_1_636-3 and is treated as a purchase_money_mortgage loan the contingent promissory note is to be paid from sources other than the subject properties having an alternate source_of_income the note cannot be an economic_interest following anderson likewise the non-recourse promissory note cannot be an economic_interest since it must be extinguished on x from sources other than the subject properties based solely on the representations made and the information submitted we conclude that a has acquired the entire economic_interest of b in the transferred properties until and unless b repurchases the property or the contingent_interest arises the volumetric production_payment is properly characterized as a purchase_money_mortgage loan under sec_636 of the code the contingent promissory note is not an economic interest in the properties the non-recourse promissory note is not an economic interest in the properties any sec_29 credit attributable to production from the properties after their sale to a is attributable to a until and unless b repurchases the property or the contingent_interest arises no opinion is expressed or implied regarding the determination of the buyer’s basis in the subject interests no opinion is expressed or implied regarding the determination of amounts attributable to interest or principal pursuant to the non-recourse note or the production_payment except as ruled above we express or imply no opinion as to the federal tax consequences of this transaction under any other provision of the code specifically we express or imply no opinion whether any fuel produced from the properties is qualified_fuel within the meaning of sec_29 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 a copy of this ruling should be attached to your tax_return filed for the year in which the transaction covered by this ruling was consummated a copy is enclosed for this purpose sincerely yours assistant chief_counsel passthroughs and special industries by joseph h makurath senior technician reviewer branch


internal_revenue_service number release date index number ------------------------------ ------------------------ ---------------------- ---------------------------- - department of the treasury washington dc person to contact -------------------- id no ------------- telephone number -------------------- refer reply to cc psi b02 - plr-149062-05 date date ------------------------ x a ------------------------- ---------------------------------------------- country d1 dear ---------------- --------------------------- ------------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 the information submitted states that x was formed under the laws of country a the owner of x represents that x is a foreign_entity eligible to elect to be treated as disregarded_entity and that x was intended to be classified as a disregarded_entity effective d1 however form_8832 entity classification election was not filed timely for x sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes sec_301_7701-3 i provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member plr-149062-05 does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that to elect to be classified other than as provided in b an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 gives the commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or an announcement published in the internal_revenue_bulletin determine whether to grant a discretionary extension of time these standards indicate that the commissioner should grant relief when the taxpayer provides evidence proving 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 sec_301_9100-3 sets forth the standards which the commissioner uses to based solely on the facts submitted and representations made we conclude that the requirements of ' have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity effective d1 a copy of this letter should be attached to the form_8832 a copy is included for that purpose federal tax consequences of the facts described above under any other provision of the code except as specifically set forth above no opinion is expressed concerning the plr-149062-05 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 sincerely heather c maloy associate chief_counsel passthroughs special industries copy of this letter copy for sec_6110 purposes enclosure cc


tax_exempt_and_government_entities_division uil number release date department of the treasury internal_revenue_service tege eo examinations mail stop dal commerce st dallas texas date date tax_year s ending taxpayer_identification_number person to contact employee identification_number employee telephone number phone certified mail - return receipt dear this is a final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in code sec_501 for the tax period s above your determination_letter dated 19xx is revoked our adverse determination as to your exempt status was made for the following reason s you have exceeded the gross_receipts limitation on income from non-member sources also you do not adhere to the record keeping requirements of revproc_70_17 as you were unable to produce records regarding your membership or your rental income this letter isn’t a determination of your exempt status under sec_501 for any periods other than the tax period s listed above organizations that are not exempt under sec_501 generally are required to file federal_income_tax returns and pay tax where applicable for further instructions forms and information please visit www irs gov if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition or complaint in one of these three courts must be filed within days from the date this determination_letter was mailed to you please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory_judgment by referring to the enclosed publication you may write to the courts at the following addresses united_states tax_court second street n w washington d c u s court of federal claims madison place n w washington d c u s district_court for the district of columbia constitution ave n w washington d c processing of income_tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory_judgment under sec_7428 of the internal_revenue_code you may also be eligible for help from the taxpayer_advocate_service tas tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayeradvocate irs gov or call if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter sincerely maria hooke director eo examinations enclosures publication department of the treasury internal_revenue_service tax exempt and government entities irs exempt_organizations examinations date date - taxpayer_identification_number e orm tax_year s ended person to contact employee id telephone fax manager’s contact information employee id telephone response due_date certified mail return receipt requested dear why you're receiving this letter we enclosed a copy of our audit report form 886-a explanation of items explaining that we propose to revoke your tax-exempt status as an organization described in internal_revenue_code irc sec_501 c if you agree if you haven't already please sign the enclosed form_6018 consent to proposed action and return it to the contact person shown at the top of this letter we'll issue a final adverse letter determining that you aren't an organization described in sec_501 c for the periods above after we issue the final adverse determination_letter we'll announce that your organization is no longer eligible to receive tax deductible contributions under sec_170 if you disagree request a meeting or telephone conference with the manager shown at the top of this letter send any information you want us to consider if you request a meeting with the manager or file a protest with the irs appeals_office send additional information as stated in and above you'll still be able to file a protest with irs appeals_office after the meeting or after we consider the information the irs appeals_office is independent of the exempt_organizations division and resolves most disputes informally if you file a protest the auditing agent may ask you to letter rev catalog number 34809f irs appeals_office enough time to consider your case for your protest to be valid it must contain certain specific information including a statement of the facts applicable jaw and arguments in support of your position for specific information needed for a valid protest refer to publication how to appeal an irs determination on tax- exempt status fast track mediation ftm referred to in publication the examination process generally doesn’t apply now that we've issued this letter request technical_advice from the office of associate chief_counsel tax exempt government entities if you feel the issue hasn’t been addressed in published precedent or has been treated inconsistently by the irs if you're considering requesting technical_advice contact the person shown at the top of this letter if you disagree with the technical_advice decision you will be able to appeal to the irs appeals_office as explained above a decision made in a technical_advice_memorandum however generally is final and binding on appeals if we don't hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final adverse determination_letter contacting the taxpayer_advocate office is a taxpayer right the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayveradvocate irs gov or call oo for additional information you can get any of the forms and publications mentioned in this letter by visiting our website at www irs gov forms-pubs or by calling 800-tax-form if you have questions you can contact the person shown at the top of this letter sincerely maria hooke director exempt_organizations examinations enclosures form 886-a form_6018 letter rev catalog number 34809f form 886-a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended 20xx 20xx issue should the tax exempt status of as of january 20xx facts under sec_501 be revoked bylaws were approved and adopted on january 19xx and states membership must be male and female people of acceptable for the membership will also be men or women married to person of such descent or person of such parentage either on mother's or father side all members must be years of age and over all applicants must be of sound mind and of good character in what is now known as northern origin which includes and the organization was incorporated in the state of certificate of incorporation states the purpose of the organization is to promote the friendship of its members to inculcate in them a high sense of loyalty to each other to stimulate their intellectual advancement to hold meetings and social gatherings to foster interest in and promote civic patriotic and social work in the community to cultivate social intercourse among its members to establish a center of work and interest for the members in order to improve their health physical and mental condition to promote friendship social ability and culture among members on february 19xx the received letter dated january 19xx indicating that the organization was exempt under sec_501 c of the internal_revenue_code letter states in part a sec_501 organization is permitted to receive up to of its gross_receipts including investment_income from sources outside of its membership without losing its tax-exempt status of the not more than of the gross_receipts may be derived from the use of the club's facilities or services by the general_public income in excess of these limits may jeopardize your continued tax exemptstatus our examination of form_990 ez filed with the irs for the tax years ending december 20xx and december 20xx shows that the organization received rental income of dollar_figure in 20xx and dollar_figure in 20xx total membership dues for the same periods equal dollar_figure and dollar_figure respectively the organization owns a facility located at and rents there are apartments on each floor in apartments are rented the service has no record of the organization filing form total t to report rental income for the tax years ending december 20xx and december 20xx our review of the organization's books and bank records determined income was derived from the sources as reported below 20xx__-12 20xx membership dues rental income gross_income from fundrai total dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure total dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure form 886-a rev page -1- department of the treasury - internal_revenue_service form 886-a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended 20xx 20xx the investment_income represent and of gross_receipts for the years under exam the membership dues represent and of gross_receipts for the years under exam a membership roster and the amount of dues each member paid was requested but the organization was unable to provide this information the organization stated that there were members who paid dollar_figure in annual dues in 20xx and who paid a dollar_figure in annual dues in 20xx no additional supporting documents were provided lease agreements for the apartment rentals and a schedule of payments was requested but the organization was not able to any of these agreements and only produced a list as follows 20xx 20xx dollar_figure month dollar_figure month dollar_figure month dollar_figure month dollar_figure month dollar_figure month dollar_figure month dollar_figure month no additional supporting documents were provided an internet search shows that organization listed the apartments for rent on the following websites https httos awww see attached exhibit exhibit and exhibit the organization fails to maintain records to support that is activities are for exempt purposes law internal_revenue_code sec_501 provides exemption to clubs organized for pleasure recreation and other nonprofitable purposes substantially_all of the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder income_tax regulation c -1 a states in part exemption is provided only to clubs which are organized and operated exclusively for pleasure recreation and other nonprofitable purposes and exemption extends to social clubs and recreation clubs which are supported solely by membership fees dues and assessments form 886-a rev page -2- department of the treasury - internal_revenue_service form 886-a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended 20xx 20xx revproc_70_17 1971_1_cb_683 describes the records required when nonmembers use a club's facilities it states in part that a club must maintain books_and_records of each use and that the amount derived from each use the committee reports for public law senate report no 2d session c b states that it is intended that social clubs be permitted to receive up to of their gross_receipts including investment_income from sources outside of their membership without losing their tax-exempt status within thi sec_35 no more than of the gross_receipts may be derived from the use of the club's facilities or services by the general_public revrul_58_589 c states in part the organization must have an established membership of individuals personal contacts and fellowship the commingling of members must be material to the organization revrul_66_149 c states in part a social_club is not exempt from federal_income_tax as an organization described in sec_501 of the code where it regularly derives a substantial part of its income from nonmember sources taxpayer's position the organization does not agree that the tax-exempt status of revoked should be governments position it is the government's position that the tax exempt status of because the organization has exceeded the gross_receipts limitation on income from non- member sources be revoked the organization also does not adhere to the recordkeeping requirements of revproc_70_17 as they were unable to produce records regarding their membership or the rental income exempt status should be revoked because it regularly derives a substantial part of its income from nonmember sources forms ez clearly discloses that the revenue exceeds the limitation on nonmember income sources established by public law conclusion is not operating as an organization described in sec_501 of the internal_revenue_code accordingly we propose to revoke the organization's exempt status effective as of january 20xx the organization will be required to file form_1120 for all tax periods subsequent to the revocation of their tax exempt status form 886-a rev page -3- department of the treasury - internal_revenue_service


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc intl plr date date legend index number number release date in re taxpayer cpa firm individual a date a date b dear this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file form_8279 election to be treated as a fsc or as a small_fsc pursuant to temp sec_1_921-1t q a effective for the tax_year beginning on date a the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon 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 material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a is a senior manager with cpa firm one of his duties was to ensure that an election to treat taxpayer as a fsc was timely filed on or before date b with the irs for various reasons individual a believed that form_8279 had been forwarded to the parent of taxpayer for signature it was discovered after date b that form_8379 had not been filed taxpayer’s failure to timely file form_8279 has not been discovered by the irs in re plr sec_301_9100-1 provides that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i treas reg provides rules for extensions of time for making regulatory elections when the deadline for making the election is other than a due_date prescribed by statute a regulatory election means an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 sec_301_9100-3 provides that requests for relief subject_to this section 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 in the present situation sec_1_921-1t q a fixes the time to elect treatment as an fsc or small_fsc thus the commissioner has discretionary authority pursuant to sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file form_8279 effective for the tax_year beginning on date a this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer and the other authorized representative sincerely allen goldstein reviewer office of the associate chief_counsel international


t c memo united_states tax_court margaret m merker petitioner v commissioner of internal revenue respondent docket no filed date margaret m merker pro_se marjory a gilbert for respondent memorandum findings_of_fact and opinion powell special_trial_judge this case was assigned pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 unless otherwise indicated all 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 in petitioner's federal income taxes for the taxable years and in the amounts of dollar_figure and dollar_figure respectively respondent also determined additions to tax pursuant to sec_6651 in the respective amounts of dollar_figure and dollar_figure petitioner resided in chicago illinois at the time she filed her petition after concessions the primary issue is whether amounts received by petitioner as a disability retirement annuity under the federal employees' retirement_system fers are excludable from gross_income for the years in issue findings_of_fact petitioner worked in a distribution center for the u s postal service postal service from date to date as a result of the inhalation of dust emanating from the postal machines petitioner developed severe asthma or occupational respondent concedes that for the taxable years and petitioner is not liable for the additions to tax under sec_6651 due to petitioner's reliance on the erroneous advice of the u s office of personnel management discussed infra petitioner is entitled to credits for the permanently_and_totally_disabled pursuant to sec_22 in the amounts of dollar_figure and dollar_figure respectively and if the fers disability retirement annuity is not subject_to federal_income_tax petitioner was not required to file federal_income_tax returns petitioner concedes that the interest and dividends described in the notice_of_deficiency constitute taxable_income congress created the federal employees' retirement_system the successor to the civil service retirement_system with the enactment of the federal employees' retirement_system act of publaw_99_335 100_stat_514 codified as amended pincite u s c secs disease to compound petitioner's medical problems petitioner was injured when she fell while on the job petitioner has severe arthritis has had one knee replaced and as of the date of trial was scheduled for surgery to replace her other knee these maladies have left petitioner completely and permanently disabled in date at the age of petitioner retired from the postal service due to her disability petitioner subsequently began receiving a fers disability retirement annuity disability annuity petitioner received disability annuity payments during and in the amounts of dollar_figure and dollar_figure respectively petitioner was told by the u s office of personnel management opm that her disability annuity was not subject_to federal_income_tax no federal_income_tax was withheld from the payments as a result of the advice from opm petitioner did not file federal_income_tax returns for the taxable years or respondent issued a notice_of_deficiency for the taxable years and in the notice_of_deficiency respondent determined that petitioner failed to report the disability annuity payments as well as interest and dividend income in the amounts of dollar_figure and dollar_figure respectively as gross_income for the taxable years and as of the date of trial no notice_of_deficiency had been issued to petitioner for the taxable_year opinion petitioner's brief does not directly address the taxability of the disability annuity but rather expresses petitioner's frustration and anger at the u s government her various statements requests and arguments reflect these feelings this court is a court of limited jurisdiction see sec_7442 60_tc_977 our jurisdiction to redetermine a deficiency is dependent on the issuance of a valid notice_of_deficiency sec_6213 rule a 106_tc_430 97_tc_437 our jurisdiction does not extend to settling employment disputes with various departments and agencies of the united_states see sec_7442 steines v commissioner tcmemo_1991_588 affd without published opinion 12_f3d_1101 7th cir the issue over which we have jurisdiction is whether petitioner's fers disability annuity payments or any portion thereof are excludable from gross_income sec_61 defines gross_income broadly as all income from whatever source derived the supreme court has given a liberal construction to this broad phraseology in recognition of petitioner's petition also sought to bring her taxable_year before the court since no notice_of_deficiency has been issued for petitioner's taxable_year we lack jurisdiction over petitioner's taxable_year 106_tc_430 the intention of congress to tax all gains except those specifically exempted 348_us_426 exclusions from income are matters of legislative grace and are construed narrowly commissioner v schleier u s ___ 115_sct_2159 966_f2d_668 fed cir a taxpayer seeking a deduction or exclusion must be able to point to an applicable statute and show that he comes within its terms 292_us_435 commissioner v schleier supra generally sec_72 excludes from gross_income any amount_received_as_an_annuity under an annuity endowment or life_insurance_contract to the extent such an amount is attributable to the taxpayer's investment_in_the_contract sec_1_72-15 income_tax regs provides that as a general_rule sec_72 does not apply to any amount received as an accident or health benefit sec_104 excludes from gross_income any amounts described in paragraphs through of that section paragraphs and of sec_104 are on their face inapplicable to the facts before us and we focus our attention on the remaining paragraphs in addition sec_105 sec_104 applies to taxpayers that have served in the armed_forces or certain other organizations with which petitioner continued includes in gross_income certain amounts received under accident and health_plans sec_104 sec_104 excludes from gross_income amounts received under workmen's_compensation acts as compensation_for personal injuries or sickness to meet the definition of workmen's_compensation acts for purposes of sec_104 the statute in issue must require as a precondition to eligibility for benefits that the injury be incurred in the course of employment 804_f2d_553 9th cir affg 82_tc_630 78_tc_864 affd per curiam 709_f2d_1206 8th cir the relevant inquiry is into the nature of the statute pursuant to which the payment is made and not the source of the particular taxpayer's injury 806_fsupp_932 n d ala affd per curiam 3_f3d_389 11th cir thus if the statute does not qualify the fact that the taxpayer's injury was in fact work related is irrelevant id eligibility for disability retirement benefits under fers is dependent on completion of months of creditable civilian continued has had no affiliation sec_104 applies to victims of terrorist attacks petitioner does not purport to be the victim of a terrorist attack service and a determination of disability u s c sec a a disability is defined in u s c sec a b which provides for purposes of this subsection an employee shall be considered disabled only if the employee is found by the office opm to be unable because of disease or injury to render useful and efficient service in the employee's position under this statute a taxpayer's disability and thus eligibility for benefits depends upon the ability to perform the tasks required by the employment not the place of injury petitioner's disability annuity payments were made pursuant to u s c section a because that section does not distinguish between injuries occurring on the job or elsewhere sec_104 does not exclude the disability annuity payments received by petitioner from gross_income see haar v commissioner supra pincite holding that similar wording in u s c sec relating to the civil service retirement_system did not distinguish between injuries occurring on and off the job sec_104 sec_104 excludes from gross_income the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal u s c sec was repealed by the omnibus budget reconciliation act of publaw_96_499 tit iv sec_403 94_stat_2606 cf u s c sec injuries or sickness the term 'damages received whether by suit or agreement ' means an amount received other than workmen's_compensation through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution sec_1_104-1 income_tax regs thus the exclusion must derive from some sort of tort claim against the payor 900_f2d_655 3d cir affg in part and revg in part on other grounds 92_tc_510 the federal employees' compensation act provides compensation to federal employees for work-related injuries u s c secs the liability of the united_states or any instrumentality thereof in or under any judicial proceeding civil_action workmen's_compensation statute or federal tort liability statute is expressly limited to the relief provided in the federal employees' compensation act u s c sec c petitioner however received her disability annuity under u s c secs since the exclusive legal remedy for redress of petitioner's tort claims against the federal government resulting from on the job injuries is contained in the federal employees' compensation act it is axiomatic that petitioner's disability annuity received under a different set of statutes must have been received for a different purpose see flaherty v commissioner tcmemo_1987_61 holding that an internal_revenue_service employee's disability retirement annuity payments received under the civil service retirement_system were not excludable under sec_104 because the payments were intended to provide for the physical and mental well-being of the employee and were not damages from the settlement or prosecution of a legal suit see also federal employees' retirement_system act of publaw_99_335 sec 100a 100_stat_516 listing the purposes of fers none of which include compensation_for tort type claims thus sec_104 does not apply here sec_104 and sec_105 sec_104 excludes from gross_income amounts received by an employee through accident_or_health_insurance for personal injuries or sickness except to the extent such amounts are a attributable to contributions made by the employer which were not includable in the gross_income of the employee or b paid_by the employer sec_105 is essentially the mirror image of sec_104 and subject_to two exceptions includes in the gross_income of an employee amounts received through accident_or_health_insurance for personal injuries or sickness to the extent such amounts are a attributable to contributions by the employer which were not includable in the gross_income of the employee or b are paid_by the employer sec_105 provides an exclusion for amounts paid_by an employer to the taxpayer to reimburse the taxpayer for expenses for medical_care medical expense reimbursements are not at issue in this case so the exception in sec_105 does not apply sec_105 excludes from gross_income amounts paid_by an employer to the extent such amounts constitute payment for the permanent loss or loss of use of a member or function of the body or the permanent disfigurement of the taxpayer and are computed with reference to the nature of the injury without regard to the period the employee is absent from work however sec_105 applies to exclude payments from gross_income only if the plan or contract under which such payments are made varies the amount of the payments according to the type and severity of the injury suffered by the employee 829_f2d_506 4th cir 814_f2d_1304 9th cir affg en_banc tcmemo_1985_25 former sec_105 provided a limited exclusion_from_gross_income for amounts received in lieu of wages prior to attaining age by completely disabled persons retired on disability sec_105 was repealed by sec_122 of the social_security amendments of publaw_98_21 97_stat_87 and replaced with a credit for the permanently_and_totally_disabled for years beginning after date provided in sec_37 sec_37 was subsequently renumbered as sec_22 deficit_reduction_act_of_1984 publaw_98_369 98_stat_484 respondent has conceded that petitioner is entitled to a credit under sec_22 for the years in issue see supra note under fers the computation of disability retirement annuity payments does not vary with the nature of the injury all employees considered disabled receive benefits under a single formula based on the employee's average pay u s c secs and accordingly petitioner is not entitled to exclude the disability annuity payments under sec_105 see beisler v commissioner supra pincite thus we are left to consider the possibility of exclusion under sec_104 or sec_72 to grant petitioner relief from taxation under either sec_104 or sec_72 it is necessary to determine the amount of the disability annuity payments attributable to petitioner's contributions toward the disability annuity as well as the percentage of the overall contributions that this constitutes while petitioner's participation in fers may require after-tax contributions there is no evidence of the amount of her after-tax fers contributions see u s c sec a and accordingly we are unable to grant petitioner any relief under either sec_104 or sec_72 petitioner claims that she is being persecuted for the government's mistake in legal terms this amounts to an argument that respondent should be equitably estopped from we need not decide therefore any questions concerning the interrelationship or applicability of these two sections to the disability annuity received by petitioner assessing the deficiencies against petitioner because opm provided petitioner with erroneous advice concerning the taxability of her disability annuity payments even if we assume that equitable_estoppel can operate against the government in some circumstances there is no basis for applying the concept here cf opm v richmond 496_us_414 the traditional elements of estoppel are misrepresentation by the party against whom estoppel is asserted reasonable reliance on that misrepresentation by the party asserting estoppel and detriment to the party asserting estoppel 467_us_51 965_f2d_413 7th cir both the heckler and kennedy cases discussed the detriment requirement in heckler v community health services supra the supreme court described the detriment suffered as the inability to retain money medicare reimbursements that should never have been received in the first place the supreme court stated this is not a case in which a party has lost any legal right either vested or contingent or suffered any adverse change in its status here the party lost no rights but merely was induced to do something which could be corrected at a later time there is no doubt that the party will be adversely affected by the government's recoupment of the funds that it has already spent it will surely have to curtail its operations and may even be forced to seek relief from its debts through bankruptcy the party may need an extended period of repayment or other modifications in the recoupment process if it is to continue to operate but questions concerning the government's method of enforcing collection are not before us the question is whether the government has entirely forfeited its right to the money id pincite fn refs omitted in kennedy v united_states supra the court_of_appeals for the seventh circuit held that the underpayment of taxes lawfully owing did not constitute a detriment relying on heckler v community health services supra the court_of_appeals for the seventh circuit stated that we do not believe the estoppel doctrine should be used against the government when the estoppel claimant's detriment is the loss of a windfall that could have never been statutorily effectuated kennedy v united_states supra pincite see also 92_tc_206 accordingly petitioner is not entitled to relief under the equitable_estoppel doctrine petitioner also demands a jury trial in 576_f2d_70 5th cir affg tcmemo_1977_220 the court_of_appeals for the fifth circuit answered this demand by stating that the seventh amendment preserves the right to jury trial in suits at common_law since there was no right of action at common_law against a sovereign enforceable by jury trial or otherwise there is no constitutional right to a jury trial in a suit against the united_states thus there is a right to a jury trial in actions against the united_states only if a statute so provides congress has not so provided when the taxpayer elects not to pay the assessment and sue for a redetermination in the tax_court for a taxpayer to obtain a trial by jury he must pay the tax allegedly owed and sue for a refund in united_states district_court the law is therefore clear that a taxpayer who elects to bring his suit in the tax_court has no right statutory or constitutional to a trial by jury citations omitted finally in passing petitioner has mentioned that she incurred significant medical_expenses sec_213 subject_to certain limitations allows taxpayers a deduction for medical_expenses that are not_compensated_for_by_insurance_or_otherwise however petitioner has not introduced any evidence to establish the amount of her medical_expenses for the years in issue accordingly we are unable to grant petitioner any relief from the determined deficiencies in the form of a deduction for medical_expenses we conclude that except as provided in respondent's concessions petitioner is not entitled to any relief from the determined deficiencies we reach this decision with some reluctance but note as did the supreme court in 332_us_380 that the circumstances of this case tempt one to read the regulations and statutes with charitable laxity but not even the temptations of a hard case can elude the clear meaning of the regulations and statutes to reflect the foregoing decision will be entered under rule


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number number release date eo t1 date date uil employer_identification_number legend a b c d e x dear --------------- this is in response to a letter from your authorized representative requesting a ruling on your behalf that you meet the requirements of revproc_95_48 1995_2_cb_418 facts b c and d counties are located in the state of e the boards of county commissioners are governmental entities created by county statute under the laws of the state of e the boards of county commissioners of b c and d counties created a under the federal workforce investment act of fwia to receive funding under the fwia a was formed through an intergovernmental_agreement between b c and d counties a provides workforce development employment services and job training for b c and d counties the internal_revenue_service has determined that a is exempt from federal_income_tax under sec_501 of the internal_revenue_code and is classified as a publicly_supported_organization described in sec_509 and sec_170 a has no members a’s board_of directors consist of x members all of a’s directors are appointed by the boards of county commissioners of b c and d counties in accordance with criteria established under the fwia therefore the boards of county commissioners of b c and d counties effectively control a a’s financial support is received from grants that originated from the united_states department of labor a is included in the financial statements of the state of e also a must be audited for each fiscal_year and the results presented to the state of e the boards of county commissioners officials and personnel approve all of a’s expenses a does not have a taxable subsidiary does not engage in public fund-raising efforts and its activities do not provide significant benefits to any private interest under a’s articles of incorporation if a is terminated its assets will be distributed to the boards of county commissioners or if that is not available to a successor organization with the same purpose of a ruling requested a satisfies the requirements of being an affiliate of a governmental_unit of revproc_95_48 1995_2_cb_418 and therefore is not required to file form_990 law sec_501 of the code provides an exemption from federal_income_tax for organizations described in sec_501 including organizations that are organized and operated exclusively for charitable educational or scientific purposes sec_6033 generally requires the filing of annual information returns by exempt_organizations sec_6033 of the code provides certain mandatory exceptions to filing annual information returns sec_6033 of the code provides discretionary exceptions from filing such returns where the secretary determines that such filing is not necessary to the efficient administration of the tax laws revproc_95_48 provides an exception from filing for governmental units or affiliates of governmental units that are exempt from federal_income_tax under sec_501 section dollar_figure of revproc_95_48 provides that an organization will be treated as an affiliate of a governmental_unit if it is described in sec_501 of the code and either a it has a ruling from the service that its exempt_purpose income is excluded under sec_115 it is entitled to receive deductible contributions under sec_170 because the contributions are the for_the_use_of a governmental_unit or it is a wholly owned instrumentality of a state or political_subdivision for employment_tax purposes or b it meets the requirements of sec_4 b sec_4 b of revproc_95_48 provides the following criteria to be used to determine whether an organization meets the requirements of sec_4 b i the organization is either operated supervised or controlled within the meaning of sec_1_509_a_-4 of the income_tax regulations by governmental units or by an organization's governing body that is elected by the public at large ii the organization possesses two or more affiliation factors listed under section dollar_figure of the revenue_procedure and iii the organization's filing of form_990 is not otherwise necessary to the efficient administration of the internal revenue laws section dollar_figure of revproc_95_48 describes among the affiliation factors the following a the organization was created by one or more governmental units organizations that are affiliates of governmental units or public officials acting in their official capacity b the organization is subject_to financial audit by the governmental_unit to which it reports or the governmental_unit or affiliate of a governmental_unit exercises control_over or oversees some or all of the organization's expenditures and c one or more governmental units or organizations that are affiliates of governmental units exercise control_over or oversee some or all of the organization’s expenditures section dollar_figure of revproc_95_48 provides that in making a ruling or determination whether the organization’s filing of form_990 is otherwise necessary to the efficient administration of the internal revenue laws under sec_4 b iii all relevant facts and circumstances shall be considered these include the extent to which the organization has taxable subsidiaries or participates in joint ventures with non-exempt entities whether it engages in substantial public fund-raising efforts and whether its activities provide significant benefits to private interests sec_1_509_a_-4 of the regulations provides in part that the terms operated by supervised by ' and controlled by as used in sec_509 of the code presupposes a substantial degree of direction over the policies programs and activities of a supporting_organization by one or more publicly supported organizations the relationship described under any one of these terms is comparable to that of a parent and subsidiary where the subsidiary is under the direction of and accountable or responsible to the parent organization this relationship is established by the fact that a majority of the officers directors or trustees of the supporting_organization are appointed or elected by the governing body officers acting in their official capacity or the membership of one or more publicly supported organizations analysis you have stated that a does not have a letter that meets the criteria of sec_4 a of revproc_95_48 and therefore it must meet the requirements in sec_4 b the internal_revenue_service has determined that a is exempt from federal_income_tax under sec_501 of the code and is classified as a publicly_supported_organization described in sec_509 and sec_170 of the code a was created by an intergovernmental_agreement between b c and d counties under federal_law and is managed by a board_of directors all of whom are appointed by the boards of county commissioners therefore the boards of county commissioners effectively controls a thus a is operated supervised or controlled by a governmental_unit within the meaning of sec_1_509_a_-4 of the regulations accordingly a meets the requirement of sec_4 b i of revproc_95_48 b c and d counties are located in the state of e the boards of county commissioners are governmental entities created by county statute under the laws of the state of e the boards of county commissioners of b c and d counties created a under the federal workforce investment act of fwia to receive funding under the fwia a was formed through an intergovernmental_agreement between b c and d counties a provides workforce development employment services and job training for b c and d counties therefore a possesses the affiliation factor in sec_4 a of revproc_95_48 a’s financial support is received from grants from the united_states department of labor therefore a possesses the affiliation factor in sec_4 b of revproc_95_48 a is included in the financial statements of the state of e also a must be audited for each fiscal_year and the results presented to the state of e e and labor officials and personnel approve all of a’s expenses therefore since a is financially accountable to a governmental_unit a possesses the affiliation factor in sec_4 c of revproc_95_48 under a’s articles of incorporation if a is terminated its assets will be distributed to the boards of county commissioners or a successor to the boards of county commissioners therefore a possesses the affiliation factor in sec_4 e of revproc_95_48 therefore since a possesses two or more of the affiliation factors listed in section dollar_figure of revproc_95_48 a meets the requirements of sec_4 b ii a has no taxable subsidiaries does not participate in joint ventures with non-exempt entities does not engage in substantial public fund-raising efforts and does not provide significant benefits to private interests therefore since the filing of form_990 is not otherwise necessary to the efficient administration of the internal revenue laws a meets the requirement of sec_4 b iii of revproc_95_48 since a is described in sec_501 of the code and meets the requirements of sec_4 b of revproc_95_48 a is treated as an affiliate of a governmental_unit under section dollar_figure of revproc_95_48 ruling a satisfies the requirements of being an affiliate of a governmental_unit of revproc_95_48 and therefore is not required to file form_990 this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described please keep a copy of this ruling in your permanent records this ruling is based on the understanding that there will be no material changes in the facts upon which it is based this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter thank you for your cooperation sincerely yours steven b grodnitzky acting manager exempt_organizations technical group enclosure notice


internal_revenue_service number release date index number - ------------------- ------------------------------ ----------------------------- ------------------------------- - department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 - plr-130108-03 date date x country date dear ---- --------- --------------------------------- ein ---------------- ---------- ------------------ this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting an extension under ' of the procedure and administration regulations for x to elect under sec_301_7701-3 to be treated as a partnership for federal tax purposes the information submitted states that x is an entity formed under the laws of country the members of x intended that the x elect to be treated as a partnership effective date however inadvertently form_8832 entity classification election was not filed on behalf of x sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the foreign eligible_entity has more than one owner and makes and election to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can plr-130108-03 be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed 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 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 published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make 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 of time for making 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 a based solely on the information submitted we conclude that x has satisfied the requirements of and as a result x is granted an extension of time for making the election to be classified as a partnership for federal tax purposes effective date for days following the date of this letter x should make the election by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the form a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied this ruling is directed only to the taxpayer s requesting it sec_6110 of concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the internal_revenue_code provides that it may not be used or cited as precedent plr-130108-03 being sent to x pursuant to a power_of_attorney on file with this office a copy of this letter is sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes