t c memo united_states tax_court john s cooper jr petitioner v commissioner of internal revenue respondent docket no filed date john s cooper jr pro_se james c o’leary for respondent memorandum findings_of_fact and opinion gerber judge respondent determined an dollar_figure deficiency in petitioner’ sec_2002 federal_income_tax and additions to tax under sec_6651 and a in the amounts of dollar_figure and dollar_figure respectively respondent also determined section references are to the internal_revenue_code as amended and in effect for the period under consideration rule references are to this court’s rules_of_practice and procedure an addition_to_tax under sec_6651 in his petition petitioner questioned the entire deficiency alleging that respondent was in error and more specifically that respondent’s agent had no authority to conduct an examination and that petitioner was not afforded due proce sec_2 during the administrative examination procedures respondent has orally moved that the court award sanctions under sec_6673 alleging that petitioner’s position is frivolous and interposed merely for delay we consider the following issues in this opinion whether petitioner has shown that respondent’s determination is in error and whether petitioner is liable for the additions to tax under sec_6651 sec_6651 and sec_6654 and whether damages should be awarded under sec_6673 petitioner has not made clear how he was not afforded due process or what he means by that term findings of fact3 petitioner had his legal residence in hyattsville maryland at the time his petition was filed during petitioner received wages in the amount of dollar_figure from equant inc he also received dollar_figure in interest from washington gas light federal credit_union petitioner did not file a federal_income_tax return for the or tax_year on date respondent mailed to petitioner a statutory_notice_of_deficiency determining an dollar_figure income_tax deficiency for petitioner’ sec_2002 tax_year in determining the income_tax deficiency respondent afforded petitioner a dollar_figure standard_deduction one dollar_figure personal_exemption and single filing_status to determine the tax_rate petitioner did not make any estimated_tax payments for and his federal_income_tax withholding was limited to dollar_figure for the parties’ stipulation of facts and the exhibits are incorporated by this reference at trial petitioner objected to the stipulation of facts that he had entered into some time prior to the scheduled trial date the stipulation is brief and contains basic information including the notice_of_deficiency petitioner’s address at the time the petition was filed and the facts that he received wage and interest_income during respondent’s counsel told petitioner if he did not stipulate the income figures respondent would call witnesses to testify about those items petitioner did not wish having his employer called to testify and agreed to the stipulation at trial petitioner claiming duress attempted to repudiate his agreement and force respondent to prove the items of income under those circumstances the court held that petitioner was bound to his stipulation and that respondent would be prejudiced if the stipulation was nullified the entire year respondent prepared a substitute return for petitioner’ sec_2002 tax_year under sec_6020 opinion the main thrust of petitioner’s position is that he owes no tax because respondent still has yet to identify a statutory duty obligation to petitioner which shows a tax due and owing to the u s treasury petitioner also contends that respondent has failed to show who created the notice_of_deficiency if the individual had proper authority or if procedures were followed in determining a deficiency existed first we address whether respondent has any burden to show that his determination of the income_tax deficiency is correct generally taxpayers bear the burden of proving that the commissioner’s determination is in error rule a 290_us_111 the burden_of_proof with respect to a factual issue relevant to liability for tax may shift to respondent where a taxpayer produces credible_evidence and certain other statutory requirements are met by the taxpayer sec_7491 in this case petitioner has not produced any credible_evidence and has not shown that he meets the statutory criteria for shifting the burden to respondent respondent has admitted that he has the burden of production with respect to the additions to tax and penalties see sec_7491 accordingly petitioner has the burden of showing that respondent’s income_tax deficiency determination is in error petitioner received income from wages and interest during hi sec_2002 tax_year petitioner has made several arguments in support of his position that respondent’s determination is either erroneous or fraudulent but he has stipulated and has not otherwise denied the receipt of the wage and interest_income for hi sec_2002 tax_year we note that all of petitioner’s arguments are specious and without substance and many of them have been offered by others who are merely attempting to avoid the payment of federal tax accordingly we hold that petitioner has not shown that respondent’s dollar_figure income_tax determination is in error next we consider whether petitioner is liable for additions to tax under sec_6651 and for failure_to_file a income_tax return or to pay the tax due for that year sec_6651 provides for an addition_to_tax for failure_to_file unless it is shown that the failure is due to reasonable_cause and not due to willful neglect similarly sec_6651 provides for an addition_to_tax for failure to pay the amount shown as tax on any return unless it is shown that the failure is due to reasonable_cause and not due to willful neglect respondent has satisfied his burden of production with respect to the addition_to_tax under sec_6651 by means of documents and testimony showing that petitioner failed to file a federal tax_return in addition respondent caused to be prepared for petitioner’ sec_2002 tax_year a substitute return under the criteria of sec_6020 see 120_tc_163 accordingly respondent has met his burden of producing evidence that would support an addition for failure to pay the tax due for that year under sec_6651 petitioner presented no evidence showing that his failure_to_file or pay was due to reasonable_cause and not due to willful neglect as already mentioned petitioner has advanced several specious arguments as to why he should not have to file or pay tax none of his arguments suffice to show that he had reasonable_cause for his failure_to_file or pay accordingly we hold that petitioner is liable for the additions to tax for failure_to_file and failure to pay under sec_6651 and respectively next we consider whether petitioner is liable for the addition_to_tax under sec_6654 for failure to make estimated payments the required_annual_payment of estimated_tax as it relates to this case equal sec_90 percent of petitioner’s tax for sec_6654 petitioner’s income_tax deficiency for is dollar_figure required_annual_payment petitioner’s withholding_from_wages was dollar_figure and he made no payments of estimated_tax clearly he has not made the required_annual_payment of the statute there are other exceptions to the obligation to make estimated_tax payments set forth in sec_6654 but we do not find that petitioner comes within those exceptions accordingly we hold that petitioner is liable for the sec_6654 addition_to_tax for failure to make estimated_tax payments finally we consider respondent’s oral motion that sanctions be awarded under sec_6673 due to petitioner’s advancing frivolous and groundless arguments and or maintaining this proceeding for delay on at least two occasions prior to trial respondent advised petitioner that sec_6673 sanctions would be sought in this case on brief petitioner contended that his position is not frivolous he states mere questions about what laws information and procedures the respondent relied upon to conclude a deficiency exists do not constitute a frivolous position or argument petitioner here has made a concentrated effort to avoid the payment of his federal tax obligation he did not file a other measures of the required_annual_payment are inapplicable because respondent produced evidence that petitioner failed to file a return for hi sec_2001 and sec_2002 tax years see sec_6654 and ii nicholls v commissioner tcmemo_2006_218 return and his withholding was limited throughout petitioner’s dealings with respondent and the court he provided nothing but specious and well-worn arguments all of which represent nothing more that a baseless collateral attack on the real question of whether he had a federal tax_liability for the vast majority of petitioner’s arguments have already been addressed by this and other courts and are not worthy of further analysis by this court the remainder are irrelevant to the question we consider at trial petitioner attempted to thwart the litigation process by attempting to withdraw from his agreed stipulation at the last minute he presented no evidence or meaningful testimony at the trial and merely forced respondent and the court to the expense and use of time to air his groundless and sophistic technical arguments all of which were designed to delay the reporting and payment of petitioner’ sec_2002 tax_liability taxpayers who have been issued a notice_of_deficiency have a right to avail themselves of this federal tax forum petitioner by his failure to present evidence and the frivolousness of his argument has abused that right it appears to the court that the only reason petitioner pursued this litigation is for the purpose of delay under those aggravated circumstances we hold that petitioner is liable for a dollar_figure penalty under sec_6673 to reflect the foregoing order and decision will be entered for respondent


t c summary opinion united_states tax_court norman j kelley petitioner v commissioner of internal revenue respondent docket no 22639-08s filed date norman j kelley pro_se denise a diloreto for respondent wherry judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and 1unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and in effect for the tax_year at issue the rule reference is to the tax_court rules_of_practice and procedure this opinion shall not be treated as precedent for any other case respondent determined that petitioner is liable for a dollar_figure federal_income_tax deficiency for his tax_year petitioner timely petitioned the court to redetermine that deficiency the issue for decision is whether dollar_figure representing percent of the dollar_figure in social_security_benefits that petitioner received in is includable in petitioner’s gross_income background some of the facts have been stipulated and the stipulated facts and accompanying exhibits are hereby incorporated by reference into our findings at the time he filed his petition petitioner resided in west virginia during petitioner received dollar_figure in social_security_benefits which was reported to respondent on form ssa-1099 social_security_benefit statement petitioner filed a form_1040 u s individual_income_tax_return for the tax_year but did not report any taxable_amount from social_security_benefits on date respondent sent petitioner a notice_of_deficiency indicating that he was liable for a dollar_figure federal_income_tax deficiency for the tax_year petitioner on date filed a timely petition with this court on date the parties filed a joint motion for leave to submit case under rule and a stipulation of facts the court granted the motion and struck the case from the date charleston west virginia trial session discussion since sec_86 has required some taxpayers to include a portion of their social_security_benefits in their gross_income for federal_income_tax purposes 123_tc_245 affd 436_f3d_344 2d cir before then social_security_benefits had not been taxed congress evidently believed that a change was necessary to shore up the solvency of the social_security trust funds and to treat ‘more nearly equally all forms of retirement and other income that are designed to replace lost wages’ id quoting s rept pincite 1983_2_cb_326 b y taxing only a portion of the benefits congress intended to allow taxpayers some cost_recovery for their contributions ie for the taxes they pay into the social_security system roberts v commissioner tcmemo_1998_172 affd without published opinion 182_f3d_927 9th cir the formula for determining the portion of social_security_benefits includable in gross_income is set forth in sec_86 although somewhat complex the formula provides that a single_taxpayer whose modified_adjusted_gross_income plus one-half of his or her social_security_benefits received during the taxable_year exceeds an adjusted_base_amount of dollar_figure must include percent of the social_security_benefits in gross_income sec_86 c petitioner seems to make two arguments first he asserts that one-half of the amount in his social_security is his investment contribution and that since social_security is taxed through his original contribution i f any of his social_security should be taxed it should at most be the employer’s contribution petitioner also argues that he was not required to include in gross_income any portion of his dollar_figure social_security_benefits in because all of the benefits were paid out of his contributions petitioner asserts that his social_security_benefits should be taxed only to the extent that the benefits he received exceed his social_security contributions as explained below we are not persuaded by any of petitioner’s arguments when sec_86 was enacted congress using the same logic as petitioner set the maximum amount of taxable social_security_benefits at only one-half of the benefits received in recognition of the fact the social_security_benefits are partially financed by the after-tax contributions of employees and self-employed individuals roberts v commissioner supra citing s rept supra pincite c b pincite however in congress amended sec_86 to require that a taxpayer with a modified_adjusted_gross_income plus one-half of the social_security_benefits exceeding dollar_figure or dollar_figure in the instance of a joint tax_return must include percent of social_security_benefits in income omnibus_budget_reconciliation_act_of_1993 publaw_103_66 sec 107_stat_475 second petitioner asserted that he was not required to include in gross_income any portion of his benefits because all of the benefits were paid out of his contributions although congress initially concluded that social_security_benefits should be treated like other retirement benefits and taxed to the extent ‘they exceed a worker’s after-tax contributions’ it ultimately chose a method of taxation that differs from the manner in which other retirement benefits are taxed roberts v commissioner supra quoting s rept supra pincite c b pincite this intentional legislative decision increased revenue increased productivity and eliminated the complicated recordkeeping requirements associated with annuities which allow taxpayers to exclude a share of their investment in the periodic_payments underlying all of petitioner’s arguments is a question of fairness however as we said in roberts this court is not a forum to judge legislation ‘normally a legislative classification will not be set_aside if any state of facts rationally justifying it is demonstrated to or perceived by the courts ’ id quoting 400_us_4 congress had a valid and rational basis for the distinctions made in sec_86 roberts v commissioner supra petitioner received dollar_figure in social_security_benefits in and his modified_adjusted_gross_income plus one-half of the social_security_benefits received exceeded dollar_figure accordingly under sec_86 petitioner is required to include percent or dollar_figure of the social_security_benefits in his gross_income for the foregoing reasons we sustain respondent’s determination_of_a_deficiency for petitioner’s tax_year the court has considered all of petitioner’s contentions arguments requests and statements to the extent not discussed herein we conclude that they are meritless moot or irrelevant to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 3-plr-119809-99 date date legend corporation trust llc x z d1 d2 d3 d4 d5 dear this responds to a letter dated date submitted on behalf of corporation requesting a ruling under sec_1362 of the internal_revenue_code plr-119809-99 facts d2 corporation was incorporated on d1 and elected subchapter_s status effective on d3 x the sole shareholder of corporation transferred all of the outstanding_stock of corporation to trust a_trust described in sec_1361 prior to this transfer corporation had revoked its s election specifying a prospective effective date of d4 on d4 llc a california limited_liability_company acquired all of the stock of corporation z is the sole owner of llc and llc is a disregarded_entity for federal tax purposes neither llc nor z are related to trust or x and neither llc nor z were corporation shareholders before d4 in addition neither llc nor z were involved in the decision to revoke the s election of corporation corporation requests permission pursuant to sec_1362 and sec_1_1362-5 of the income_tax regulations to elect s_corporation status effective d5 analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides that an election under sec_1362 may be terminated by revocation sec_1362 provides that if a small_business_corporation has made an election under sec_1362 and if the election has been terminated under sec_1362 the corporation shall not be eligible to make an election under sec_1362 for any taxable_year before it sec_5th taxable_year which begins after the 1st taxable_year for which the termination is effective unless the secretary consents to the election sec_1_1362-5 provides that the commissioner may permit an s_corporation whose election has terminated to make a new election before the 5-year period expires the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should consent to a new election the fact that more than percent of the stock in the corporation is owned by persons who did not own any stock in the corporation on the date of the termination tends to establish that consent should be granted plr-119809-99 conclusion based solely on the facts and representations submitted we conclude that corporation may make a new election under sec_1362 effective d5 a copy of this letter should be attached to corporation’s federal_income_tax return for its taxable_year for which the s election is accepted as timely filed except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning corporation’s eligibility as a small_business_corporation under sec_1361 to elect to be an s_corporation pursuant to a power_of_attorney on file with this office copies of this letter are being sent to corporation and another authorized representative 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 sincerely shannon cohen acting assistant to the chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date date date uil contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final since you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions you should follow the instructions in notice if you agree with our deletions you do not need to take any further action in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements letter cg catalog number 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 federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely lois lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number uil nos tax_exempt_and_government_entities_division date date legend b date c state d date e individual f individual g individual h organization j country k individual l individual m individual n date p date dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issue do you qualify for exempt status under sec_501 no for the reasons given below does your inability to adequately establish operations as exclusively charitable preclude exemption under sec_501 yes for the reasons given below facts you were formed as a corporation on date b in the state of c form_1023 requesting exemption under c was filed on date d three years after your formation your officers are e f and g your articles of incorporation are compliant with c purposes and along with your bylaws state you were formed to financially support a kollel school h located in j a foreign_country your name is friends of h your only given activity is supporting h which you describe as an academic institution based in j the work of h is done under the direction of k a noted scholar and author of many religious themes you stated that you were formed after members of your board were inspired by seeing the actual activities of h and wanting to support its function on form_1023 in describing grant making procedures you indicate you will make pre-grant inquiries about any potential foreign recipient s and use follow-up procedures to ensure distributions were used in furtherance of your purposes applications would be required to be submitted by any potential recipient s of your funds indicating the purpose and use to be made of those funds foreign organizations would accept contributions made to your organization earmarked for a specific country or organization also contributors of funds to your organization would know you had ultimate authority to use those funds at your discretion you first stated that you gained familiarity with h by visitation in j and through correspondence that later changed to phone calls and a representative from h visiting the united_states no supporting materials or documentation could be provided to substantiate those visits aside from the dates visitation occurred you were unable to locate any written documentation or communication with h which you’d previously received or substantiate any pre-grant inquiries were made you received no written reports from h despite stating periodic follow up would take place your grant selection process was reliant on familiarity with the recipient entity rather then documented policies and procedures on how or why you were awarding funds on date n you provided a copy of your grant application and agreement that would be used for potential and actual recipients of all future distributions up to this date no applications for funds were ever submitted despite your indication that applications will be required to be submitted indicating the purpose and use to be made of the grants and periodic follow up will take place to see that this has occurred you were unable to provide evidence any grants made after this date were made under the new agreement you stated that you would advise beneficiaries and donors of funds to your organization on the use of funds you have provided no documentation demonstrating how contributors of funds to your organization would know you had ultimate authority over those funds you indicated a close connection with h and applied as a supporting_organization to them on schedule e form_1023 on that schedule you indicate that you or h would not earmark funds for support of a particular program or activity directly conflicting with information given on another part of form_1023 your bylaws require you to have a board meeting at least twice per year at which proper recordings of proceedings would be kept by your secretary despite the provisions in your bylaws for these meetings to date none have been held when asked for records of your meetings including copies of minutes you indicated there were none your bylaws and minutes submitted with your application are the only documentation from meetings that exist you solicit donations in the united_states to promote the work of h solicitations are made by volunteers either in person or by telephone the only expenses_incurred by you are any governmental tax and related filing fees all funds collected in the united_states minus those expenses are sent directly to h k is in receipt of all funds sent to h and h is the only foreign organization to obtain contributions from you since your inception your financial data show total support given to h exceeds dollar_figure to date you provided copies of cancelled checks that were signed by l and m who are not board members with an unknown address printed on the checks when asked why they were signing checks on your behaif you stated that l and m who reside in the united_states and support your purposes were asked to be signatories because they have a good relationship with the bank at which you have your account they could not sign checks without consultation with your board on date p you stated that only members of the governing body would sign checks on your behalf from that point forward however you submitted canceled checks written after that statement that were signed by l when asked further about the unknown address printed on your checks you stated that l and his family have been in the real_estate business for many decades and since they operate an office they were kind enough to let you utilize that office as your address since you had no other office and wished to keep expenses at a minimum while e f and g each have listed mailing addresses in the state of c none are in receipt of day to day correspondence addressed to your organization law sec_501 of the internal_revenue_code_of_1986 provides for the exemption from federal_income_tax for organizations described in sec_501 such organizations are recognized as exempt if they are organized and operated exclusively for religious charitable and educational_purposes sec_1_501_c_3_-1 of the regulations states that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt revrul_66_79 held that contributions to a domestic charity described in sec_170 of the code which are solicited for a specific project of a foreign charitable_organization are deductible where the domestic charity has reviewed and approved the project as being in furtherance of its own exempt purposes and has control and discretion as to the use of the contributions revrul_68_489 held that an organization will not jeopardize its exemption under sec_501 of the code even though it distributes funds to nonexempt organizations provided it retains control and discretion over use of the funds for sec_501 purposes in 71_tc_102 the court upheld the denial of exemption on an organization that made grants to individuals the organization asserted that its grants were made in furtherance of a charitable purpose to assist the poor the organization was unable to furnish any documented criteria which would demonstrate the selection process of a deserving recipient the reason for specific amounts given or the purpose of the grant the only documentation contained in the administrative record was a list of grants made during one of the three years in question which included the name of the recipient the amount of the grant and the reason for the grant the court held that this information was insufficient in determining whether the grants were made in furtherance of an exempt_purpose 73_tc_196 the petitioner's only activities were some individual counseling and distribution of a few grants to needy individuals the petitioner's failure to keep adequate_records and its manner of operation made it impossible to trace the money completely but the court found it clear that money passed back and forth between petitioner and its director and his for-profit businesses the court held that petitioner had not shown it was operated exclusively for exempt purposes or the no part of its earnings inured to the benefit of its officer application of law sec_501 of the internal_revenue_code provides for exemption for organizations operated exclusively for religious charitable and educational_purposes sec_1_501_c_3_-1 of the regulations states that if an organization fails to meet either the organizational_test or the operational_test it is not exempt we cannot determine and you are unable to substantiate that your fund distribution program is furthering exclusively c purposes you are not described in sec_501 of the code because you are not described in sec_501 you fail the operational_test and are not exempt you are unlike the organization described in revrul_66_79 as you have provided no evidence you review and approve the projects for which you solicit funds or have control and discretion over distributed funds despite the provision in your bylaws for regular meetings to date none have been held you have no meeting minutes or other documentation substantiating fund distributions despite your statement that pre-grant inquiries would be made no evidence has been provided to confirm these were done you have also shown no evidence of control and discretion over the use of the funds you did distribute after stating l and m would no longer sign checks at least three more were written to h containing f’s signature demonstrating a lack of control_over financial transactions you've provided no evidence of follow-up procedures to ensure proper use of funds by h despite the statements made that these would occur you are unlike the organization described in revrul_68_489 as you have provided no evidence that you retained control and discretion over the use of your funds awarded to h you were unable to produce documentation showing how you ensured funds were used by h for c purposes you have indicated funds were limited to certain projects yet you have provided no evidence those projects furthered your purposes although you created an application and follow up procedures you have either not followed or have been unable to substantiate that you have followed these procedures when asked for copies of your grant application or follow up reports you indicated that you could not find any record of prior correspondence or record of being contacted you have no meetings no minutes no discussions and you have failed to compile or retain such records overall you have been unable to provide documentation to demonstrate maintenance or control_over the funds you have distributed to h in church in boston the court upheld the denial of exemption on an organization that made grants to individuals when information was insufficient in determining whether the grants were made in an objective and nondiscriminatory manner and whether the distribution of such grants was made in furtherance of an exempt_purpose like the organization in that ruling your method of distributing grants shows no manner of objective selection and you've provided no documentation demonstrating your distributions have furthered an exempt_purpose you provided no criterion for why grants were awarded and no reasoning behind the amounts given the selection and distribution relied on a familiarity of h and their immediate need versus a structured application and review process there is a lack of documentation demonstrating what these funds were used for and for this reason we cannot determine these were used for c purposes as seen in western a lack of sufficient records made it impossible to trace the use of that entity's money completely and that organization was denied exempt status here while you have shown the beginning and end results of the movement of funds what took place before and after that movement is not documented you are unable to show any formal process that took place prior to distributing funds to h and you are unable to show any follow up activity that took place once h had full control and use of said funds for this reason we are unable to determine the use of those funds or the reason why they were awarded since we cannot determine especially how those funds were used or why they were awarded the determination cannot be made that they were used for c purposes since your sole activity is the distribution of funds and those funds cannot be confirmed to have been used for charitable purposes you are not operated exclusively for c purposes you allowed non-board members l and m to sign for and receive your bank statements as well as sign and authorize checks you delegated your authority responsibility and operations to individuals outside of your organization’s internal operating control you allowed non-board members and otherwise unauthorized individuals who have no official responsibility access to your day to day finances and accounts these fact patterns are also consistent with western where lack of control_over an organizations funds failed to establish an exempt_purpose consistent with sec_1 c of the regulations conclusion based on the above facts and law we conclude you do not qualify for exemption under sec_501 of the code as you are not operated exclusively for c purposes you lack documentation records and evidence that distributions were made and used for exclusively you have not held any meetings resulting in no recordation individual sec_501 purposes outside the purview of your organization had signatory authorization on accounts you do not exercise adequate discretion and control_over funds you have distributed and therefore you do not qualify for exemption under c you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal’ accompanied by the following declaration the statement of facts item must be under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete the declaration must be signed by an officer or trustee of the organization who has personal knowledge of the facts your appeal will be considered incomplete without this statement if an organization's representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois lerner director exempt_organizations enclosure publication


department of the treasury internal_revenue_service washington d c aa dec ono tax_exempt_and_government_entities_division u ll sro ccr ic hr er kk rrc caco ic ac ac legend taxpayer a fee cr cr eo a ak taxpayer b ira x ira y i ok ok ok ok 3k ok ok ok ok 2k ok ok ok ok ok ec cc ak a 2k fio a io ko a ok a i ok ak companym rcs cacc cc a ak ak hk sum o sum n sum p bank b ira z ae crc accc ea ss ec cr ra ar a ak srr ror hch 2k 2k eh re ce ci ice ak ak kk scc crc rc dear ar aor ar or io ik this is in response to a letter dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative in which you request relief under sec_301_9100-3 of the procedure and administration regulations the regulations the following facts and representations have been submitted a es page taxpayer a is married to taxpayer b taxpayer a maintained a roth individual_retirement_arrangement ira ira x and a traditional_ira ira y with company m on et ox payer a transferred sum o from roth_ira x and sum n from traditiona at company m to ira z a roth_ira he established with bank b documentation submitted by taxpayer a supports that on es p sum o plus sum n was deposited into roth_ira z in a transaction that he files a joint tax_return for the tax_year he reported the above distributions as non-taxable rollovers taxpayer a and taxpayer b state that they timely filed their lirederal income_tax return b as a participant rollover’ taxpayer a asserts income_tax return with his spouse taxpayer b and that when he prepared his described by bank taxpayer a asserts that he was unaware that he had inadvertently converted traditional_ira y to a roth_ira ira z until he discovered the error in the spring of in connection with the preparation of his tax returns for taxpayer a asserts that his adjusted_gross_income for exceeded sr hus making him ineligible to convert a traditional_ira to a roth_ira taxpayer a’s was advised by his accountant to seek relief as described in sec_301_9100-3 of the regulations taxpayer a’s request for relief under sec_301 of the regulations was filed with the service prior to the service discovering that taxpayer a was not eligible to convert traditional_ira y to roth_ira z and prior to the service discovering that taxpayer a had not timely elected to recharacterize sum n back to a traditional_ira based on the above facts and representations you request a ruling that pursuant to of the regulations taxpayer a be granted a period not to exceed sixty days from the date of this ruling letter to recharacterize sum n back to a traditional_ira with respect to your request for relief under sec_301_9100-3 of the regulations sec_408a of the code and sec_1_408a-5 of the income_tax regulations the i t regulations provide that except as otherwise provided by the secretary a taxpayer may elect to recharacterize an ira contribution made to one type of ira as having been made to another type of ira by making a trustee-to-trustee transfer of the ira contribution plus earnings to the other type of ira in a recharacterization the ira contribution is treated as having been made to the transferee ira and not the transferor ira under sec_408a and sec_1 408a- this recharacterization election generally must occur on or before the date prescribed by law including extensions for filing the taxpayer’s federal_income_tax returns for the year of contributions sec_1_408a-5 question and answer -6 of the i t regulations describes how a taxpayer makes the election to recharacterize the ira contribution to recharacterize an amount that has been converted from a traditional_ira to a roth_ira the taxpayer must notify the roth_ira trustee of the taxpayer’s intent to recharacterize the amount the taxpayer must provide the trustee and the transferee trustee if different from the transferor trustee with specified information that is sufficient to effect the recharacterization and the trustee must make the transfer code sec_408a provides in relevant part that an individual with adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to make a qualified_rollover_contribution to a roth_ira from an individual_retirement_plan other than a roth_ira during that taxable_year jeoueeaaaaennees page sec_1_408a-4 question and answer -2 of the i t regulations provides in summary that an individual with modified_adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to convert an amount to a roth_ira during a taxable_year sec_1_408a-4 question and answer -2 further provides in summary that an individual and his spouse must file a joint federal tax_return to convert a traditional_ira to a roth_ira and that the modified_adjusted_gross_income subject_to the dollar_figure limit for the taxable_year is the modified_adjusted_gross_income derived from the joint_return using the couple’s combined income sec_301_9100-1 sec_301_9100-2 and sec_301_9100-3 of the regulations provide guidance concerning requests for relief submitted to the service on or after date sec_301_9100-1 of the regulations provides that the commissioner of the internal_revenue_service in his discretion may grant a reasonable extension of time fixed by a regulation a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin for the making of an election or application_for relief in respect of tax under among others subtitle a of the code sec_301_9100-2 of the regulations lists certain elections for which automatic extensions of time to file are granted sec_301_9100-3 of the regulations generally provides guidance with respect to the granting of relief with respect to those elections not referenced in sec_301_9100-2 the relief requested in this case is not referenced in sec_301_9100-2 sec_301_9100-3 of the regulations provides that applications for relief that fall within sec_301_9100-3 will be granted when the taxpayer provides sufficient evidence including affidavits described in sec_301_9100-3 to establish that the taxpayer acted reasonably and in good_faith and granting relief would not prejudice the interests of the government sec_301 b of the regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith i if its request for sec_301_9100-1 relief is filed before the failure to make a timely election is discovered by the service if the taxpayer inadvertently failed to make the election because of intervening events beyond the taxpayer’s control if the taxpayer failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv the taxpayer reasonably relied upon the written advice of the service or v the taxpayer reasonably relied upon a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 of the regulations provides that ordinarily the interests of the government will be treated as prejudiced and that ordinarily the service will not grant relief when tax years that would have been affected by the election had it been timely made are closed by the statute_of_limitations before the taxpayer’s receipt of a ruling granting relief under this section in this case taxpayer a transferred amount o from roth_ira x to roth_ira z which he was eligible to do under code sec_408a however taxpayer a also transferred amount n from traditional_ira y to roth_ira z which resulted in a conversion of a traditional_ira to a roth_ira taxpayer a was not eligible to convert traditional_ira y into roth_ira z since page taxpayer a’s and taxpayer b’s combined modified_adjusted_gross_income for mm exceeded dollar_figure taxpayers a and b timely filed their joint a was unaware that traditional_ira y had been converted to roth_ira z until the spring o when he began to complete his tax_return for calendar_year jis not a closed tax_year therefore it is necessary to determine whether taxpayer a is eligible for relief under the provisions of sec_301_9100-3 of the regulations federal_income_tax return taxpayer taxpayer a was ineligible to convert traditional_ira y to roth_ira z however he was unaware of the conversion until roth_ira z and learning that he was ineligible for the conversion taxpayer a requested an extension of time to recharacterize sum n back to a traditional_ira taxpayer a filed his request for relief under sec_301 prior to the service discovering that he was ineligible to convert traditional_ira y to roth_ira z and prior to the service discovering that taxpayer a had not timely elected to recharcterize sum n back to a traditional_ira upon realizing traditional_ira y had been converted to with respect to your request for relief we believe that based on the information submitted and the representations contained herein the requirements of the sec_301_9100-1 and sec_301_9100-3 of the regulations have been met and that you have acted reasonably and in good_faith with respect to making the election to recharacterize sum n the amount transferred from traditional_ira y to roth_ira z as a traditional_ira specifically the service has concluded that you have met the requirements of clause i of sec_301_9100-3 of the regulations therefore you are granted an extension of days from the date of the issuance of this letter_ruling to so recharacterize this ruling assumes that the above iras qualify under sec_408 and sec_408a of the code at all relevant times 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 that requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this ruling letter is being sent to your authorized representative if you have any questions regarding this ruling please contact sincerely signed joyor ruurl joyce e floyd manager employee_plans technical group


office_of_chief_counsel internal_revenue_service memorandum cc intl posts-133292-03 ---------- number release date uilc date september to david brodsky associate area_counsel cc lm f bos from jacob feldman special counsel cc intl whether the sale of national defense weaponry military systems and similar sale of export_property for use by the united_states government subject this chief_counsel_advice responds to your request for non-taxpayer specific guidance regarding the captioned subject in accordance with sec_6110 chief_counsel_advice may not be used or cited as precedent i issue equipment -- that qualifies as export_property under sec_927 of the foreign_sales_corporation fsc provisions -- for use by the united_states or any instrumentality thereof the u s government violates sec_924 ii conclusion export_property under sec_927 of the fsc provisions for use by the u s government does not violate sec_924 where the purchase of such property is made pursuant to an administrative or discretionary decision of the u s government rather than a law or regulation that prohibits the purchase of foreign-made property in addition sec_924 is not violated where a law or regulation encourages or favors procurement of domestic-made goods but does not prohibit the procurement of foreign-made goods finally sec_924 is not violated where a law or regulation that requires the purchase of domestic-made goods is negated by a waiver iii facts the sale of national defense systems and military equipment that qualifies as generally a foreign_sales_corporation fsc may claim a partial exemption posts-133292-03 the u s government uses national defense weaponry military systems and similar equipment military products because of national security interests trade issues and other concerns the u s government often awards procurement contracts for military products to domestic companies these domestic companies often manufacture military products within the united_states we understand that critical facts pertaining to this general fact pattern -- as well as the relevance of certain national security procurement and other provisions -- vary from case to case in some cases military products satisfy the definition of export_property in sec_927 and the manufacturers of those products have claimed fsc benefits under sec_921 iv law from income_tax with respect to foreign_trading_gross_receipts ftgr from the sale of export_property as defined in sec_927 sec_921 through under sec_924 gross_receipts from a sale of export_property that would otherwise qualify as ftgr under sec_924 do not qualify as ftgr if the export_property is for use by the united_states or any instrumentality thereof and such use of export_property is required_by_law or regulation temp sec_1 a - 1t g i elaborates foreign_trading_gross_receipts of a fsc do not include otherwise qualifying gross_receipts if a sale of export_property is for use by the united_states or an instrumentality thereof in any case in which any law or regulation requires in any manner the purchase of property manufactured produced grown or extracted in the united_states for example a sale by a fsc of export_property to the department of defense for use outside the united_states would not produce foreign_trading_gross_receipts for the fsc if the department of defense purchased the property from appropriated funds subject_to either any provision of the department of defense federal acquisition regulations supplement cfr chapter or any appropriations act for the department of defense for the applicable_year if the regulations or appropriations act requires that the items purchased must have been grown reprocessed reused or produced in the united_states the department of defense’s regulations do not require that items purchased by the department for resale in post or base exchanges and commissary stores located on united_states military installations in foreign countries be items grown reprocessed reused or produced in the united_states therefore receipts arising from the sale by a fsc to those post or base exchanges and commissary stores will not be excluded from the definition of foreign_trading_gross_receipts by this paragraph g emphasis added posts-133292-03 temp sec_1 a -1t g iii b provides an exception to the government- sale exclusion rule if the purchase is pursuant to a program whether bilateral or unilateral under which sales to the united_states government are open to international competitive bidding v analysis as ftgr do not constitute ftgr if the export_property that gave rise to the gross_receipts is used by the u s government and the u s government was required_by_law or regulation to use export_property temp sec_1 a -1t g i restates the statutory rule in such a way that seems to broaden the statutory definition by describing a requirement in any manner temp sec_1 a - 1t g i interpretation of sec_924 and temp sec_1 a -1t g i has revealed that the cases in this area may be highly fact-dependent as a result we believe that an attempt to provide an interpretation of these provisions that addresses each and every case involving this issue would be inappropriate however this memorandum provides some guidance on this issue that may be helpful in some cases question of how broadly the terms law or regulation should be construed for example a broad construction might result in the characterization of administrative and discretionary decisions as laws or regulations a narrow construction might result in a definition of law or regulation that includes only federal statutes and regulations the words in any manner in temp sec_1 a -1t g i raise the sec_924 provides that gross_receipts that would otherwise qualify our analysis and consideration of several specific cases involving the we note that sec_924 refers to use of export_property required_by_law or regulation while temp sec_1 a -1t g i refers to the required purchase of property manufactured produced grown or extracted in the united_states in our view the regulatory language is not inconsistent with the statutory language an interpretation of law or regulation that includes such decisions would after careful consideration of this interpretive problem we believe that it is posts-133292-03 inappropriate to treat an administrative or discretionary decision or a series of such decisions as a law or regulation for purposes of sec_924 and temp sec_1 a -1t g i that the decision to use domestic-made goods is made pursuant to a law or regulation does not mean that the use of such goods is required_by_law or regulation although we have concluded that the effect of the words in any manner may broaden the meaning of the terms law or regulation to include more than only federal statutes and regulations we believe that including administrative and discretionary decisions within that definition would be an over-broad interpretation of the phrase in any manner improperly disregard the meaning of the term required an administrative or discretionary decision to restrict procurement to domestic-made goods where procurement of foreign-made goods would have been legally permissible does not rise to the level of required_by_law or regulation described in sec_924 in short we construe law or regulation as referring to legal authority that affirmatively requires the purchase of domestic-made goods or prohibits the purchase of foreign- made goods where such legal authority has not been waived applying this interpretive approach we also conclude that laws or regulations that encourage or favor procurement of domestic-made goods but do not require the purchase of domestic- made goods or prohibit the procurement of foreign-made goods do not rise to the level of required_by_law or regulation example an appropriations act provides funding specifically for the purchase of military products manufactured in the united_states in this scenario sellers of the military products identified in the appropriations act are denied fsc benefits under sec_924 example federal provision r generally restricts the location of specified materials and technologies to the united_states however federal provision r allows for a waiver of the restriction under certain circumstances for purposes of national defense the u s government purchases military products that contain materials and technologies restricted to the united_states by federal provision r absent inclusion in the an example of such a provision is the arms export control act and the regulations thereunder which generally prohibit the export of certain articles services and technical data but also permit export licenses to be granted for such items u s c et seq pub_l_no 82_stat_1321 c f_r sec_121 et seq the following examples illustrate our position posts-133292-03 purchased military products of those particular materials and technologies which render the purchased military products technologically superior to any other military products of the same type the u s government would not have purchased those particular military products situation a if the restriction is not waived and manufacture of the military products using the restricted materials and technologies occurs entirely within the united_states sellers of the military products containing the restricted materials and technologies are denied fsc benefits under sec_924 situation b if the restriction is not waived and manufacture of the military products using the restricted materials and technologies occurs predominantly within the united_states the national_office should be consulted regarding the applicability of sec_924 situation c if the restriction is waived and manufacture of the military products using the formerly restricted materials and technologies occurs predominantly outside the united_states federal provision r does not constitute a law or regulation described in sec_924 situation d if the restriction is waived and manufacture of the military products using the formerly restricted materials and technologies occurs predominantly inside the united_states federal provision r does not constitute a law or regulation described in sec_924 example a federal regulation promulgated under a certain statute regulation1 prohibits the purchase by the u s government of military product x manufactured outside the united_states a federal regulation promulgated under a different statute regulation2 waives the regulation1 prohibition with respect to manufacture of military product x in foreign_country y the u s government purchases for its own use units of military product x that were manufactured in the united_states even though regulation1 standing alone limits u s government purchases of military product x to domestic-made items the regulation2 waiver for manufacture in foreign_country y negates the requirement of domestic manufacture contained in the regulation1 therefore in this scenario fsc benefits are not denied to the seller of military product x under sec_924 example the u s government wants to purchase units of a military product for its own use outside the united_states rather than using standard competitive bidding procedures to award the procurement contract the u s government decides for national security posts-133292-03 reasons to award the contract to a company that has manufacturing facilities only in the united_states and does not contract outside the united_states in this scenario even though the administrative decision to forego competitive bidding precluded the possibility of foreign manufacture as a practical matter fsc benefits are not denied to the seller of the military products under sec_924 because the purchase of domestic-made goods resulted from an administrative decision and was not required_by_law or regulation example the u s government solicits bids for a contract to manufacture military products a price preference provision - for example the buy american act3 or the balance of payments program4 -- discourages purchases of foreign-made goods for use by the u s government by artificially increasing bids from foreign companies by a fixed percentage of the actual price the contract is awarded to a company that manufactures only within the united_states this situation does not involve a requirement by law or regulation that domestic-made goods be purchased either a qualifying low bid from a foreign manufacturer or a lack of satisfactory domestic manufacturers could result in the purchase of foreign-made products therefore fsc benefits would not be denied by sec_924 because of the buy american act the balance of payments program or a similar price preference described in this memorandum in determining whether to pursue cases involving the application of sec_924 to sales of military products please call cc intl branch at --------------------- if you have any further questions jacob feldman special counsel office of the associate chief_counsel international we recommend that the field and examination apply the consideration sec_3 u s c 10a et seq pub_l_no 47_stat_1520 c f_r sec_25 et seq fed reg big_number date an exception to the buy american act and balance of payments program provides that artificial increases to bids from foreign companies do not apply to acquisitions of military products made in specified countries such as certain members of the north atlantic treaty organization c f_r a however companies organized in such specified countries have in some cases been prohibited entirely from bidding on acquisition contracts for certain specified military products see eg c f_r and c f_r because those prohibitions prevent bids from certain foreign companies but do not preclude the possibility of foreign manufacture either by domestic companies or by non-prohibited foreign companies we believe such a prohibition would not change the outcome in this example


internal_revenue_service number release date index no 2601-dollar_figure department of the treasury p o box ben franklin station washington dc person to contact telephone number refer reply to cc psi - plr-101444-02 date january in re legend settlor daughter grandchild grandchild grandchild greatgrandchild greatgrandchild greatgrandchild greatgrandchild trust year court dear this responds to your letter dated date and subsequent correspondence requesting a ruling regarding the generation-skipping_transfer gst tax consequences of the proposed modification to trust facts the facts submitted and representations made are as follows settlor created trust in year to provide for his wife daughter and daughter’s descendants settlor and his wife are deceased article i paragraph b of trust provides as follows so long as the settlor’s wife is living and thereafter so long as the settlor’s daughter is living the trustees shall further pay or apply so much of the plr-101444-02 net_income from the trust property as may remain from time to time after the payment of premiums or charges on umatured policies of life_insurance on the life of the settlor’s wife to or for the benefit of such one or more of the settlor’s daughter and issue of the settlor’s daughter as may be living from time to time and at such times and in such amounts as the trustees shall in their sole discretion determine accumulating and adding to the principal of the trust property any income not so paid or applied in determining the time amount and proportion of each such payment or payments and the person or persons to whom such payment or payment shall be made the decision of the trustees shall be final and binding on all persons article ii of trust provides upon the death of the survivor of the settlor’s wife and the settlor’s daughter the trustees shall pay over the then remaining principal of the trust property together with any undistributed_income free of all trusts to the issue of the settlor’s daughter by right of representation daughter has three children grandchild grandchild and grandchild daughter also has four grandchildren greatgrandchild greatgrandchild greatgrandchild and greatgrandchild the trustees have consistently distributed trust’s net_income to daughter the parties petitioned court to reform trust to allow the trustees to invest for total return including both income yields and growth in capital appreciation and to distribute not only income as conventionally defined but also as much of principal as they deem prudent and as they believe is within the scope of settlor’s intent however the trustees may only make distributions in excess of income as defined under the original trust instrument to settlor’s daughter and to those of the settlor’s issue who would receive a share if the settlor’s daughter were to die on the date of the distribution and the remainder were to be distributed to her issue by right of representation trust was irrevocable on date you represent that no additions actual or constructive have been made to trust since date we have been asked to rule as follows that the reformation of trust will not cause trust to lose its exempt status for generation-skipping_transfer_tax purposes of b a of the tax_reform_act_of_1986 and sec_26_2601-1 or cause trust or any distributions from trust to be subject_to generation-skipping_transfer taxes under sec_2601 of the internal_revenue_code plr-101444-02 law and analysis sec_2601 imposes a tax on every generation-skipping_transfer under a of the tax_reform_act_of_1986 act the gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to any generation-skipping_transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument or to correct a scrivener’s error will not cause an exempt trust to be subject_to the provisions of chapter if the judicial action involves a bona_fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer sec_26_2601-1 example considers a situation where a_trust is modified to convert the income_interest into a unitrust_interest the grantor established an irrevocable_trust under the terms of which trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes the court approves a modification to the trust that converts a’s income_interest into the right to receive the greater of the entire income of the trust or a fixed percentage of the trust assets valued annually to be paid each year to a for life the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in this example the modification can only operate to increase the amount plr-101444-02 distributable to a and decrease the amount distributable to a’s issue in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the modification will not subject the trust to the provisions of chapter in the present case trust was irrevocable on date and it is represented that no additions actual or constructive have been made to trust after that date the proposed reformation will not result in a shift of any beneficial_interest to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the proposed reformation as in example the modification can only operate to increase the amount distributable to daughter and decrease the amount distributable to daughter’s issue in addition the proposed reformation will not extend the time for vesting of any beneficial_interest beyond the period provided for in the trust instrument therefore based on the facts submitted and the representations made we conclude that the reformation of trust will not cause trust to lose its exempt status for generation-skipping_transfer_tax purposes of b a of the act and sec_26 b i or cause trust or any distributions from trust to be subject_to generation- skipping transfer_taxes under sec_2601 accordingly after the proposed reformation trust will continue to be exempt from the gst tax imposed under sec_2601 provided there are no additions to trust after date except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically no opinion is expressed on whether the reformation will be respected for purposes of sec_643 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours by_________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number inf0 release date uil date dear this letter is in response to your inquiry dated date on behalf of your constituent his employer is incorrectly treating automobile expense reimbursements as taxable wages and he would like to argue his position to the u s tax_court he believes has no recourse to the u s tax_court or any other federal tax administrative authority if he disagrees with his employer’s reporting of the automobile expense reimbursements as taxable wages this is the case regardless of whether the employer is a federal_agency or a private enterprise because the rule is that an employer must treat payments to employees as taxable wages unless an exception clearly applies his recourse is to claim a miscellaneous itemized_deduction for expenses that are deductible under revrul_99_7 1999_1_cb_361 enclosed which is discussed below i hope the following information helps explain our answer an employer’s payments to employees generally are included in the employee’s gross_income and are treated as taxable wages subject_to tax withholding and information reporting however if an employer establishes an accountable_plan as defined in sec_1_62-2 of the income_tax regulations and reimburses deductible business_expenses the reimbursements are not taxable wages and are not subject_to tax withholding or information reporting thus in complying with its withholding and reporting obligations the employer must correctly determine that the expenses are deductible business_expenses in general daily transportation_expenses incurred in going between an employee’s residence and a work location are nondeductible commuting expenses and an employer’s reimbursement of these expenses would be taxable wages this general_rule is not limited to work locations maintained by the employer however revrul_99_7 provides an exception to this general_rule for an employee with one or more regular work locations away from the residence daily transportation_expenses incurred in going between the employee’s residence and a temporary_work_location are deductible business_expenses an employer’s reimbursement of these expenses under an accountable_plan would not be taxable wages a temporary_work_location is a work location where employment is realistically expected to last and does in fact last for year or less deciding whether employment at a particular work location is temporary depends on applying the rules to the facts and circumstances of the employment when reimbursing these expenses an employer must be certain that an employee’s employment at a particular work location is temporary otherwise the employer must treat the reimbursements as taxable wages although an employer may be able to identify with certainty whether some reimbursements meet the requirements of revrul_99_7 other reimbursements may require a closer look if analyzing each trip taken by each employee is difficult the employer may decide in properly complying with its tax withholding and reporting obligations to adopt a bright-line_rule that treats automobile expense reimbursements as taxable wages unless the expenses without question fall under revrul_99_7 of course this action may result in reimbursements paid as taxable wages when the underlying expenses are in light of the facts and circumstances deductible business_expenses under revrul_99_7 in this case the employee can claim a miscellaneous itemized_deduction for the expenses on his or her federal_income_tax return again i hope this information is helpful please call edwin b cleverdon identification_number at if you have any questions sincerely associate chief_counsel income_tax accounting by robert a berkovsky chief branch enclosure


t c memo united_states tax_court dale p role petitioner v commissioner of internal revenue respondent docket no filed date larry d harvey for petitioner randall l preheim for respondent memorandum opinion vasquez judge this case is before the court on respondent’s motion for summary_judgment pursuant to rule unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the year in issue after a concession the sole issue for decision is whether petitioner can exclude from income wages earned during from working in antarctica background at the time he filed the petition petitioner resided in westerville ohio during petitioner performed services at mcmurdo station in ross island antarctica on his federal_income_tax return petitioner excluded wage income earned and received during for services performed in antarctica i summary_judgment discussion rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and that the legal issues presented by the motion may be decided as a matter of law see rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law respondent concedes that no penalty pursuant to sec_6662 is due from petitioner for ii in general sec_61 provides that gross_income means all income from whatever source derived accordingly citizens of the united_states generally are taxed on income earned outside the geographical boundaries of the united_states unless the income is specifically excluded from gross_income 117_tc_95 affd sub nom 68_fedappx_44 9th cir affd sub nom 357_f3d_1108 10th cir exclusions from income are construed narrowly and taxpayers must bring themselves within the clear scope of the exclusion id iii sec_911 in 126_tc_89 473_f3d_790 7th cir arnett ii we addressed the arguments made by the parties herein regarding sec_911 the u s court_of_appeals for the seventh circuit agreed with our analysis of sec_911 and affirmed our conclusion that antarctica is not a foreign_country pursuant to sec_911 and the regulations thereunder arnett v commissioner f 3d pincite we shall not repeat our analysis from arnett i herein we follow our analysis and holding in arnett i and the analysis and holding of the court_of_appeals in arnett ii in 126_tc_89 affd 473_f3d_790 7th cir we concluded our opinion with a continued iv conclusion accordingly for the reasons stated in arnett i arnett ii and herein we conclude that petitioner cannot exclude from gross_income wages earned during from working in antarctica to reflect the foregoing an appropriate order and decision will be entered continued citation of sec_863 suggesting that sec_863 provided an additional reason to rule against the taxpayer id pincite see also sec_863 providing that income earned in antarctica by a u_s_person is sourced in the united_states in arnett v commissioner f 3d pincite the u s court_of_appeals for the seventh circuit addressed sec_863 in greater detail stating at the outset we think that it is important to note that considering antarctica not to be a foreign_country is compatible with the general statutory scheme notably sec_911 is found under subtitle a chapter subchapter_n of the irc which is designated tax based on income from sources within or without the united_states part i of this subchapter entitled source_rules and other general rules relating to foreign_income deems any activity in antarctica to be space_or_ocean_activity in turn the united_states is designated the source country of income from such activity when earned by a citizen_of_the_united_states sec_863 although this provision does not provide a definitive answer as to whether antarctica is a foreign_country it supports the conclusion that sec_911 is not intended to apply to income earned for services provided in antarctica we take this opportunity to state our agreement with the court of appeals’ conclusion set forth above see also 450_us_1


internal_revenue_service number release date index number --------------------------- ------------------------------------------------------ ----------------------- ---------------------------------------- -------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc intl b02 plr-118601-10 date march ty -------- legend taxpayer --------------------------- ---------------------- fc --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- year state x country y subsidiary parent affiliate accounting firm accountant accountant vp attorney president law firm ------- ------------- --------------------- ---------------------------- --------------------------- ---------------------------------------------------------------- ----------------------------- --------------------- -------------------------- -------------------------- ---------------------- ------------------- -------------------------------------------------- ------------------------------------------------------ dear ------------ plr-118601-10 this is in response to the letter received by our office on date submitted by your authorized representative requesting the consent of the commissioner of the internal_revenue_service for taxpayer to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to taxpayer’s investment in fc the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer is a state x corporation and made an investment in fc through subsidiary a state x limited_liability_company in year subsidiary always has been a disregarded for u s federal_income_tax purposes as an entity separate from taxpayer parent a country y corporation established taxpayer to invest in u s real_estate the investment_advisor and manager on behalf of parent in connection with its investment in taxpayer is affiliate also a county y corporation taxpayer is a calendar-year and accrual-method taxpayer since its incorporation taxpayer has engaged accounting firm to prepare its federal_income_tax returns taxpayer’s federal_income_tax returns have been signed by accountant or accountant since year accountant and accountant are competent tax professionals and have advised taxpayer with respect to u s tax issues including elections for many years prior to investing in fc vp who is the vice-president and secretary of taxpayer and attorney who is a tax specialist from law firm discussed and concluded that an investment in fc would be an investment in shares of a passive_foreign_investment_company pfic and that a qef election should be made with respect to fc president who is an attorney at law firm and the president of taxpayer sent an email to accountant with details of the discussion and highlighted the conclusion that a qef election should be made on taxpayer’s u s federal_income_tax return for year accountant prepared and timely filed the income_tax return for year but failed to make the qef election taxpayer has submitted an affidavit signed under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date including the role of accountant taxpayer has also submitted affidavits of accountant vp and attorney corroborating the representations made by taxpayer plr-118601-10 taxpayer represents that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayer requests the consent of the commissioner of the internal_revenue_service to make a retroactive election under sec_1_1295-3 with respect to fc for year law sec_1295 provides that a pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united_states government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayers to make a retroactive qef election with respect to fc for year under sec_1_1295-3 provided that taxpayer comply plr-118601-10 with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election this private_letter_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 must be attached to any_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s authorized representatives sincerely jeffrey g mitchell branch chief international


t c memo united_states tax_court barry s michelson petitioner v commissioner of internal revenue respondent shelley a michelson petitioner v commissioner of internal revenue respondent docket nos filed date barry s michelson pro_se shelley a michelson pro_se carmino j santaniello for respondent memorandum opinion raum judge the commissioner determined deficiencies in petitioners' federal income taxes as follows petitioner deficiency sec_6651 sec_6654 barry michelson dollar_figure dollar_figure shelley michelson big_number dollar_figure dollar_figure pursuant to respondent's uncontested motion the cases have been consolidated for trial briefing and opinion at issue is whether either petitioner is entitled under sec_6402 and sec_6511 to a refund of overpayment of taxes withheld from petitioner shelley a michelson's wages dividends and interest petitioners will sometimes be referred to simply as barry and shelley respectively the facts have been stipulated unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue petitioners are husband and wife they resided in stamford connecticut when they filed their respective petitions in these cases petitioners filed a timely request for an automatic month extension of time to file their return as a result of the extension their return was due on date a saturday the following monday date was not a legal_holiday in the district of columbia or the state of 1the court ordered simultaneous briefs however although the government filed its opening brief the court has been informed that petitioners do not intend to file any brief massachusetts see sec_7503 however petitioners did not file their joint_return until date after individual notices of deficiency had already been issued to each spouse during the taxable_year barry was a self-employed consultant on schedule c of their return petitioners reported a net dollar_figure loss with respect to barry's consulting activities during barry received compensation in the total amount of dollar_figure summarized as follows employer amount withholdings city of stamford dollar_figure town of greenwich -0- during shelley received wages from ambac indemnity in the total amount of dollar_figure from which her employer withheld federal income taxes in the amount of dollar_figure she received dividends from manufacturer's hanover trust as transfer agent in the amount of dollar_figure from which manufacturer's withheld federal income taxes in the amount of dollar_figure she also received interest_income from citybank in the amount of dollar_figure from which the bank withheld federal income taxes in the amount of dollar_figure 2although petitioners resided in connecticut their return was to be filed with the andover service_center in andover massachusetts whether the filing_date is a legal_holiday is determined by reference to the state where the internal_revenue_district office is located sec_7503 petitioners had not yet filed their return when the notices of deficiency were issued a separate individual notice_of_deficiency was sent to barry on date and a separate individual notice_of_deficiency was sent to shelley on date the statutory notice to barry was issued by the andover service_center the statutory notice to shelley was sent by the hartford district_director both statutory notices were based upon wage and other information obtained by the irs from third party sources on their return petitioners reported taxable_income in the amount of dollar_figure and federal_income_tax withholdings in the amount of dollar_figure resulting in a claimed overpayment of dollar_figure the commissioner accepted the return as filed but disallowed as untimely petitioners' claim_for_refund reflected on that return the government has conceded that there is no deficiency in income_tax due from either petitioner for and that neither petitioner is liable for the additions to tax under sec_6651 and sec_6654 at issue is whether either petitioner is entitled to a refund of the dollar_figure overpayment sec_6402 provides in the case of any overpayment the secretary within the applicable_period of limitations may credit the amount of such overpayment including any interest allowed thereon against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall subject_to subsections c and d refund any balance to such person emphasis added it has long been recognized by this court that a husband and wife are treated as separate taxpayers even where they have filed a joint_return 53_tc_287 since petitioners must be treated as separate taxpayers and since their notices of deficiency were issued at different times we must determine separately each petitioner's eligibility for a refund of the overpayment barry where spouses claim a refund under a joint_return the refund is divided between the spouses with each receiving a percentage of the refund equivalent to his or her proportion of the withheld tax_payments 757_f2d_1157 11th cir 673_f2d_366 see also 397_fsupp_342 e d pa revrul_80_7 1980_1_cb_296 as amplified by revrul_85_70 1985_1_cb_361 sets out a formula for determining each spouse's share of the overpayment the parties have stipulated that no taxes were withheld from barry's wages for and that all of the taxes responsible for the overpayment were withheld from shelley's income since all of the taxes were withheld from her income barry has no interest in any portion of the overpayment and thus is not entitled to a refund we note that this result is consistent with revrul_74_611 1974_2_cb_399 shelley since the overpayment was attributable entirely to taxes withheld from shelley's income she alone has any interest in the refund of the overpayment however she must demonstrate that her claim_for_refund was timely sec_6512 provides limit on amount of credit or refund no such credit or refund shall be allowed or made of any portion of the tax unless the tax_court determines as part of its decision that such portion was paid-- b 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 sec_6511 provides that when a claim_for_refund is not made within the 3-year period described in sec_6511 the amount of the credit or refund may not exceed the amount of tax paid within the years preceding the claim_for_refund sec_6511 provides that a claim_for_refund must be made within years from the time the return was filed or if no return was filed by the taxpayer within years from the time the tax was paid under sec_6513 and b the taxes attributable to shelley's income were deemed withheld on date and pursuant to sec_6513 petitioners' extension to date did not change the due_date of the tax from date the notice_of_deficiency was issued to shelley on date petitioners thereafter on date filed their return which served as their claim_for_refund under sec_6511 if the 3-year period from filing the return applies shelley is entitled to a refund if the 2-year period applies the limitations_period has expired and shelley is barred from receiving a refund sec_6513 time return deemed filed and tax considered paid a early return or advance_payment of tax -- for purposes of sec_6511 any return filed before the last day prescribed for the filing thereof shall be considered as filed on such last day for purposes of sec_6511 and c and sec_6512 payment of any portion of the tax made before the last day prescribed for the payment of the tax shall be considered made on such last day for purposes of this subsection the last day prescribed for filing the return or paying the tax shall be determined without regard to any extension of time granted the taxpayer and without regard to any election to pay the tax in installments b prepaid_income tax --for purposes of sec_6511 or any_tax actually deducted and withheld at the source during any calendar_year under chapter shall in respect of the recipient of the income be deemed to have been paid_by him on the 15th day of the fourth month following the close of his taxable_year with respect to which such tax is allowable as a credit under sec_31 sec_6513 and b this case is governed by commissioner v lundy u s ___ 116_sct_647 in lundy income taxes of the taxpayers husband and wife were withheld from their wages during on date the commissioner issued a notice_of_deficiency to the taxpayer-husband three months later on date the taxpayers filed their joint_return id at ___ s ct pincite the court framed the issue as follows w e must determine which of these two look-back periods to apply when the taxpayer fails to file a tax_return when it is due and the commissioner mails the taxpayer a notice_of_deficiency before the taxpayer gets around to filing a late return id at ___ s ct pincite the supreme court held that the 2-year period applied we reach this conclusion by following the instructions set out in sec_6512 the operative question is whether a claim filed on the date of the mailing of the notice_of_deficiency would be filed within years from the time the return was filed in the case of a taxpayer who does not file a return before the notice_of_deficiency is mailed the claim described in sec_6512 could not be filed within years from the time the return was filed no return having been filed there is no date from which to measure the 3-year filing period described in sec_6511 consequently the claim contemplated in sec_6512 would not be filed within the 3-year window described in sec_6511 and the 3-year look-back period set out in sec_6511 would not apply the applicable look-back period is instead the default 2-year period described in sec_6511 which is measured from the date of the mailing of the notice_of_deficiency see sec_6512 the taxpayer is entitled to a refund of any taxes paid within two years prior to the date of the mailing of the notice_of_deficiency id at ___ s ct pincite the lundy court also stated that a delinquent filer's entitlement to a refund in tax_court depends on the date of the mailing of the notice_of_deficiency sec_6512 tolls the limitations_period in that it directs the tax_court to measure the look-back period from the date on which the notice_of_deficiency is mailed and not the date on which the taxpayer actually files a claim_for_refund but in the case of delinquent filers sec_6512 establishes only a 2-year look-back period so the delinquent filer is not assured the opportunity to seek a refund in tax_court if the notice_of_deficiency is mailed more than two years after the taxes were paid the tax_court lacks jurisdiction to award the taxpayer a refund id at ___ s ct pincite here the notice_of_deficiency dated date was mailed to shelley more than years after the taxes were deemed paid on date under lundy since no tax_return or claim_for_refund was filed until after the notice_of_deficiency was issued shelley is not entitled to a refund see lundy v commissioner u s ___ s ct pincite we anticipated that result in 99_tc_475 affd 23_f3d_406 6th cir we there commented upon the seemingly harsh consequences as is true in many of the cases in this field the result may seem harsh in view of an actual overpayment but petitioner failed to file his income_tax return more promptly and the statute is precise the unhappy result for petitioner is the consequence of a problem of his own creation 97_tc_339 the situation is not an unfamiliar one and has been before us in a variety of other circumstances cf eg 72_tc_1126 62_tc_635 and a number of memorandum opinions cited in berry v commissioner supra pincite n id pincite since as we have already concluded above neither barry nor shelley is entitled to a refund in these cases decisions will be entered for respondent