t c memo united_states tax_court brian h mclane petitioner v commissioner of internal revenue respondent docket no 20317-13l filed date p filed a federal_income_tax return for his taxable_year that claimed deductions on schedule c profit or loss from business r determined a deficiency for that year on the basis of his disallowance of those deductions and purportedly mailed p a notice_of_deficiency that p did not receive r later issued to p a notice_of_federal_tax_lien nftl in regard to p's and taxable years after a collection_due_process_hearing r issued a notice_of_determination sustaining the nftl for both years in his petition seeking review of the notice_of_determination p assigned no error in regard to his taxable_year but challenged r's assessment of a deficiency for on the grounds that r had not mailed him a notice_of_deficiency p also claimed that r's appeals_office appeals had not given him sufficient opportunity to substantiate the expenses underlying the disallowed deductions in a supplemental hearing following our remand of the case appeals allowed about half of the deductions p claimed p presented further documentation of his business_expenses during and after our trial of the case that eventually led r to concede p's entitlement to deductions in excess of those claimed on his return r has thus agreed to abate his assessment of a deficiency for p's taxable_year and release the lien for that year p asks us to determine an overpayment of his federal_income_tax and order a refund of that amount held sec_6330 gives us no jurisdiction to determine and order the credit or refund of an overpayment for any of the years in issue 126_tc_1 followed brian h mclane pro_se wendy yan nancy m gilmore and elizabeth c mourges for respondent memorandum opinion halpern judge this case is before us to review a determination by the internal_revenue_service appeals_office appeals to sustain a notice_of_federal_tax_lien nftl respondent issued to petitioner in regard to his taxable years ended date and in his petition petitioner made no assignment of error concerning his taxable_year but alleged that an assessment of additional tax for his taxable_year was invalid because the brief amicus curiae was filed by jacqueline lainez-flanagan professor carlton m smith and roxy araghi student university of the district of columbia david a clarke school of law tax clinic period of limitations provided in section had expired before assessment petitioner also claimed that appeals did not give him sufficient opportunity to substantiate expenses underlying deductions he claimed on his federal_income_tax return that respondent had disallowed petitioner's return included a schedule c profit or loss from business reporting a net profit gross_income less deductible expenses from his contracting business respondent's notice_of_deficiency disallowed almost all of the deductions petitioner claimed on his schedule c at a supplemental hearing that appeals conducted after we remanded the case to allow for fuller consideration of petitioner's challenges to the validity of respondent's assessment for his year petitioner presented documentation that led appeals to allow about half of the deductions he had claimed on his schedule c petitioner presented additional documentation at and after our trial of the case that led respondent to allow further deductions petitioner eventually established to respondent's satisfaction that he was entitled to deductions in amounts in excess of those claimed on his return as a result respondent now concedes that petitioner's correct_tax liability for is dollar_figure respondent's concession 1all section references are to the internal_revenue_code in effect at all relevant times we round all dollar amounts to the nearest dollar regarding petitioner's liability renders moot any issue regarding the validity of respondent's assessment of additional tax_liability for petitioner's taxable_year respondent further concedes that petitioner is entitled to abatement of the additional liability respondent sought to collect and the release of the lien for his taxable_year although as respondent observes his abatement of petitioner's tax_liability and release of the lien for that year is the very relief that petitioner sought when he challenged the original notice_of_determination petitioner is unsatisfied with that result and claims that he is entitled to a refund of tax for his taxable_year thus the only issue remaining for our consideration is our jurisdiction to determine and order a credit or refund of any overpayment petitioner might have made for background petitioner filed a federal_income_tax return for the taxable_year ended date that reported a tax_liability of dollar_figure respondent received petitioner's return on date petitioner's return included a request for an installment_agreement under which petitioner would pay his tax_liability in monthly payments of dollar_figure between date and date petitioner made payments of dollar_figure toward that liability he paid an additional dollar_figure between date and date in date respondent assessed petitioner additional tax of dollar_figure for his taxable_year petitioner however did not receive a notice_of_deficiency concerning that assessment after respondent issued petitioner the nftl in date petitioner timely requested a collection_due_process cdp hearing following that hearing respondent issued petitioner a notice_of_determination sustaining the nftl in response petitioner who then resided in maryland filed with this court a petition for lien action under code sec_6320 and sec_6330 that petition assigns no error in regard to petitioner's taxable_year but asserts that respondent issued no notice_of_deficiency to him for during a conference call with the parties on date upon being apprised by respondent's counsel that the deductions respondent allowed as a result of petitioner's submission of additional documentation during and following trial had eliminated petitioner's tax_liability for we asked the parties whether they objected to our entry of a decision upholding respondent's determination only in regard to petitioner's taxable_year while respondent's counsel voiced no objection petitioner objected on the basis of his belief that he is now entitled to a refund of all or part of the tax he had previously paid for petitioner's petition makes no claim that he overpaid his federal_income_tax liability neither the case activity record printout concerning petitioner's cdp hearing nor respondent's notice_of_determination provides any indication that petitioner raised during that hearing the possibility that he was entitled to a refund of tax paid for because the postrial briefs the parties initially submitted did not address the question of our jurisdiction in a cdp case to determine and order the credit or refund of an overpayment we requested the parties to submit supplemental briefs addressing the issue our request for supplemental briefs asked the parties to address among other things appeals' jurisdiction to consider refund claims because of its view that the present case has potential significance in the area of taxpayer rights and procedural efficiency the university of the district of columbia david a clarke school of law tax clinic moved for leave to file an amicus memorandum of law in support of petitioner we granted the clinic's motion and filed the memorandum it had lodged with its motion i applicable law discussion a relevant statutory provisions sec_6511 governs the timeliness of refund claims sec_6511 limits the time during which a taxpayer can file a claim even when the taxpayer files a claim that is timely under sec_6511 he is entitled to a refund only of payments made during a specified lookback period under sec_6511 the applicable lookback period turns on whether the taxpayer filed a return for the taxable_year in question and if so whether he received any extensions of the time for filing that return if the taxpayer filed a return for the year his refund cannot exceed the portion of the tax paid within the period immediately preceding the filing of the claim equal to years plus the period of any extension of time for filing the return sec_6511 sec_6214 gives us jurisdiction to redetermine the correct amount of a deficiency determined by the commissioner when a taxpayer files a timely petition for redetermination sec_6512 gives us jurisdiction in a deficiency case to determine the amount of any overpayment of income_tax made by the taxpayer for a taxable_year before us whether or not we also find a deficiency for that year any overpayment we determine under section b must be refunded or credited to the taxpayer but sec_6512 limits our jurisdiction to order a credit or refund to only that portion of a tax paid after the mailing of a notice_of_deficiency or in regard to which a timely claim_for_refund was pending or could have been filed on the date of mailing of the notice_of_deficiency sec_6320 and sec_6330 provide a taxpayer the right to notice and the opportunity for an appeals hearing before the commissioner can collect unpaid taxes by means of a lien or levy against the taxpayer's property if a taxpayer requests a cdp hearing the appeals officer conducting the hearing must verify that the requirements of any applicable law or administrative procedure have been met sec_6320 sec_6330 the taxpayer may raise at a hearing any relevant issue relating to the unpaid tax or the collection action including appropriate spousal defenses challenges to the appropriateness of collection actions and offers of collection alternatives see sec_6330 the taxpayer may also raise at the hearing challenges to the existence or amount of the underlying tax_liability for any period if he did not receive a statutory notice for that liability or did not otherwise have an opportunity to dispute it see sec_6330 sec_6330 allows a taxpayer to petition this court for a review of a determination made under sec_6320 or sec_6330 and grants us jurisdiction with respect to the matter upon the timely filing of a petition sec_6404 allows the secretary to abate the assessment of interest on a deficiency that is attributable in whole or in part to any unreasonable error or delay by an officer_or_employee of the internal_revenue_service in performing a ministerial or managerial act if the secretary denies a taxpayer's claim_for_abatement of interest sec_6404 allows the taxpayer to petition this court within a prescribed period to determine whether the secretary's failure to abate interest was an abuse_of_discretion sec_6404 provides that r ules similar to the rules of sec_6512 apply for purposes of sec_6404 b greene-thapedi v commissioner in 126_tc_1 we considered a petition to review the commissioner's determination to collect by levy a taxpayer's tax_liability as established by a stipulated decision in a prior deficiency proceeding after the taxpayer filed a petition to review the commissioner's determination to uphold the proposed levy the commissioner offset that liability by applying against it an overpayment for the taxpayer's taxable_year we thus accepted the commissioner's request to dismiss the case as moot before dismissing the case however we had to address the taxpayer's claim that she was entitled to a refund of interest that had accrued before she received from the commissioner a form cp advising her of his intent to levy on specified_assets the taxpayer's refund claim was an alternative to her argument that she was not liable at all for her deficiency or interest thereon because the commissioner failed to assess that deficiency and mail her a timely notice_and_demand to pay it we thus viewed the taxpayer's refund claim as having arisen under sec_6330 as an outgrowth of her challenge to the existence and amount of her underlying tax_liability id pincite the taxpayer's right to challenge her liability however arose only in connection with her challenge to the proposed collection action id once the proposed levy became moot we reasoned the taxpayer's opportunity to challenge her liability vanished and with it any right to claim a refund of any improperly accrued interest more fundamentally we observed sec_6330 does not expressly give this court jurisdiction to determine an overpayment or to order a refund_or_credit of taxes paid id and in the absence of explicit statutory authority we declined to assume jurisdiction in a cdp case either to determine an overpayment or to order a refund_or_credit of taxes paid id pincite we saw no indication that congress in enacting sec_6330 intended sub silentio to provide taxpayers a back-door route to tax refunds and credits free of the longstanding and well- established limitations provided in sec_6511 and sec_6512 regarding when taxpayers can claim refunds and the amounts they can claim greene-thapedi v commissioner t c pincite moreover in light of the detailed and comprehensive codification of such limitations we doubted that congress would have intended that such limitations should arise by inference in sec_6330 with respect to claims for tax refunds or credits as to which our jurisdiction would similarly arise under sec_6330 if at all only by inference id we thus concluded that congress did not intend sec_6330 to provide for the allowance of tax refunds and credits id in a footnote to our opinion in greene-thapedi v commissioner t c pincite n we allowed for the possibility that our consideration in a cdp case of the taxpayer's possible overpayment might be necessary for a correct and complete determination of whether the proposed collection action should proceed in a case unlike the one before us in greene-thapedi in which the taxpayer is entitled to challenge his underlying liability we reasoned the validity of the proposed collection action might depend upon whether the taxpayer has any unpaid balance which might implicate the question of whether the taxpayer has paid more than was owed id because the refund claim of the taxpayer in greene-thapedi involved accrued interest we also considered the potential applicability of sec_6404 on the basis of the cross-reference in sec_6404 to sec_6512 we determined in goettee v commissioner tcmemo_2003_43 wl at aff'd 192_fedappx_212 4th cir that we have jurisdiction to determine any overpayment that results from the abatement of interest under sec_6404 the taxpayer in greene-thapedi v commissioner t c pincite n did not expressly assert any claim for interest abatement pursuant to sec_6404 moreover the record before us in that case provided no evidence that the interest the taxpayer sought to have refunded had accrued as the result of an unreasonable error or delay resulting from a 'ministerial act' id pincite n therefore we did not view the taxpayer's refund claim as being predicated on a claim for interest abatement pursuant to sec_6404 id pincite we added e ven if the taxpayer's claim were so construed that circumstance would not affect our conclusion that we lack jurisdiction under sec_6330 to determine any overpayment or to order a refund_or_credit unlike sec_6404 sec_6330 contains no cross-reference to the rules of sec_6512 nor does sec_6330 cross-reference sec_6404 sec_6404 illustrates that congress has acted infrequently to extend this court's overpayment jurisdiction and then only in a deliberate and circumscribed manner these considerations buttress our conclusion that we should not assume overpayment jurisdiction in a sec_6330 proceeding absent express statutory provision id pincite in a separate dissenting opinion joined by one other judge judge vasquez invoked the importance of construing remedial legislation broadly to implement its purposes and on the basis of that principle suggested that the commissioner could not unilaterally deprive the court of jurisdiction in sec_6330 cases by merely stating that he no longer intends to proceed with collection id pincite vasquez j dissenting granting the commissioner that authority he reasoned would frustrate t he congressional intent behind the enactment of sec_6330 id pincite vasquez j dissenting judge vasquez also accused the majority in greene-thapedi of failing to acknowledge that this court's predecessor the board_of_tax_appeals decided it had overpayment jurisdiction pursuant to the revenue act of even though congress had not granted the board that jurisdiction in explicit statutory language id pincite vasquez j dissenting he cited four cases that in his view exemplified the board's exercise of its assumed overpayment jurisdiction barry v commissioner 1_bta_156 hickory spinning co v commissioner 1_bta_409 walker-crim co v commissioner 1_bta_599 and maritime sec co v commissioner 2_bta_188 because the taxpayer before us in greene-thapedi v commissioner t c pincite vasquez j dissenting had properly invoked our jurisdiction judge vasquez reasoned our failure to address the taxpayer's entitlement to an underpayment left an essential issue unaddressed finally judge vasquez described the majority opinion in greene-thapedi as creat ing a trap for the unwary id pincite vasquez j dissenting he elaborated taxpayers who choose to litigate their sec_6015 innocent spouse and sec_6404 claims as part of a sec_6330 proceeding cannot obtain decisions of an overpayment or a refund in tax_court if those same taxpayers had made claims for sec_6015 relief or interest abatement in a non-section-6330 proceeding we could enter a decision for an overpayment and could order a refund id ii analysis the case before us requires that we revisit the issue we addressed in greene-thapedi whether we should infer jurisdiction not expressly granted to us by the applicable statutory provisions that allows us in a cdp case brought under sec_6330 to determine and order the credit or refund of an overpayment for any of the years in issue neither petitioner nor amicus has given us sufficient reason to depart from that precedent a whether greene-thapedi is distinguishable petitioner attempts to differentiate challenges to the amount of a taxpayer's tax_liability and those that relate to alleged failures by the commissioner to follow the procedures required to collect that liability he observes that the taxpayer in greene-thapedi had had a prior opportunity to contest before this court her tax_liability for the year in issue and that her claim for a refund of interest arose from her allegation that the commissioner had not properly assessed the tax on which the interest accrued and timely issued to her a notice_and_demand for payment on the basis of those observations petitioner describes the refund claim of the taxpayer in greene-thapedi as an assertion that the appeals officer had failed to verify under sec_6330 compliance with applicable law and administrative procedure therefore our inability to consider the taxpayer's refund claim in greene-thapedi in petitioner's view does not establish that we lack jurisdiction to determine an overpayment by a taxpayer entitled to challenge his underlying liability under sec_6330 petitioner describes as very limited the overpayment jurisdiction he claims that we have in cdp cases in particular he argues that we have such jurisdiction only where the underlying tax_liability is at issue because of the non-receipt of a mailed notice_of_deficiency petitioner reads sec_6512 to mean that the mailing of a notice_of_deficiency preserve s an imputed refund claim for the taxpayer as of the date of that mailing--a claim that is activated by a petition to tax_court when the taxpayer does not receive the notice_of_deficiency however he will through no fault of his own miss the opportunity to file a petition and activate that automatic refund claim thus sec_6330 which allows a taxpayer to challenge the existence or amount of his underlying tax_liability in a cdp hearing when he did not receive a notice_of_deficiency for the year in issue also allows the taxpayer in petitioner's view to raise any refund claim that would have been activated by a petition for redetermination filed in response to the undelivered notice_of_deficiency because petitioner's argument rests on the mailing of a notice_of_deficiency not received by the taxpayer he now accepts the premise that respondent mailed him a notice_of_deficiency for his taxable year--although that premise conflicts with the position he had consistently maintained before learning of hi sec_2sec b b allows for a credit or refund of amounts paid within the period which would be applicable under sec_6511 c or d if on the date of the mailing of the notice_of_deficiency a claim had been filed whether or not filed stating the grounds upon which the tax_court finds that there is an overpayment potential overpayment for that year in the assignment of errors in his petition petitioner repeatedly asserted no notice_of_deficiency was issued to him in his postrial briefs petitioner continued to challenge the validity of respondent's assessment claiming that respondent had not established that a notice_of_deficiency had been mailed to him before the expiration of the period of limitations on assessment petitioner abandons that position in his supplemental brief which he describes as based on the premise that a notice_of_deficiency for tax_year was in fact mailed we see no reason why the issuance of a notice_of_deficiency that petitioner never received should allow him to pursue a claim_for_refund that would otherwise have become time barred long before he manifested any awareness of it because respondent received petitioner's federal_income_tax return on date the period of limitations on a claim_for_refund of any of the dollar_figure petitioner paid between date and date expired no later than date see sec_6511 the period of limitations on a claim_for_refund of any of the dollar_figure petitioner paid between date and 3if the envelope containing petitioner's federal_income_tax return were postmarked on or before the return's due_date the return would be treated as having been filed on the date of the postmark rather than the date respondent received it see sec_7502 date expired two years after the date of each payment respondent's issuance in date of a notice_of_deficiency for petitioner's taxable_year if such a notice was actually mailed in no way lulled petitioner into complacency in his pursuit of any refund claim because--as the parties agree--he never received the notice a taxpayer's filing with this court of a petition for redetermination in response to a notice_of_deficiency effectively tolls the period of limitations on any claim_for_refund for a year covered by the notice because the petition cuts off the taxpayer's right to seek a refund for the year in any other forum see sec_6512 but the issuance of a notice_of_deficiency by itself does not bar the taxpayer from seeking a refund in other courts thus petitioner's nonreceipt of any notice_of_deficiency for his taxable_year did not deprive him of an opportunity to pursue a claim for a refund of any overpayment he made for that year but petitioner manifested no awareness of the possibility that he had overpaid his federal_income_tax until our call with the parties on date--long after the period of limitations on any refund claim had expired we see no reason to read into sec_6330 jurisdiction that that section does not explicitly grant u sec_4respondent claims that he mailed petitioner a statutory_notice_of_deficiency on date petitioner accepts that date as t he assumed date that the snod statutory_notice_of_deficiency for was mailed to give those in petitioner's situation another opportunity to pursue a refund claim in regard to which they took no action during the applicable_period of limitations amicus' efforts to distinguish greene-thapedi are similar to petitioner's and also unavailing like petitioner amicus points to the receipt of a notice_of_deficiency by the taxpayer in greene-thapedi and her opportunity to contest the deficiency in this court as factors that distinguish that case from the present one unlike petitioner however amicus offers us no reason why that distinction should make a difference in particular amicus misreads note to our opinion in greene-thapedi in that footnote we accepted the potential relevance of a taxpayer's payment of more tax than was owed--but not because we assumed we would have jurisdiction in such a case to determine the amount of the taxpayer's overpayment and order that it be credited or refunded instead we saw the question as relevant only in that a taxpayer's overpayment would mean that he had 5petitioner suggests that a ttempting to apply sec_6330 in isolation apart from th e statutory scheme governing the assessment of deficiencies could lead to an absurd conclusion that when a person did not receive an snod but no greater liability was assessed than that showing on his return a challenge to his own self-assessed liability is allowed the absurdity of that conclusion however is far from self-evident see 122_tc_1 allowing taxpayers in a cdp case to challenge the liability reported on their return no unpaid liability and that the proposed collection action would thus be invalid in other words the relevant question overpayment or not could be answered without the need to determine the precise amount of any overpayment simply determining that the taxpayer had paid more than he owed--by some amount--would mean that the commissioner's collection action could not go forward b whether greene-thapedi is correct amicus argues that we should overrule greene-thapedi if we find ourselves unable to distinguish it most of amicus' arguments for overruling greene- thapedi appear in the dissenting opinion judge vasquez filed in that case having considered those arguments in issuing our opinion in greene-thapedi we might be justified in setting them aside without further explanation nonetheless in response to amicus' invitation that we reconsider those arguments we will explain why we do not view them as grounds for overruling our established precedent implementation of congress' remedial purpose first amicus argues as did judge vasquez in greene-thapedi that our holding in that case is contrary to sec_6330's remedial purpose we fail to see however how our holding in greene-thapedi that we lack jurisdiction in a cdp case to determine and order the refund_or_credit of an overpayment undermines the objectives congress sought to achieve in enacting the cdp provisions the legislative_history of those provisions indicates that congress enacted them to insure due process in the use by the internal_revenue_service of its authority to collect taxes by means of liens and levies see generally s rept no pincite c b pincite respondent concedes that petitioner is entitled to abatement of his federal_income_tax liability and the release of the lien to collect that liability that concession ensures that respondent will not use his collection authority in a manner that violates petitioner's rights and thus it fully satisfies the purpose of the cdp provisions nothing in the relevant legislative_history of those provisions suggests that their purpose extends to protecting taxpayers from the consequences of their failure to pursue refund claims timely petitioner and amicus both invoke our observation in 122_tc_1 that the substantive and procedural protections contained in sec_6320 and sec_6330 reflect congressional intent that the commissioner should collect the correct amount of tax if respondent ends up having collected too much tax from petitioner for however it will not be because of respondent's misuse of his collection authority but instead because of petitioner's failure to realize in time that documents in his possession established his entitlement to deductions in excess of those he claimed on his return need for resolution of continuing controversy amicus suggests that petitioner's appeal of respondent's determination to sustain the nftl for his and taxable years vests us with jurisdiction to resolve the parties' entire controversy amicus reasons that the parties' disagreement over whether we have jurisdiction to consider petitioner's claim for a refund of any overpayment he made for his taxable_year means that we have jurisdiction to resolve that disagreement amicus explains a lthough respondent has conceded to petitioner's substantiations of deductions for the tax_year at issue respondent's concession should have no bearing on this court's jurisdiction because there remains a controversy between the parties which this court must address petitioner believes that he has made an overpayment of his income_tax and is entitled to a refund of this amount respondent argues that even if there is admittedly now an overpayment the tax_court lacks jurisdiction to decide the overpayment in a collection review proceeding it follows that there remains a controversy which this court should address its jurisdiction having been properly invoked pursuant to section d we readily agree that w e have jurisdiction to determine our jurisdiction 143_tc_301 but accepting that we have jurisdiction to answer the question of whether we can determine an overpayment in a cdp case does not dictate an affirmative answer to that question precedent for imputing jurisdiction amicus also repeats judge vasquez's claim in greene-thapedi that our predecessor the board_of_tax_appeals assumed overpayment jurisdiction under the revenue act of that the statute did not expressly grant it amicus urges us to follow our predecessor's example and assume that we have overpayment jurisdiction in collection review proceedings in the cases to which amicus refers--the same cases to which judge vasquez referred in his dissent in greene-thapedi--the board determined overpayments not for the purpose of ordering a credit or refund but instead as a necessary step in 6in 85_tc_527 on which amicus relies we wrote that generally once a petitioner invokes the jurisdiction of the court jurisdiction lies with the court and remains unimpaired until the court has decided the controversy we determined that we had jurisdiction in naftel to resolve a dispute about whether the taxpayer had received refund checks the commissioner had issued but we did so because resolution of that dispute fell within our express statutory jurisdiction to redetermine deficiencies and determine the existence and amount of any overpayments as we explained when we are presented with a case over which we have jurisdiction and in which we possess the necessary and usual powers to resolve the dispute we must consider all the issues raised by the case id pincite thus naftel does not establish that we must address disputes whose resolution is outside our necessary and usual powers redetermining the taxpayers' deficiencies for the years before it the revenue acts governing those cases required that a taxpayer's deficiency for a given year be reduced by any overpayments made in prior years thus for example in barry the commissioner reduced the deficiency he determined for the taxpayer's taxable_year by the overassessment he determined for the taxpayer claimed that the amount by which he was overassessed for was greater than the amount the commissioner allowed the board rejected the commissioner's contention that its jurisdiction covered only the taxpayer's taxable_year and that it could not determine the amount of the taxpayer's overassessment for in the board's view the exercise of its jurisdiction to determine the proper deficiency for required a determination of the amount of any overpayment for thus the board did not assume jurisdiction beyond that expressly granted to it instead it simply undertook those determinations necessary for the effective exercise of its statutorily defined jurisdiction see barry v commissioner b t a pincite we think it was clearly the intention of congress in creating the board that on appeals by taxpayers we should consider every question necessary to a correct and complete determination of any deficiency which the commissioner proposes to assess cases like barry thus do not establish a precedent for our arrogation of authority beyond what congress expressly granted to us in particular they do not support our assuming jurisdiction in a cdp case to determine and order the credit or refund of any overpayment the taxpayer may have made for the years in issue in contrast to the situation the board addressed in barry and similar cases our determination of an overpayment in a cdp case is not a required element of our statutorily defined jurisdiction if appeals had the authority to consider refund claims and its determination in a particular case included the denial of a taxpayer's refund claim our consideration of that claim might be an element of our review of appeals' determination under sec_6330 cf 571_f3d_215 2d cir treating a taxpayer's petition under sec_6330 as invoking our jurisdiction to review appeals' failure to abate interest and determine any overpayment of interest because the taxpayer had raised the interest abatement issue in his cdp hearing vacating in part tcmemo_2006_273 in his supplemental brief petitioner cites a delegation_order that grants appeals the authority provided in sec_7121 to enter into closing agreements see internal 7we discuss infra part ii b the implications for the present case of 571_f3d_215 2d cir vacating in part tcmemo_2006_273 revenue manual pt date because sec_7121 refers to credits and refunds petitioner reasons that congress has thus given appeals through the secretary's delegation broad-based authority to enter into agreements extending even to refunds and credits petitioner misreads the delegation_order that appeals can enter into closing agreements and closing agreements can result in refunds or credits does not establish that appeals has the authority to order refunds or credits--particularly those barred by the statute_of_limitations therefore even if petitioner had advanced his refund claim before appeals reviewing appeals' failure to consider that claim would not be a necessary element of our review of appeals' determination under sec_6330 amicus also claims that our jurisdiction to consider refunds in innocent spouse cases brought under sec_6015 lacks explicit statutory foundation we disagree when an individual to whom the commissioner denies relief under sec_6015 from joint_and_several_liability petitions this court for review of the sec_7121 authorizes the secretary to enter into agreements concerning a taxpayer's tax_liability sec_7121 concerns the finality of those agreements and provides in para that as a general_rule in any suit action or proceeding a closing_agreement or any determination assessment collection payment abatement refund_or_credit made in accordance therewith shall not be annulled modified set_aside or disregarded commissioner's determination sec_6015 gives us jurisdiction to determine the appropriate relief available to the individual under that section and sec_6015 expressly authorizes credits or refunds to the extent not time barred as part of the appropriate relief potential concurrent jurisdiction under multiple code sections wright illustrates that petitions ostensibly filed under sec_6330 can give us jurisdiction to determine and order the refund_or_credit of an overpayment when the petition includes a claim for interest abatement wright involved the commissioner's effort to collect a taxpayer's tax_liabilities for and the taxpayer had received a notice_of_deficiency for those years and petitioned this court for redetermination of the deficiencies see wright v 9amicus observes that sec_6015 includes no express statement that sec_6512 applies in an innocent spouse case instead sec_6015 requires the allowance of a credit or making of a refund to the extent attributable to the application of sec_6015 n othwithstanding any other law or rule_of law other than specified sections including sec_6511 and sec_6512 thus sec_6015 assumes that sec_6511 and sec_6512 apply simply because their application is not expressly negated but the exclusion of sec_6511 and sec_6512 from those provisions that cannot override sec_6015 does not establish our overpayment jurisdiction in an innocent spouse case instead it simply ensures that claims to refunds or credits under sec_6015 are subject_to the same limitations as claims made on grounds other than relief from joint_and_several_liability if sec_6015 made no mention of sec_6511 and sec_6512 we could award credits or refunds in innocent spouse cases without regard to when the taxpayer paid the amounts in issue commissioner tcmemo_1998_224 aff'd without published opinion 173_f3d_848 2d cir although the taxpayer was therefore barred from contesting his underlying liability in his subsequent cdp case he sought the abatement of interest that had accrued on that liability because of the commissioner's failure to apply a refund due him for to reduce his liabilities for the years in issue without notifying him of that failure although we agreed with the taxpayer that he was entitled to additional interest abatement beyond what the commissioner had allowed we did not consider his claim that he was also entitled to a refund of interest already paid citing greene-thapedi we noted that we lack ed jurisdiction to determine whether an overpayment exists or to order a refund_or_credit for to the extent that the amount of the abatement of interest exceeds the amount remaining unpaid for wright v commissioner tcmemo_2006_273 wl at on appeal the court_of_appeals for the second circuit disagreed with our conclusion regarding the scope of our jurisdiction since wright properly raised the issue of interest abatement at the agency it follows that the subsequent notice of determination-- which did not grant wright an abatement--was the secretary's final_determination not to abate interest under sec_6404 and because wright appealed the notice_of_determination to the tax_court within the time period required by sec_6404 the tax_court had juris- diction to determine whether wright was entitled to an abatement and if he was whether he made an overpayment and is entitled to a refund wright v commissioner f 3d pincite the opinion of the court_of_appeals in wright does not call into question greene-thapedi's central holding that a petition filed under sec_6330 does not give us jurisdiction to determine and order the credit or refund of an overpayment for any of the taxable years in issue wright rests on the proposition which as explained below we have since accepted that a petition ostensibly filed under sec_6330 can also be viewed as having been filed under sec_6404 if the taxpayer had raised the issue of interest abatement in his cdp hearing by contrast because the taxpayer in greene-thapedi made no claim of entitlement to interest abatement under sec_6404 and the record provided no evidence that she was so entitled we did not view her claim as predicated on sec_6404 although amicus accepts that wright may be distinguishable on several grounds it suggests that the court_of_appeals opinion in that case warns against a crabbed interpretation of the scope of our jurisdiction in cdp cases we have already heeded that warning in 138_tc_295 we accepted that a petition ostensibly filed under sec_6330 that includes a claim for interest abatement can be treated as having been filed as well under sec_6404 citing the court_of_appeals opinion in wright with approval we explained because the taxpayer requested an abatement of interest in connection with her sec_6330 hearing the notice_of_determination included a determination not to abate interest under sec_6404 and the petition seeks our review of that determination we conclude that the notice and petition confer jurisdiction under sec_6404 that is independent of sec_6330 id pincite although the issue at hand was the timeliness of the taxpayer's petition which was filed too late for review under sec_6330 but would have been timely as a petition under sec_6404 our conclusion that the petition gave us jurisdiction under sec_6404 suggests that we could have considered under sec_6404 any claim_for_refund resulting from the abatement of interest see king v commissioner tcmemo_2015_36 rev'd 829_f3d_795 7th cir in king we followed gray and concluded in the exercise of our jurisdiction under sec_6404 that the commissioner had abused his discretion in not abating interest we viewed as excessive within the meaning of sec_6404dollar_figure 10because the interest at issue in king v commissioner tcmemo_2015_36 rev'd 829_f3d_795 7th cir related to employment_taxes it could not be abated under sec_6404 see 112_tc_19 scanlon white inc v commissioner tcmemo_2005_282 aff'd continued because the taxpayer had paid the interest along with taxes penalties and additions to tax after the commissioner's determination to sustain a notice_of_federal_tax_lien our conclusion was tantamount to the determination of an overpayment although the court_of_appeals for the seventh circuit reversed our decision in king it did so not because it disagreed with our exercise of jurisdiction to review the commissioner's failure to abate interest instead the court concluded that we had applied the wrong standard in determining when interest is excessive within the meaning of sec_6404 our acceptance of the views expressed by the court_of_appeals in wright is of no help to petitioner again the court of appeals' opinion in wright does not conflict with greene-thapedi's central holding that sec_6330 does not give us overpayment jurisdiction instead the principle underlying wright calls into question only the view we expressed in dicta in greene-thapedi that even if the taxpayer's refund claim had been grounded in sec_6404 we would still have concluded that we lacked jurisdiction to determine and order the credit or continued f 3d 10th cir miller v commissioner tcmemo_2000_196 aff'd 310_f3d_640 9th cir see also sec_301_6404-2 proced admin regs the general abatement provision of sec_6404 however authorizes the secretary to abate the unpaid portion of the assessment of any_tax or any liability in respect thereof if among other things the assessment is excessive in amount see sec_6404 refund of any overpayment resulting from the abatement of interest because a claim for interest abatement made in connection with a cdp hearing gives us jurisdiction under sec_6404 that is independent of our jurisdiction under sec_6330 it follows that in our review of a notice_of_determination denying abatement we can consider any claim by the taxpayer that the abatement requested would result in an overpayment that should be refunded to the taxpayer or credited to his account the refund petitioner seeks however is not grounded in a claim_for_abatement of interest and more generally on the facts before us we cannot view the petition filed in this case as one filed not only under sec_6330 but also under another provision that would give us overpayment jurisdiction in particular we cannot accept the petition as one for redetermination of the deficiency in petitioner's federal_income_tax that would provide us with ancillary overpayment jurisdiction under sec_6512 petitioner's supplemental brief posits that respondent mailed him a notice_of_deficiency for his taxable_year on date on that premise a petition for redetermination of that deficiency would have been timely under sec_6213 only if filed by date--a date that preceded by almost nine months the issuance of the notice_of_determination in response to which petitioner filed his petition moreover neither in that petition nor as far as the record discloses in his cdp hearing did petitioner claim that he had overpaid his federal_income_tax liability disparate treatment of innocent spouse claims amicus also repeats judge vasquez's argument that our declining to exercise jurisdiction in a cdp case to determine and require the refund_or_credit of an overpayment would result in disparate treatment of innocent spouse claims depending on whether they were brought as stand-alone claims under sec_6015 or instead as defenses in cdp cases although the taxpayer in greene-thapedi like petitioner did not raise a spousal defense under sec_6330 amicus reasons that if greene-thapedi were pushed to its logical conclusions it would preclude us from considering in a cdp case a claim_for_refund grounded in a valid spousal defense that may be so but cases following greene-thapedi have read it more narrowly instead of accepting that we cannot exercise in a cdp case overpayment jurisdiction grounded in a provision other than sec_6330 we have concluded that a petition ostensibly filed under that section can be viewed as giving independent jurisdiction under another provision that may provide us with the authority to consider overpayment claims although gray and king involved interest abatement rather than innocent spouse relief we see no reason why the rationale of those cases would not extend to a claim_for_refund made under sec_6330 in connection with a cdp hearing that would give us authority under sec_6015 to order a credit or refund as part of the appropriate relief to a taxpayer who successfully establishes a spousal defense in that case amicus' concerns about the potential disparate treatment of stand- alone innocent spouse claims and those made in cdp cases would prove unfounded even if amicus' premise were correct the resulting disparate treatment of innocent spouse claims depending on their jurisdictional posture would be required by the applicable statutory provisions sec_6330 allows for the raising of appropriate spousal defenses when relevant to the unpaid tax or the proposed levy in contrast to sec_6015 sec_6330 provides no express basis for a taxpayer to claim or for appeals to consider a taxpayer's claim for a refund arising from a grant of relief from joint_and_several_liability such a claim could be considered only if the taxpayer's request for a cdp hearing and petition to this court for review of a notice_of_determination denying the requested relief could be viewed as grounded in sec_6015 as well as sec_6330 cf gray v commissioner t c pincite plain language of sec_6512 amicus argues that t he plain language of sec_6512 authorizes the court to determine the existence of a deficiency or an overpayment in all cases other than small tax proceedings brought under sec_7463 so long as the requirements of sec_6512 b or c are met cf greene-thapedi v commissioner t c pincite vasquez j dissenting congress added sec_6512 to the code giving us authority to order a refund of any overpayment we disagree sec_6512 gives us jurisdiction to determine an overpayment in a case in which we also determine the existence of a deficiency it provides in pertinent part i f the tax_court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of income_tax for the same taxable_year in respect of which the secretary determined the deficiency or finds that there is a deficiency but that the taxpayer has made an overpayment of such tax the tax_court shall have jurisdiction to determine the amount of such overpayment and such amount shall when the decision of the tax_court has become final be credited or refunded to the taxpayer thus the plain terms of sec_6512 indicate that our jurisdiction to determine overpayments is ancillary to the jurisdiction granted us by sec_6214 to redetermine deficiencies moreover the limitations on our jurisdiction to order a credit or refund of an overpayment provided in sec_6512 are based in part on the date of mailing of a notice_of_deficiency which we take as further indication that our overpayment jurisdiction under sec_6512 is ancillary to our deficiency jurisdiction we therefore reject amicus' argument that sec_6512 by its plain terms grants us jurisdiction in this cdp case to determine and order a credit or refund of any overpayment petitioner might have made in his federal_income_tax for petitioner's due process claim petitioner does not explicitly ask us to overrule greene-thapedi but he implicitly criticizes our failure to exercise overpayment jurisdiction in that case when he suggests that respondent's retention of an acknowledged overpayment would violate due process according to petitioner where a tax is not owed but the payment thereof the overpayment is retained by respondent the question arises whether that overpayment the property of the taxpayer has been taken from him without due process in violation of the fifth_amendment to the constitution whenever the statute_of_limitations bars a taxpayer from pursuing a claim_for_refund however it will result in the commissioner's retention of an overpayment_of_tax that result cannot be viewed as violating the taxpayer's due process rights because his loss of any refund to which he might have been entitled would arise from his own failure to claim the refund timely moreover most of the payments that petitioner now seeks to have refunded to him were voluntary payments of the tax he reported on his federal_income_tax return we fail to see how our decision not to assume jurisdiction to consider a refund claim of which petitioner manifested no awareness before the expiration of the applicable_period of limitations would result in an unconstitutional violation of his due process rights inferences drawn in greene-thapedi from the absence in sec_6330 of a cross-reference to sec_6404 or sec_6512 petitioner also claims that the inferences we drew in greene-thapedi from the absence in sec_6330 of a cross-reference to sec_6404 or sec_6512 trespasses the provision at sec_7806 sec_7806 provides the cross references in this title to other portions of the title or other provisions of law where the word 'see' is used are made only for convenience and shall be given no legal effect nothing in sec_7806 precludes the drawing of inferences from the absence of cross-references such as the one provided in sec_6404 that do not use the word see and thus have operative effect c conclusion the notice_of_determination that petitioner asked us to review sustained an nftl concerning respondent's efforts to collect amounts petitioner allegedly owed for his taxable years and petitioner's petition assigned no error in regard to his taxable_year and in his supplemental brief he concedes sustaining the lien for that year is appropriate respondent concedes that petitioner is entitled to abatement of his liability and subsequent release of the lien on the tax_year for the reasons explained above we have no jurisdiction to consider petitioner's claim that he has overpaid his federal_income_tax consequently we will issue an order upholding the nftl for and directing respondent to release the lien for and abate his assessment of tax against petitioner for that year as appropriate to reflect his concessions regarding petitioner's substantiation of deductions related to his contracting business an appropriate order and decision will be entered


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c jul uniform issue list tep ralt1 legend taxpayer a taxpayer b ira c ira d ira e ira f financial_institution g financial_institution h financial_institution city j company k amount amount amount amount amount amount l dear this letter is in response to a request for a letter_ruling dated october as supplemented by additional correspondence dated january march may and date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayers a and b represent that they withdrew amount sec_1 and from iras c d e and f respectively in order to pay off an existing mortgage on an investment_property taxpayers a and b asserts that their failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to unforeseen delays in the sale of the investment_property taxpayer a maintained ira c a traditional individual_retirement_account ira under sec_408 of the code taxpayer a also maintained ira d a roth_ira under sec_408a of the code the custodian of both iras was financial_institution g taxpayer b maintained ira e a traditional_ira under sec_408 of the code taxpayer b also maintained ira f a roth_ira under sec_408a of the code the custodian of ira e was financial_institution g the custodian of ira f was financial_institution h in taxpayer a and his investment partner purchased a multi-tenant building in city j to complete the purchase of the building taxpayer a and his partner borrowed funds from financial_institution which was evidenced by a mortgage and promissory note for amount the mortgage on the property was due and payable on date taxpayer a and his partner attempted to refinance the existing mortgage around this same time company k approached taxpayer a and his partner with an offer to buy the investment_property in city j on date taxpayer a his partner and company k entered into an agreement for the sale of the investment_property ira d taxpayer a's spouse taxpayer b contributed amount sec_3 and from to complete the sale the promissory note had to be paid off taxpayer a and his partner spent a considerable amount of time attempting to find a bank or other lending institution willing to loan money secured_by commercial real_estate faced with foreclosure if the loan was not paid off in full by date taxpayer a resorted to withdrawing amount from ira c and amount from ira e and ira f respectively on date amount sec_1 and totaling amount were withdrawn from taxpayer a and b’s four iras and used to pay off the existing promissory note taxpayer a and b’s 60-day time period for completing a rollover of amount sec_1 and back to an eligible_retirement_plan occurred expired on date company k desired to build a brewery on the investment_property amount sec_1 and were withdrawn from iras c d e and f respectively in anticipation of the sale of the investment_property which was due to close in late august settlement was delayed because company k had to secure a zoning variance before it would be issued a construction_contract other delays in company k’s attempt to obtain approval from city j meant that settlement on the investment_property and the return of amount to the taxpayers did not occur until the week of date based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted in this case indicates that taxpayers a and b withdrew amount sec_1 and amount from iras c d e and f respectively with the stated intent of paying off a mortgage on commercial real_estate in order to sell the property to a prospective buyer the taxpayers were unable to complete the sale of the property within the 60-day period for rolling amount sec_1 and into eligible retirement plans the service has the authority to waive the 60-day rollover requirement for a distribution from an ira where the individual failed to complete a rollover to another ira within the 60-day rollover period but was prevented from doing so because of one of the factors enumerated in revproc_2003_16 which include errors committed by a financial_institution death hospitalization postal error incarceration and or disability in this instance taxpayers a and b have not presented any evidence to the service as to how any of the factors outlined in revproc_2003_16 affected their ability to roll over amount sec_1 3and4ona timely basis in essence taxpayers a and b made short term loans when they withdrew amount sec_1 and from iras c d e and f while they had the intent at the time of withdrawal to redeposit amount into iras prior to the expiration of the 60-day rollover period they assumed the risk that amount might not be returned to them timely under the circumstances presented in this case the service hereby declines to waive the 60-day rollover requirement with respect to the distribution of amount thus amount will not be considered a valid rollover_contribution within the meaning of sec_408 of the code because the 60-day rollover requirement was not satisfied and therefore amount will be includible in gross_income for the taxable_year no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter 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 fetter ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact at i d sincerely yours corbte a wot manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-152312-02 date dec legend x state d1 d2 t1 t2 d3 dear this responds to the letter dated date and related correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code code for inadvertent termination of s election facts the information submitted discloses that x is a corporation organized under the laws of the state which elected to be treated as a subchapter_s_corporation effective d1 on d2 a portion of x’s stock were transferred to t1 and t2 x represents that as of d2 t1 was not a permitted shareholder of x under sec_1361 c a of the code the income plr-152312-02 beneficiary of t1 did not make a qualified_subchapter_s_trust qsst election for t1 effective d2 therefore x’s s election terminated as of d2 x also represents that as of d2 t2 was a permitted shareholder under sec_1361 however on d3 t2 became an impermissible shareholder of x upon the resignation of its trustee the income_beneficiary of t2 did not make a qsst election for t2 effective d3 therefore x’s s election would have terminated again as of d3 law and analysis sec_1361 defines an s_corporation with respect to any taxable_year as a small_business_corporation for which an s election under sec_1362 is in effect for such year sec_1361 provides that a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a subchapter_s_corporation shareholder sec_1361 defines the term qualified_subchapter_s_trust as a_trust - a the terms of which require that i during the life of the current income_beneficiary there shall be only income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current beneficiary the trust shall distribute all its assets to such beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to individual who is a citizen or resident_of_the_united_states sec_1361 states that a qsst whose beneficiary makes an election under sec_1361 will be treated as a_trust described in sec_1361 and the qsst’s plr-152312-02 beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst’s s_corporation stock to which the election under sec_1362 applies sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the first day of the taxable_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation the termination is effective on and after the day of the cessation sec_1362 sec_1362 in relevant part provides that if an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the termination was inadvertent no later than a reasonable period of time after discovery of the event resulting in the termination steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder in the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the terminating event the corporation shall be treated as continuing to be an s_corporation during the period specified by the secretary the committee reports accompanying the subchapter_s_revision_act_of_1982 explain sec_1362 as follows if the internal_revenue_service determines that a corporation’s subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequence of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that the taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts s rep no 97th cong 2d sess 1982_2_cb_718 h_r rep no 97th cong 2d sess 1982_2_cb_730 plr-152312-02 conclusions based solely on the facts submitted and the representations made we conclude that x’s subchapter_s_election terminated upon the transfer of a portion of its stock to t1 on d2 and would also have terminated upon the resignation of t2's trustee on d3 we also conclude that the terminations constituted inadvertent terminations within the meaning of sec_1362 further we conclude that pursuant to sec_1362 x will be treated as continuing to be an s_corporation from d2 and thereafter assuming x’s s_corporation_election is valid and not otherwise terminated under sec_1362 in addition we conclude that the income_beneficiary of t1 has until sixty days from the date of this letter to elect to treat t1 a qsst effective d2 and that the income_beneficiary of t2 has until sixty days from the date of this letter to elect to treat t2 a qsst effective d3 the elections should be made with the appropriate service_center copies of this letter should be attached to the elections except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is a valid s_corporation or whether t1 and t2 are valid qssts this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x s david r haglund sincerely david r haglund senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ----------------------------------------- ------------------------------------------------------------ ----------- ------------------------------- ------------------------ - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------------- id no ---------- -------- telephone number -------------------- refer reply to cc fip b02 plr-134247-06 date date ------------------------------------------------------------------ legend fund ------------------------------------------------------------ dear ------------ authorized representative on behalf of fund you request that the internal_revenue_service rule that the exchange of securities described in this letter does not constitute an acquisition within the meaning of sec_851 of the internal_revenue_code_of_1986 as amended code this responds to your request dated date submitted by your facts fund is a closed-end interval fund registered as a management company under the investment_company act of u s c 80a-1 et seq as amended the act fund represents that it has qualified to be taxed as a regulated_investment_company ric under subchapter_m part of the code in private companies these private equity investments compose a significant percentage of fund’s total assets as an interval fund under the securities laws fund has committed to offer to repurchase at least of its outstanding shares on a quarterly basis under rule 23c-3 of the fund seeks long-term capital appreciation by making venture capital investments fund is closed to new investors and its shares are not listed on any exchange plr-134247-06 act since fund’s shares are not listed on an exchange this repurchase program is the primary means by which fund provides liquidity to its shareholders in order to fund repurchases of shares fund must liquidate investments fund’s private equity investments are generally illiquid unless a private equity company in which fund holds shares engages in a business combination or an initial_public_offering in general an initial_public_offering requires a company to conform its capital structure and reporting systems to public company norms in order to permit the company to issue new shares to the general_public in exchange for cash and to create a public market in its shares in order to create a public market in a company’s shares any discrepancies in legal rights such as special voting dividend or liquidation rights between the existing private shares and the public common_stock will be eliminated in conjunction with the initial_public_offering engaging in an initial_public_offering are able to sell shares of the company to the public at the same time the company sells new shares such sales are often limited however in order to reassure prospective public investors that the original investors believe that the company remains a good investment sales by existing private shareholders are customarily restricted during a lock-up period following the initial private offering converted into common_stock pursuant to a recently completed initial_public_offering as a party to a customary lock-up agreement fund is contractually prevented from selling its shares of this company’s common_stock for a period of approximately months in certain cases existing private shareholders such as fund of a company fund held shares of preferred_stock in a private company that have been fund represents that no business_assets were added to the company in the course of the initial_public_offering fund further represents that the exchange of preferred shares for common shares in the course of the initial_public_offering was structured as a tax-free transaction with respect to fund under either sec_368 or sec_1036 of the code law and analysis sec_851 of the code provides that a corporation shall not be considered a ric for any taxable_year unless at the close of each quarter of the taxable_year a at least percent of the value of its total assets is represented by cash cash items government securities securities of other rics and other_securities limited in the case of other_securities of any one issuer to not more than of the value of the assets of the ric and to not more than percent of the voting_securities of the issuer and b not more than of the value of the ric’s total assets is invested in i securities other than government securities or the securities of other rics of any one issuer ii the securities other than the securities of other rics of or more issuers plr-134247-06 which the ric controls and which are engaged in the same similar or related trades_or_businesses or iii the securities of one or more qualified publicly_traded_partnerships sec_851 of the code provides in pertinent part that a corporation which meets the requirements of sec_851 at the close of any quarter shall not lose its status as a ric because of a discrepancy during a subsequent quarter between the value of its various investments and such requirements unless the discrepancy exists immediately after the acquisition of any security or other_property and is wholly or partly the result of this acquisition the diversification requirements of sec_851 are designed to prevent rics from concentrating their investment_assets in a small number of companies or in certain forms of assets revrul_76_392 1976_2_cb_249 relief from a strict mechanical application of the percentage limitations set forth in sec_851 is provided in sec_851 which distinguishes between cases in which the failure to comply with the percentage limitations results from a fluctuation in the market_value of the investment_assets held and not from an acquisition of a new or additional investment id see also sec_1_851-5 example of the income_tax regulations the regulations sec_851 also offers a corporation the opportunity to cure a failure to meet the diversification requirements occasioned by an acquisition within days after the close of the quarter in which the acquisition occurred in view of these two broad areas of classification or mitigating provisions revrul_76_392 states that it is reasonable to give the term acquisition an expansive interpretation to further the legislative objective of prohibiting concentration of investment_assets id pincite revrul_63_170 1963_2_cb_286 holds that the term acquisition as used in sec_851 of the code includes the receipt of securities of a third party that is the acquiring_corporation in a reorganization with a portfolio company pursuant to sec_368 this ruling also holds that the term acquisition includes the receipt of securities of a third party by in-kind distribution from a portfolio company pursuant to an anti-trust order revrul_74_133 1974_1_cb_165 holds that a stock split does not constitute an acquisition as that term is used in sec_851 of the code because it is a mere change in the number of shares and is therefore distinguishable from the exchange for stock of another company in an acquisitive reorganization described in revrul_63_170 revrul_76_392 analyzed the distinction between revrul_63_170 and revrul_74_133 as dependent on whether there has been a mere change in the number of shares representing the original investment in a corporation as opposed to a change in the nature or extent of such investment in making this determination the ruling further alludes to a significant change in the nature of the investment itself as one of the relevant considerations although the nontaxable_exchange of preferred_stock for common_stock described in this letter represents a change in the nature if not the plr-134247-06 extent of fund’s original investment that differs from the mere change in the number of shares in a corporation undergoing a stock split as described in revrul_74_133 the change is not sufficiently significant to warrant the classification of the transaction as an acquisition for purposes of sec_851 unlike the receipt of securities of an acquiring_corporation in a sec_368 reorganization as described in revrul_63_170 no business_assets have been added to the private equity company pursuant to the terms of its initial_public_offering the exchange of preferred_stock for common_stock of a single company under these circumstances also does not fundamentally resemble the receipt of securities of a third party by in-kind distribution from a portfolio company pursuant to an anti-trust order that is treated as an acquisition in revrul_63_170 furthermore a closed-end interval fund requires liquidity in order to redeem a percentage of its shares on a periodic basis as it is required to do under the act an initial_public_offering offers a closed-end interval fund that invests a significant percentage of its assets in private equity investments a principal means of achieving this necessary liquidity to require instead under the tax law that fund dispose_of its investments in a private equity company prior to an initial_public_offering would significantly impede fund from achieving the liquidity necessary to fulfill its securities laws obligations in view of the requirement that a ric comply both with the diversification rules of subchapter_m and the provisions of the act it is appropriate to consistently interpret these sets of rules see revrul_2003_84 2003_2_cb_289 conclusion where as described in this letter fund as a closed-end interval fund exchanges preferred_stock of a corporation for common_stock of that corporation a in a reorganization that is nontaxable under either sec_368 or sec_1036 of the code b pursuant to the terms of an initial_public_offering that does not involve a business combination or other infusion of business_assets other than cash and c is contractually prohibited from disposing of the common_stock for a significant period of time under a customary lock-up agreement we rule that fund’s receipt of common_stock does not constitute an acquisition within the meaning of sec_851 plr-134247-06 no opinion is expressed concerning whether fund otherwise qualifies as a ric under subchapter_m part i of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely william e coppersmith william e coppersmith chief branch office of associate chief_counsel financial institutions products


internal_revenue_service department oth treasury significant index number washington dc lef ol contact person telephone number - in reference to pate t-ep ra t3 fbg good _ legend company a plan x dear this is in response to a request for a private_letter_ruling dated date as supplemented by correspondence dated date date and date which was submitted on your behalf by your authorized representative concerning certain proposed transactions your authorized representative submitted the following facts and representations in support of the ruling_request company a established plan x effective date for the benefit of its employees in an exempt loan intended to shares of company common_stock plan x is a stock_bonus_plan qualified under sec_401 of the internal_revenue_code and an employee_stock_ownership_plan esop which meets the requirements of code sec_4975 in plan x’s related trust borrowed dollar_figure comply with code sec_4975 to purchase this represented of company a’s common_stock at that time pursuant to the terms of the stock pledge agreement executed in conjunction with the exempt loan agreement all of the shares purchased with the proceeds of the exempt loan and subsequently placed in the esop suspense_account are held as security for the exempt loan at the time that plan x was established and leveraged company a fully intended to make contributions to plan x so that plan x could repay the exempt loan and all of the shares held as collateral could be released from suspense and allocated to participants’ accounts however for reasons described below company a terminated plan x effective date as of that date company a had made recurring and substantial principal contributions to plan x of approximately dollar_figure leaving a balance due on the exempt loan of dollar_figure of the shares originally purchased by plan x have been released from suspense and allocated to plan x participants as of date approximately page during the period of time that plan x was in existence company a represents that its business and market changed dramatically resulting in the need for increased capital spending in order to remain competitive company a increased capital spending and estimated that additional capital needs would be substantial company a also anticipated that relocation would be necessary because of the expansion of an airport adjacent to real_property owned by company a while searching for a new plant location in company a was approached by a third party to discuss merger after negotiations company a received an unsolicited offer to combine its business with this third party merger partner company a and merger partner signed a letter of intent on date to begin the process of merger of company a into an entity controlled by merger partner pursuant to the letter of intent company a and merger partner will adopt a two-stage approach to the complete integration of merger partner’s - operations and certain lines of company a’s businesses in the first stage company a and merger partner will form a limited_liability_company llc and each will transfer its operating_assets to this company after the transfer company a will represent approximately one-third of the value of the llc company a and merger partner began actively and jointly conducting their businesses as of date the second stage will be a merger or its equivalent by transfer of capital assets after the success of the llc is determined to be mutually satisfactory and following internal_revenue_service approvals of the termination of plan x the termination of plan x was included as a condition because plan x does not meet the long-term financing goals of merger partner the letter of intent states in part that the merger is conditioned upon and subject_to company a’s termination of plan x and receipt of a favorable determination from the service with respect to its termination of plan x and a favorable private_letter_ruling from the service regarding the retirement of the exempt loan the termination of plan x is necessary because plan x does not meet the long-term financing goals of merger partner as required by the letter of intent the exempt loan will be retired after the redemption by as of date plan x held company a of the unallocated shares held by plan x unallocated shares and allocated shares upon redemption company a cash equal to the purchase_price of allocated and unallocated shares to the trustee transferred of plan x plan x used the proceeds related to the unallocated shares to pay off the exempt loan to the extent possible company a forgave the remaining debt pursuant to the letter of intent employees of company a will become immediately eligible to participate in a plan sponsored by the llc company a intends to make final distributions to plan x participants after receiving a favorable ruling and determination_letter from the service plan x participants will be allowed to rollover these distributions into the plan sponsored by the llc _ bos page based on the above facts and representations your authorized representative has requested the following rulings on your behalf i the termination of plan x and sale of shares held in its related trust to company a as contemplated by the transaction will not cause the exempt loan to fail to satisfy the requirements for exemption from the prohibited_transaction rules under code sec_4975 and regulations thereunder and specifically the transaction does not violate the primary benefit requirement of code sec_4975 the transaction does not violate sec_54_4975-7 of the excise_tax regulations relating to release from encumbrance and the transaction does not violate the requirement of an exempt loan relating to its specific term as provided under sec_54_4975-7 of the regulations the proceeds received on sale of unallocated shares are a permissible source of repayment of - the exempt loan under sec_54_4975-7 of the regulations four additional ruling requests were withdrawn by your authorized representative in the letter dated date with respect to your ruling requests code sec_4975 provides that an esop is an arrangement designed to invest primarily in employer_securities within the meaning of sec_409 an esop must be part of a stock_bonus_plan qualified under sec_401 of the code or a stock_bonus_plan and money_purchase_pension_plan both of which are qualified under sec_401 a leveraged_esop borrows funds which it uses to purchase employer_securities usually from the employer the loan to the esop is generally guaranteed by the employer the acquired employer_securities are held in a suspense_account pending allocation to the accounts of the plan participants according to the rules of sec_54_4975-11 of the excise_tax regulations an esop generally uses employer contributions to the plan to repay the exempt loan under code sec_4975 an esop_loan generally is exempt from the prohibitions provided in sec_4975 and the excise_taxes imposed by sec_4975 and b only if the loan is primarily for the benefit of the participants and beneficiaries of the plan the primary benefit requirement sec_54_4975-7 of the regulations provides that all of the surrounding facts and circumstances will be considered in determining whether an esop_loan satisfies the primary benefit requirement among the relevant facts and circumstances are whether the transaction promotes employee ownership of employer stock whether contributions to the esop are recurring and substantial and the extent to which the method of repayment of the loan benefits the employees all aspects of the loan transaction including the method of repayment will be scrutinized to determine whether the primary benefit requirement is satisfied sec_54_4975-7 of the regulations requires that an exempt loan must provide for the release from encumbrance of the employer_securities used as collateral for the loan using either of the two methods described therein rage sec_54_4975-7 of the regulations provides that an exempt loan must be for a specific term and must not be payable upon demand except upon default in this case company a made recurring substantial and timely payments to plan x totaling over a seven-year period resulting in the allocation to participant approximately dollar_figure accounts of approximately percent of the account when plan x was established company a fully intended to continue to make payments on the exempt loan until maturity and all stock was allocated however in company a received an unsolicited offer to merge with an unrelated identity and has begun this process in accordance with a letter of intent signed by both parties the letter of intent provides that the termination of plan x is a prerequisite for the merger plan x is being terminated and a determination_letter is being sought from the appropriate district_office shares held in plan x’s unallocated suspense upon consideration of all of the surrounding facts and circumstances of this case in accordance with sec_54_4975-7 of the regulations we conclude with respect to your first requested ruling that the termination of plan x and sale of shares held in its related trust to company a as contemplated by the transaction will not cause the exempt loan to fail to satisfy the requirements for exemption from the prohibited_transaction rules under code sec_4975 and regulations thereunder and specifically the transaction does not violate the primary benefit requirement of code sec_4975 the transaction does not violate sec_54_4975-7 of the excise_tax regulations relating to release from encumbrance and the transaction does not violate the requirement of an exempt loan relating to its specific term as provided under sec_54_4975-7 of the regulations with respect to repayment of an exempt loan sec_54_4975-7 of the regulations indicates that the employer has the primary responsibility for repayment through contributions to the plan this section also provides that the only assets of an esop that may be given as collateral on an exempt loan are qualifying employer_securities of two classes those acquired with the proceeds of the loan and those that were used as collateral on a prior exempt loan repaid with the proceeds of the current exempt loan no person entitled to payment under the exempt loan shall have any right to assets of the esop other than loan ii contributions other than contributions of employer_securities that are made under an esop to meet its obligations under the loan and ili earnings attributable to such collateral and the investment of such contributions i collateral given for the sec_54_4975-7 of the regulations does not establish a per se prohibition against exempt loan prepayment by an esop however as noted above if an esop contemplates prepaying an exempt loan the funds used to prepay the loan must be limited as described in this regulation in this case plan x will use the proceeds from the redemption of the stock acquired with an exempt loan and held in the suspense_account to pay off the exempt loan therefore with respect to your second requested ruling we conclude that the proceeds received on sale of page unallocated shares are a permissible source of repayment of the exempt loan under sec_54_4975-7 of the regulations this ruling letter assumes that plan x is qualified under code sec_401 and its related trust exempt from tax under sec_501 at all times relevant thereto it also assumes that plan x meets the requirements of code sec_4975 this ruling is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent pursuant to a power_of_attorney on file in this office the original of this letter is being sent to your authorized representative sincerely yours 4a pe wily e fevwr frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures notice deleted copy of ruling letter original to