internal_revenue_service number release date index number -------------------------------------------- --------------- ------------------------------ ------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ----------------- telephone number ------------------- refer reply to cc psi plr-119570-12 date june legend x --------------------------------------------------------------------------------------------- ----------------------- state ------------- shareholder --------------------------------------------------------------------------------------------- ------------------------- d1 ---------------------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts x was incorporated under state law on d1 x's sole shareholder shareholder intended for x to be an s_corporation effective d1 however a form_2553 election by a small_business_corporation was not filed timely x requests a ruling that it will be recognized as an s_corporation effective d1 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation plr-119570-12 sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a small_business_corporation makes an election under sec_1362 for any taxable_year and the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election is treated as made for the following taxable_year sec_1362 provides that if an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to timely make an s_corporation_election thus we conclude that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation effective d1 by filing a completed form_2553 with the appropriate service_center within one hundred twenty days following the date of this letter then such election shall be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation for federal tax purposes we direct this ruling only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-119570-12 we based the ruling contained in this letter upon information and representations the taxpayer submitted which was 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 ruling_request it is subject_to verification on examination sincerely stacy l short senior technician advisor branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index numbers 2041-dollar_figure washington dc person to contact telephone number refer reply to cc p si 4-plr-129227-01 date december re legend grantor daughter trust date date date dear this is in response to your letter dated date requesting a ruling under sec_2041 of the internal_revenue_code in grantor created a revocable_trust trust trust was finally amended on date and became irrevocable on grantor’s death date after the death of grantor the trust provides for the creation of a family_trust under the terms of the family_trust the trustee is to pay the trust income to grantor’s daughter daughter for life the trustee also has the power to invade corpus for daughter’s health and maintenance in reasonable comfort the trust further provides in article fourth sec_2 upon the death of daughter if she survives the settlor the family_trust shall be held in trust hereunder or distributed to or in trust for such one or more of settlor’s descendants with such powers and in such manner and proportions as daughter may appoint by her will making specific reference to this power_of_appointment article fourth sec_3 provides that upon daughter’s death any part of the family_trust which is not effectively appointed is to be distributed per stirpes to daughter’s then living descendants or if none then per stirpes to grantor’s then living descendants daughter died date and exercised her power_of_appointment in favor of her plr-129227-01 adult children outright you have requested a ruling that the testamentary_power_of_appointment granted to daughter over trust is not a general_power_of_appointment within the meaning of sec_2041 and therefore the existence exercise failure to exercise or partial or complete release of the power_of_appointment will not cause the value of the property in trust to be included in daughter’s gross_estate under sec_2041 sec_2041 provides that the value of the gross_estate includes the value of all property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent the property would be includible in the decedent's gross_estate under sec_2035 to inclusive for purposes of sec_2041 the power_of_appointment is considered to exist on the date of the decedent's death even though the exercise of the power is subject_to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise whether or not on or before the date of the decedent's death notice has been given or the power has been exercised sec_2041 provides with exceptions not relevant here that the term general_power_of_appointment means a power that is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_20_2041-1 of the estate_tax regulations provides that the term general_power_of_appointment as defined in sec_2041 means any power_of_appointment exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_20_2041-1 provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent's_estate or the creditors of his estate in this case daughter may appoint by will to the class consisting of grantor's descendants because daughter’s power_of_appointment is a testamentary power daughter may not appoint any part of the trust to daughter or to daughter’s creditors during daughters’s life in addition based on the terms of the trust instrument the reference to grantor's descendants as a permissible class of appointees of daughter’s testamentary power is properly viewed as not including daughter’s estate or daughter’s creditors after daughter’s death accordingly based on the information submitted and the representations made we conclude daughter’s testamentary_power_of_appointment over the principal of the trust does not constitute a general_power_of_appointment within the meaning of sec_2041 and the existence exercise failure to fully exercise or partial or complete release of daughter’s power to appoint the principal of the trust will not cause the value of the property in the trust to be included in daughter’s gross_estate under plr-129227-01 a this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely yours lorraine e gardner acting senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosure copy of letter for sec_6110 purposes


t c memo united_states tax_court r v j cezar corporation petitioner v commissioner of internal revenue respondent restituto t and virgencita p cezar petitioners v commissioner of internal revenue respondent docket nos filed date marc paul jacobs for petitioners steven m roth for respondent memorandum findings_of_fact and opinion kroupa judge respondent determined a dollar_figure deficiency in restituto t and virgencita p cezar’s petitioners individual federal_income_tax as well as a dollar_figure deficiency in the federal_income_tax of petitioners’ wholly owned corporation r v j cezar corporation the corporation for respondent also determined petitioners and the corporation were liable for accuracy-related_penalties of dollar_figure and dollar_figure respectively after concessions we must decide five issues first we must decide whether the corporation’s distribution of improvements on a corporate-owned lot to petitioners is taxable as a constructive_dividend to petitioners we find that it is the second issue is whether the corporation recognized income by distributing the improvements to petitioners the corporation’s sole shareholders we hold that the corporation recognized the income we also must decide whether petitioners as well as the corporation are liable for the accuracy-related_penalty for we hold that they each are liable findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the accompanying exhibits are incorporated by this reference petitioners resided in santa barbara california at the time they filed the petition the corporation’s headquarters was in santa barbara california at the time it filed the petition i background on petitioners and the corporation mr cezar was trained and worked as an engineer in the phillippines and american samoa before moving to the united_states he moved his family to the united_states so his disabled son could enroll in special education classes mr cezar obtained a contractor’s license after moving to california in he purchased a construction corporation from a contractor who was leaving the industry and began operating the corporation under the name r v j cezar corporation in the corporation built spec house sec_1 that it sold to the public the corporation paid the construction costs with construction loans in the corporation’s name the corporation owned each spec house it built and reported any sales of the houses on the corporate_income_tax returns petitioners were sole shareholders in the corporation during they paid dollar_figure for their stock mr cezar a general contractor was the sole employee of the corporation and he received wages from the corporation in ii the farrell drive property the corporation purchased a lot pincite farrell drive the lot in the corporation financed part of the dollar_figure purchase_price for the lot with a mortgage the corporation obtained a permit to begin construction of a big_number square foot spec home on the lot in mr cezar prepared the blueprints and oversaw the construction the spec home pincite farrell drive is approximately twice the size of the 1a spec house is a house constructed by a builder to the builder's specifications with the intention of selling it at a profit upon completion corporation’s other spec homes and includes upgrades such as granite countertops central vacuum and carpeted bedrooms the backyard has a jacuzzi tub surround sound and tile walkways the corporation is listed as the sole owner of the spec home on the blueprints the permit and the notice of completion nothing on the blueprints the permit or the completion notice indicates that the improvements were constructed through a joint_venture between petitioners and the corporation or that the corporation permitted petitioners to construct the home on the corporate-owned lot at no time did the corporation or petitioners ever notify the santa barbara county assessor’s office assessor’s office that petitioners rather than the corporation owned the improvements the assessor’s office did not assign the improvements a separate parcel number from the lot the assessor’s office sent one tax bill for the lot and the improvements rather than two separate unsecured bills to the corporation as the record_owner the corporation did not object that it had been billed for improvements that it did not own nor that the lot and the improvements were separately owned the corporation submitted construction cost estimates to the assessor’s office but did not maintain any receipts or invoices to substantiate the costs the parties agree that construction costs were dollar_figure petitioners did not produce any records or otherwise demonstrate that they paid any of the construction costs some construction materials were purchased with credit cards issued in both mr cezar’s name and the name of the corporation petitioners failed to provide any documentation as to who paid the credit card bills petitioners were only able to produce credit card statements for a year after construction was completed petitioners were unable to document most of the labor costs of constructing the home petitioners did not include any sweat equity from the corporation in income for any construction labor they may have done themselves or with the help of their sons nor did they provide testimony from their sons mr cezar hired some laborers for the construction but many of the laborers were paid in cash and no records exist mr cezar did not maintain any record of whom he hired what they did how much he paid them or whether he paid them with his own funds in addition many of the labor costs mr cezar documented were incurred after the construction was completed construction of the improvements was completed in date the corporation offered both the lot and the improvements for sale during the summer of but did not receive any purchase offers there was no transfer of interest between petitioners and the corporation until the corporation transferred the lot and improvements to petitioners by quitclaim_deed four months later petitioners assumed the outstanding mortgage of dollar_figure the lot and the improvements had a total fair_market_value of dollar_figure at the time of transfer the corporation filed a transfer of ownership report with the assessor’s office the ownership report did not indicate that the property interest transferred to petitioners was a partial interest petitioners did not report the receipt of the lot or the improvements on their return for nor did the corporation report the distribution of the lot and the improvements on the corporate return for iii the deficiency notices for respondent examined petitioners’ individual return and the corporation’s corporate return for mr cezar stated repeatedly during the audit that the improvements and the lot were corporate assets respondent issued a deficiency_notice to petitioners determining that the distribution of the lot and the improvements was a constructive_dividend from the corporation respondent determined petitioners received a qualified_dividend up to the amount of earnings_and_profits of the corporation respondent also determined that petitioners received the remainder of the distribution less their dollar_figure initial capital_contribution as long-term_capital_gain respondent also determined petitioner sec_2the deficiency notices issued to petitioners and the corporation determined other issues now conceded were liable for the accuracy-related_penalty petitioners timely filed a petition respondent also issued a deficiency_notice to the corporation determining an increase in gross_income due to the distribution of the lot and the improvements to petitioners respondent also determined the corporation was liable for the accuracy-related_penalty the corporation timely filed a petition opinion we must now determine whether the corporation’s distribution of improvements on a corporate-owned lot is taxable to petitioners as a constructive_dividend petitioners concede they received the lot as a constructive_dividend but argue that they did not receive the improvements as a constructive_dividend because they owned the improvements we must also determine the tax consequences to the corporation in a closely held situation as here where neither petitioners nor the corporation kept adequate_records we must also decide whether petitioners and the corporation are each liable for the accuracy-related_penalty for failing to maintain adequate_records and failing to properly report the distribution we address each of these issues in turn 3ownership of the improvements is not necessarily acquired by paying for the materials or even providing the labor i the constructive_dividend to petitioners from the corporation we begin with the general rules for taxability of dividends a dividend is a distribution_of_property from a corporation to its shareholders out of the corporation’s earnings_and_profits sec_316 the amount of the distribution equals the fair_market_value of the distributed property on the date of distribution sec_301 schrott v commissioner tcmemo_1989_346 any portion of a distribution that is a dividend is taxable to the recipient as ordinary_income sec_61 sec_301 sec_316 the amount of the distribution that exceeds earnings_and_profits and is therefore not a dividend is taxable capital_gain to the recipient see sec_301 dividends may be formally declared or they may be constructive and the corporation’s intent is not determinative see roy v commissioner tcmemo_1997_562 affd without published opinion 182_f3d_927 9th cir noble v commissioner tcmemo_1965_84 affd 368_f2d_439 9th cir a constructive_dividend arises when a corporation confers a benefit on a shareholder by distributing available earnings_and_profits without expectation of repayment noble v commissioner supra the classification of a distribution as a constructive_dividend is a question of fact loftin woodard inc v united 4all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated states 577_f2d_1206 5th cir there is a greater potential for a constructive_dividend with closely held corporations where dealings between shareholders and the corporation are commonly characterized by informality zhadanov v commissioner tcmemo_2002_104 petitioners bear the burden of proving that respondent’s determination of a constructive_dividend is erroneous see rule a petitioners concede that they received the lot as a constructive_dividend from the corporation they argue however that the improvements were not a constructive_dividend because they owned the improvements by having paid for the construction materials and having done all the work to construct the improvements we are not persuaded that petitioners owned the improvements they conceded that the corporation owned the lot on which the improvements were built as respondent points out it is axiomatic that improvements are built on land that one owns or else there would be an agreement identifying the rights and responsibilities of the parties we agree petitioners failed to provide any authority to support the argument that the lot and the improvements were separately owned they have not shown that there was an agreement between them and the corporation that would have allowed them to construct a home on the corporation’s property their ownership argument also is directly contradicted by mr cezar’s statements during the audit that the lot and the improvements were both corporate assets moreover petitioners did not present any credible_evidence to support their claim that they owned the improvements by paying the construction costs and personally completing the labor the only evidence petitioners presented of having completed the construction labor was mr cezar’s self-serving testimony which we are not required to accept and which we do not in fact find credible see 99_tc_202 neither petitioners nor the corporation kept adequate_records the store account and the credit card statements they did provide do not establish that petitioners were separate from the corporation the statements were for credit cards and accounts jointly held by mr cezar and the corporation and petitioners did not produce any cancelled checks or receipts to establish who paid the bills the only records petitioners produced to establish that they paid the construction costs were insufficient moreover the statements were for periods after the improvements were built furthermore the record reflects that the corporation was the sole owner of the lot as well as the improvements from the start of construction until the distribution to petitioners the corporation is listed as the sole record_owner of the lot and the improvements on the blueprints the permit and the notice of completion the corporation received property_tax bills for both the lot and the improvements and did not protest that it had been billed for improvements that it did not own we also find it compelling that the corporation which is in the business of building and selling homes offered the lot and the improvements for sale without obtaining any transfer of interest from petitioners no prospective buyer would buy only the improvements and not the lot or vice versa equally compelling we note that no other spec home that the corporation sold before or since was owned by petitioners individually rather all the homes and lots were owned and offered for sale by the corporation accordingly we find that petitioners have not established that they owned the improvements we therefore sustain respondent’s determination that petitioners must include the distribution of the lot and the improvements in gross_income as a constructive_dividend from the corporation ii the corporation’s recognition of income we now turn to the tax consequences to the corporation of the constructive_dividend we begin by noting that it is a fundamental tax principle that the commissioner’s determination sec_5the parties have stipulated that the total fair_market_value of the lot and the improvements at the time of distribution was dollar_figure we therefore find that the value of the distribution was dollar_figure not the larger amount determined in the deficiency_notice are generally presumed correct and taxpayers bear the burden of proving that these determinations are erroneous rule a 503_us_79 290_us_111 where a corporation distributes appreciated_property to a shareholder the corporation recognizes gain as if the property were sold to the shareholder at its fair_market_value see sec_311 gain is recognized to the extent that the property’s fair_market_value exceeds the corporation’s adjusted_basis see id the parties agree that the constructive_dividend to petitioners caused the corporation to recognize taxable_income to the extent the fair_market_value of the lot and the improvements exceeded the corporation’s adjusted_basis the parties also agree that the amount is taxable to the corporation as gross_income the corporation has not established its adjusted bases in the lot and the improvements as anything other than what the parties conceded we find therefore that the corporation recognized additional income iii petitioners’ liability for the accuracy-related_penalty we next consider petitioners’ liability for the accuracy- related penalty under sec_6662 and b taxpayers are liable for an accuracy-related_penalty for any portion of an underpayment of income_tax attributable to negligence or disregard of rules and regulations unless they establish that there was reasonable_cause for the underpayment and that they acted in good_faith sec_6662 and b c negligence is defined as any failure to make a reasonable attempt to comply with the provisions of the code and includes any failure by the taxpayer to keep adequate books_and_records or to substantiate items properly sec_6662 sec_1_6662-3 income_tax regs petitioners did not keep any books_and_records to substantiate their claim that they owned the improvements and properly reported the distribution of the lot and the improvements to them moreover petitioners failed to present any defense against the accuracy-related_penalty petitioners admit that they did not seek professional tax_advice nor consider the tax ramifications of receiving the lot and the improvements as a distribution from the corporation accordingly we sustain respondent’s determination that petitioners are liable for the sec_6662 accuracy-related_penalty for iv the corporation’s liability for the accuracy-related_penalty we now turn to the corporation’s liability for the accuracy- related penalty respondent determined that the corporation is liable for the accuracy-related_penalty for a substantial_understatement_of_income_tax under sec_6662 for there is a substantial_understatement of a corporation’s income_tax if the amount of the understatement exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 sec_1_6662-4 income_tax regs the corporation reported tax due of dollar_figure respondent determined the corporation had a dollar_figure understatement from failing to report an additional dollar_figure in gross_receipts respondent has therefore met his burden of production with respect to the corporation’s substantial_understatement_of_income_tax in addition the corporation failed to present any defense against the accuracy-related_penalty accordingly we sustain respondent’s determination that the corporation is liable for the sec_6662 accuracy-related_penalty we have considered petitioners’ other arguments and conclude they are irrelevant moot or meritless to reflect the foregoing and the concessions of the parties decisions will be entered under rule


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c march cc psi b06 conex-105364-11 number release date uil 25d the honorable bernard sanders united_states senator church street 2nd floor burlington vt attention ------------------------- dear senator sanders i am responding to your inquiry dated date on behalf of your constituent -- ---------------------- ---------------asked about the tax_credit for a qualified_geothermal_heat_pump_property two different credits are available for geothermal heat pump property-a percent tax_credit residential credit for a geothermal heat pump used in property that a taxpayer uses as a residence and a percent business_energy_credit business_credit for a geothermal heat pump that a taxpayer uses in a trade_or_business or for the production_of_income the information from -------------- indicates that he may qualify for the residential credit on the portion of the heat pump cost allocable to the residence and for the business_credit on the portion of the cost allocable to business or rental use residential_energy_efficient_property_credit taxpayers can take a percent tax_credit on expenditures made during a taxable_year for qualified_geothermal_heat_pump_property that they place in service before date this residential credit is available for residential energy efficient property sec_25d of the internal_revenue_code the code qualified_geothermal_heat_pump_property means any equipment that uses the ground or ground water as a thermal energy source to heat the home or as a thermal energy sink to cool the home the equipment must also meet the requirements of the energy star program in effect at the time that the taxpayer made the expenditure for the equipment the labor costs for the onsite preparation assembly and original installation of the qualified_property and the labor costs for the piping or wiring to interconnect the property to the home are also eligible for the credit conex-105364-11 taxpayers residing in either a newly constructed home or an existing home are eligible for this tax_credit a taxpayer must use the home as a residence to qualify for the credit however the law provides an allocation rule that may require a taxpayer to take a reduced credit if he or she uses a portion of the property for business purposes according to the law if a taxpayer uses more than percent of qualified_geothermal_heat_pump_property for business purposes the taxpayer can only take the portion of the expenditures that is properly allocable to use for nonbusiness purposes therefore if -- ---------------- business use of the geothermal heat pump is more than percent he should exclude the costs of the qualified_geothermal_heat_pump_property allocable to the business use when calculating the percent residential credit business_energy_credit the law also provides a business_credit for a specified percentage of the basis of certain energy_property that a taxpayer places in service during a taxable_year sec_48 of the code the business_credit is not a personal credit for a residence but is part of the general_business_credit it provides a percent credit for the cost of equipment that uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure for periods ending before date generally those costs that qualify for the residential credit will qualify for the business_credit the business_credit is only available for property that a taxpayer can depreciate sec_48 of the code generally a taxpayer can take a depreciation deduction for the exhaustion and wear_and_tear of property used in a trade_or_business or of property_held_for_the_production_of_income such as a rental property a taxpayer using a dwelling_unit as a residence may only depreciate the portion of the dwelling_unit that the taxpayer also uses in a trade_or_business or for the production_of_income sec_167 of the code although -------------- may not be able to include the full cost of the geothermal system in calculating the percent residential credit he may be eligible for the percent business_credit for the cost of the geothermal system allocable to his use of the system in a trade_or_business or for the production_of_income conex-105364-11 i hope this information is helpful if -------------- or you have any questions please contact ----------------------- or me at -------------------- for further assistance sincerely charles b ramsey chief branch office of associate chief_counsel passthroughs special industries


o f f i c e o f c h i e f c o u n se l department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date number release date uil the honorable alan grayson member u s house of representative sec_455 north garland avenue orlando fl attention -------------- dear congressman grayson cc ita b4 ------------ conex-128123-10 i am responding to your inquiry dated date submitted on behalf of your constituent -------------------------- he asked if he may take the first-time_homebuyer credit for a home that he purchased on date congress has provided an income_tax_credit to homebuyers who meet certain requirements for the purchase of a home sec_36 of the internal_revenue_code code the statute specifically limits the first-time_homebuyer credit to homes purchased on or after date sec_36 of the code because ---------------- purchased his home before date he does not qualify for the first-time_homebuyer credit the statue does not contain any exceptions or grant the internal_revenue_service the authority to make exceptions to this rule any changes to this rule would require legislative action by congress conex-128123-09 i hope this information is helpful if you have any questions please contact me or -------------------- at --------------------- sincerely michael j montemurro chief branch office of associate chief_counsel income_tax and accounting


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c may uniform issue list set cep rat legend taxpayer custodian a bank b ira c account d amount e amount f dear this letter is in response to a request for a letter_ruling dated date as supplemented by additional information dated date in which you have applied for a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested the taxpayer maintained ira c an individual_retirement_account ira under code sec_408 with custodian a the taxpayer and his spouse are both years of age and they relied on a financial consultant with custodian a for financial advice during the taxpayer received required minimum distributions from ira c totaling amount e on date the taxpayer withdrew amount f from ira c on date dissatisfied with the services provided by custodian a the taxpayer withdrew all of the funds from his accounts with custodian a on date the taxpayer deposited the funds received from custodian a including amount f from ira c into account d a non-ira account with bank b the funds including amount f continue to remain in account d and have not been used by the taxpayer during the taxpayer experienced serious health problems including cancer which required several operations upon the withdrawal of the funds from ira c the taxpayer did not realize the funds were in an ira and was not aware of the 60-day rollover requirement nor was he informed by his financial consultant that part of the funds deposited on date were ira funds that had to be rolled over to another ira account within days the mistake was discovered in date during a meeting with a financial consultant with bank b based on the above facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount g because the failure to waive such requirement would be against equity or good conscience code sec_408 provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 code sec_408 defines and provides the rules applicable to ra rollovers code sec_408 provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 code sec_408 provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 code sec_408 provides a similar 60-day rollover period for partial rollovers code sec_408 provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to code sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented by the taxpayer demonstrates that his failure to rollover amount f was due to his reliance on the advice of a financial consultant with custodian a who did not inform the taxpayer of the 60-day rollover requirement because of the taxpayer’s age and medical_condition he did not realize he was withdrawing funds from an ira and was not aware of the 60-day rollover requirement but had relied on the financial consultant to provide necessary information the mistake was not discovered until after the expiration of the 60-day rollover period amount f has remained at all times in account d considered rollover_contributions within the meaning of sec_408 therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount f from ira c with custodian a you are granted a period of days from the issuance of this ruling letter to make your rollover provided all other requirements of sec_408 except the 60-day requirement are met with respect to such contributions these amounts will be this ruling does not authorize the rollover of amounts that are required to be distributed by code sec_401 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent al to inquire about this ruling please contact se t ep ra t1 id i sincerely yours ye manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice


internal_revenue_service index no number release date department of the treasury p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-104529-99 date date re legend decedent son grandson son bank e f court county state trust year year year this is in response to your authorized representative’s letter dated date in which a ruling was requested that the implementation of a proposed settlement agreement will not cause trust or any distributions from trust to be subject_to the generation-skipping_transfer_tax under sec_2601 of the internal_revenue_code the facts submitted are as follows decedent a resident of county state died testate in year decedent was survived by two sons son and son son has one child grandson who is an adult at the present time grandson has no issue under the terms of decedent’s will decedent’s residuary_estate was divided into two separate trusts sometimes referred plr-104529-99 to as the residuary trusts one for the benefit of son and his issue trust and one for the benefit of son and his issue this ruling relates solely to issues concerning trust paragraph of decedent’s will provides that trust will terminate upon the death of son and the trust estate will be distributed to the issue of son distributions from trust are provided for in paragraph of decedent’s will as follows in the case of a residuary_trust created for a son of mine who survives me the trustees may first distribute to the son for whom such trust was created such amounts of such trust estate as are sufficient to provide for his support and maintenance in the standard of living to which he was accustomed at my death taking into consideration his other sources of support and maintenance to the knowledge of the trustees after any distribution to be made to such son at any given time has been made the income of such trust estate may be accumulated and retained in whole or in part or the trustees from time to time may distribute to any one or more of a group composed of such son’s issue such amounts of such trust estate as in the discretion of the trustees are in the best interests of such distributees in making distributions in the best interests of a distributee the trustees may take into consideration the age of a distributee the costs of a distributee’s comfort support maintenance and education any income the distributee may have from other sources to the knowledge of the trustees and any other factors deemed relevant by the trustees distributions under this paragraph may be made without regard to any requirement of equality among distributees or to the fact that any ancestor of a distributee is then living or receiving distributions hereunder and no deduction shall be made from a distributee’s share upon termination of the residuary_trust on account of any prior distributions from such trust with respect to termination and distributions from trust paragraph of decedent’s will provides in part regardless of any other provision of this will and notwithstanding the rights of any beneficiary the trustees may at any time terminate any one or more of the residuary trusts and the contingent trusts created hereunder in whole or in part if in the discretion of the trustees such plr-104529-99 early termination is in the best interests of the current beneficiaries of such trust the part of such trust estate as to which such trust is terminated shall be distributed outright to the person for whom such trust was created several provisions of decedent’s will pertain to the trustees of trust in paragraph decedent appointed son son and bank as trustees and provided that should either son cease to serve the other son shall continue to act as a co- trustee with bank if both sons should cease to serve bank shall act as sole trustee if at any time there is no trustee serving a majority of the beneficiaries who might then be entitled to a distribution from the trust shall appoint any individual bank or trust company as a successor trustee paragraph pertains to distributions to trustee- beneficiaries it states in relevant part as follows any discretionary distribution to be made from any trust to or for the benefit of any individual who is then acting as trustee including distributions to such individual’s spouse and distributions in discharge of any legal_obligation of such individual shall be made solely in the discretion of the trustees to or for whom distributions may not be made and if no such trustee is then acting such distribution shall not be made the preceding sentence shall not apply to distributions to an individual for his support and maintenance in his accustomed standard of living further any power to dispose_of the trust estate of any trust to any distributee who is one of my issue shall not be exercisable by any trustee who is an individual assigned for federal generation-skipping tax purposes to a generation which is younger than my generation and the same as or younger than the generation assignment of such distributee paragraph provides that any trustee may resign without the necessity of any court procedure by giving at least thirty days’ written notice to each beneficiary who might then be entitled to receive a distribution from trust and by accounting to such resigning trustee’s successor trustee for the administration of the trust estate as required by the successor trustee any trustee’s right to resign may be exercised with or without cause and regardless of any common_law duty_of the trustee not to resign paragraph provides that any trustee including any substitute or successor trustee shall have the right at any time after qualifying as trustee to appoint a successor trustee to act in the place of the appointing trustee either immediately or in the future upon any stated contingency if any initial plr-104529-99 trustee or any such successor for any reason fails or ceases to act without having appointed a trustee who succeeds the former trustee the remaining trustee or trustees if there be any may appoint another trustee to act in the former trustee’s place a successor trustee appointed under paragraph may be an individual bank or trust company paragraph provides that any fiduciary power granted a trustee may be released in whole or in part temporarily or permanently and except as provided in paragraph any such power may be delegated to any other trustee then acting in whole or in part temporarily or permanently in year son resigned as trustee of trust and designated an individual e as his successor in year son resigned as trustee of trust and designated an individual f as his successor at the present time bank e and f are serving as trustees in year more than years after the inception of the trust controversies arose between son and grandson regarding the meaning of the distribution standards set forth in paragraph of decedent’s will and their respective entitlements to trust distributions pursuant to such standards son has objected to distribution requests made by grandson claiming that the trust does not grant grandson any right to distributions similarly grandson has opposed the requests for distribution made by son claiming that son does not currently qualify for distributions under the support and maintenance standard in year son initiated court proceedings against grandson and the trustees requesting the court to declare that it is within the discretion of the trustees to terminate the trust and distribute the assets to him grandson responded to the petition by requesting that the court dismiss the petition deny all relief sought thereunder and exercise its equitable supervision over the trust and instruct the cotrustees regarding the distribution standards contained in the trust e and f filed an answer to the petition in which they requested a declaratory_judgment from the court concerning the meaning of the trust court ordered the parties to settle the pending litigation and other controversies among son grandson the trustees and other parties through mediation as a result of the mediation process the parties have executed a settlement agreement in order for the settlement agreement to come into effect court must approve the agreement and a favorable private_letter_ruling must be obtained from the internal_revenue_service the proposed settlement agreement contains the following provisions plr-104529-99 son will receive a distribution of of each asset of trust this distribution will be made pursuant to the power under paragraph of the will that permits the trustees to terminate trust in whole or in part if in the discretion of the trustees such early termination is in the best interests of the current beneficiaries of such trust the part of such trust estate as to which such trust is terminated shall be distributed outright to the person for whom such trust was created the remaining of each asset of trust will continue to be held under the terms of trust e and f will resign as trustees and will irrevocably refuse in writing to appoint successors bank will resign as trustee unless it receives a written request from grandson to continue to serve as the single successor corporate trustee of trust trust will be modified to permit grandson to appoint a single successor corporate trustee that may not be related or subordinate as that term is defined in sec_672 of the internal_revenue_code grandson will also have the power to remove a corporate trustee and appoint a successor corporate trustee that is not a_related_or_subordinate_party under sec_672 an order will be submitted to court requesting that the court in construing the terms of the decedent’s will make the following findings with respect to the future administration of trust a in making distributions from trust to son the trustees must strictly apply the distribution standard applicable to son support and maintenance in the standard of living to which son was accustomed at decedent’s death taking into consideration son’s other sources of support and maintenance to the knowledge of the trustees b after taking into consideration the settlement distribution to son son currently has sufficient sources of support and maintenance to more than adequately provide for son’s support and maintenance in the standard of living to which son was accustomed at the time of decedent’s death c because of other sources of support and maintenance available to son at the present time including the settlement distribution son is not currently entitled to receive any support and maintenance distributions from trust d in making distributions from trust to grandson the trustees must strictly apply the best interests standard set forth in paragraph of decedent’s will plr-104529-99 e grandson is presently entitled to distributions from trust as are in his best interests and the trustee s may consider his age the cost of his comfort support maintenance and education his income from other sources and any other factors deemed relevant by the trustee s f in light of the agreement that son currently has sufficient income from other sources to more than provide for his comfort support maintenance and education there is no current requirement that the trustee s inquire into son’s standard of living lifestyle health and financial situation and the trustee s are expressly released of any duty statutory or at common_law to currently so inquire the settlement agreement also provides that the parties to the agreement will make application to the court seeking a construction of paragraph of decedent’s will which provides that the trustees may at any time emphasis added terminate any one or more of the residuary trusts in whole or in part if in the discretion of the trustees such early termination is in the best interests of the current beneficiaries of such trust the parties will ask the court to construe this provision as meaning that a current beneficiary of trust may receive only one termination distribution from trust the settlement agreement also provides that upon satisfaction of the conditions of the settlement agreement son will not at any time directly or indirectly request or accept any further distributions from trust son agrees that if he breaches this promise he will indemnify and hold harmless the co-trustees or trustee of trust for any damages attorney’s fees expenses and court costs arising from such breach a ruling is requested on behalf of trust son grandson and all other beneficiaries of trust including future beneficiaries and beneficiaries whose interests are now contingent that the implementation of the proposed settlement agreement will not cause trust or any distributions from trust to be subject_to the generation-skipping_transfer_tax imposed by sec_2601 of the code sec_2601 provides that a tax is imposed on every generation-skipping_transfer sec_2611 defines the term generation-skipping_transfer to mean a taxable_distribution a taxable_termination and a direct_skip sec_2612 defines the term taxable_distribution to mean any distributions from a_trust to a skip_person other than a taxable_termination or a direct_skip sec_2612 plr-104529-99 provides in essence that a taxable_termination occurs when an interest in a_trust terminates such as by death and thereafter only skip persons have an interest in the trust property sec_2613 defines the term skip_person as including a natural_person assigned to a generation that is two or more generations below the generation assignment of the transferor in this case trust is a generation-skipping_trust because it provides for distributions to persons that are two or more generations below the decedent’s generation thus unless trust is excepted from the generation-skipping_transfer_tax provisions by reason of b a of the tax_reform_act_of_1986 act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations trust would be subject_to the generation-skipping_transfer_tax section b a of the act and sec_26_2601-1 provide that the generation-skipping_transfer_tax shall not apply to any generation-skipping_transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added a modification of a generation-skipping_trust that is otherwise exempt under the act and the gstt regulations will generally result in a loss of its exempt or grandfathered status if the modification changes the quality value or timing of any powers beneficial interests rights or expectancies originally provided for under the terms of the trusts the implementation of the proposed settlement agreement will be the end result of court-ordered mediation among the parties who have conflicting views as to the proper administration of the trust under its terms as written the settlement agreement upon implementation will resolve a bona_fide controversy among the parties the implementation of the proposed settlement agreement upon approval by the court including the requested construction of the meaning of paragraph under decedent’s will will not confer additional powers or beneficial interests upon any current or new trustee or upon any of the trust beneficiaries we believe that the proposed settlement agreement fairly reflects the relative merits of the claims made by the parties to the dispute and provides an allocation of trust assets that is within the range of the reasonable outcomes which could result from a court determination of the issues specifically if son prevailed in his petition to the court percent of the trust plr-104529-99 would be distributed outright to son on the other hand if grandson prevailed in his request for strict construction of the support and maintenance standard applicable to distributions to son it is likely that no further distributions from trust would be made to son thus the proposed settlement agreement is consistent with the relative merits of the parties’ contentions regarding the proper administration of the trust based on the facts submitted and the representations made we conclude that upon implementation of the proposed settlement agreement trust will continue to be exempt from the generation- skipping transfer_tax provided there are no additions to the trust constructive or otherwise neither distributions from the trust including the terminating distribution to son nor the termination of trust will be subject_to the generation-skipping_transfer_tax under sec_2601 except as we have specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions or under any other provisions of the code in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your 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 yours passthroughs and special assistant chief_counsel industries katherine a mellody senior technician reviewer branch by enclosure copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa apjp b01 jpdewald posts-105159-04 uilc date date to michael w bitner associate area_counsel small_business self employed cc sb stl attn steven w labounty from lawrence h schattner branch chief collection bankruptcy summonses branch procedure administration cc pa cbs subject collection statute expiration date and revocation of bankruptcy discharge this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issue whether sec_6503 of the internal_revenue_code code suspends the period of limitations on collection for dischargeable tax_liabilities during the period that a discharge in a chapter bankruptcy case is granted to the time the discharge is revoked conclusion sec_6503 does not suspend the period of limitations for collection during the period that a discharge in a chapter bankruptcy case is granted to the time the discharge is revoked sec_6503 generally suspends the period of limitations for collection in a bankruptcy case until the automatic_stay terminates under sec_362 of the bankruptcy code plus an additional six months however when the posts-105159-04 internal_revenue_service service ceases collection activities due to a discharge order in a chapter bankruptcy case that is later revoked equitable_estoppel should generally apply to prevent a debtor from asserting that the period of limitations for collection ran during the period that the discharge order was effective facts debtor files for chapter bankruptcy at the commencement of the bankruptcy case debtor owes a tax_liability to the service that is dischargeable the bankruptcy court grants debtor a discharge which includes a discharge of the tax_liability debtor owes to the service nine months later the trustee files a request to revoke the discharge after notice and a hearing the bankruptcy court enters a judgment revoking debtor’s discharge which includes a revocation of the discharge of the tax_liability debtor owes to the service law and analysis upon the filing of a bankruptcy petition sec_362 of the bankruptcy code operates as a stay applicable to all entities of various actions listed in sec_362 sec_362 prohibits any act to collect assess or recover a claim against the debtor that arose before the commencement of the bankruptcy case sec_362 however provides that filing a bankruptcy petition does not operate as a stay under sec_362 of making an assessment of any_tax sec_362 provides that the automatic_stay continues in an individual chapter case with respect to any act under sec_362 other than an act against property of the estate until the time the bankruptcy court grants or denies a discharge a discharge order in bankruptcy discharges the debtor from a personal obligation to pay and creates an injunction barring creditors from attempting to collect discharged debts from the debtor personally b c a a bankruptcy court however may revoke a discharge order in a chapter bankruptcy case pursuant to section d of the bankruptcy code sec_6503 of the code suspends the period of limitations on collection or assessment of federal taxes for the period in which collection or assessment is prohibited by a bankruptcy case plus an additional days for assessment or six months for collection courts have taken different positions on the issue of when the suspension_period under sec_6503 ends two courts interpreting sec_6503 have held that the suspension_period ends on the date the automatic_stay is lifted see 90_tc_68 the senate and house reports seem to equate the suspension_period with the period during which the automatic_stay is in effect 144_br_503 w d wash citing 92_tc_34 congress intended sec_6503 now h to toll the period of limitation on collection during the period the automatic_stay posts-105159-04 under u s c sec_362 was in effect one court interpreting sec_6503 held that the secretary is prohibited from collecting the tax under sec_6503 until six months after the bankruptcy case is closed see united_states v breaux u s t c big_number e d la another court held that the period of limitations for collection was extended for the period when the bankruptcy court granted the discharge order to the time the bankruptcy court set_aside the discharge order see nelson v united_states u s t c big_number e d mich that court also found that even if the limitations_period were not suspended during the time that the discharge order was effective equitable_estoppel would apply to prevent the debtor from claiming the period of limitations for collection expired id the legislative_history to sec_6503 supports the position that the suspension_period for collection in a bankruptcy case ends on the date the automatic_stay is lifted under sec_362 the period of limitations is suspended if the internal_revenue_service is prohibited for a period of time by reason of a bankruptcy case from assessment or collection of tax for example because of the automatic_stay under new u s code sec_362 s rept no 96th cong 2d sess i f the automatic_stay under new u s code sec_362 precludes the internal_revenue_service from assessment or collection of tax the running of the period of limitations is suspended for collection during the period of the stay and for six months thereafter h_r conf_rep no 96th cong 2d sess the statute_of_limitations on assessment and collection are suspended until the earlier of the determination of tax and the close of the case plus days in the case of assessment and six months in the case of collection the bankruptcy_tax_act and minor tax bills hearing on h_r before the subcomm on select revenue measures of the comm on ways and means house of representatives 96th cong based on the case law and the legislative_history to sec_6503 we think the suspension_period for collection in a bankruptcy case under sec_6503 ends on the date that the automatic_stay terminates under sec_362 plus an additional six months that sec_6503 requires to be tacked onto the suspension_period however when a bankruptcy court revokes a discharge order in a chapter bankruptcy case pursuant to section d of the bankruptcy code we think the principles of equitable_estoppel generally would apply to prohibit a debtor from claiming that the period of limitations for collection ran during the period the discharge order was effective equitable_estoppel will prevent a party from claiming the expiration of the statute_of_limitations as a defense when that party’s conduct caused the other party not to bring suit within the period of limitations see leavell v kieffer u s t c big_number s d ill citing 146_f3d_459 7th cir costa v clark and galanis viewed the suspension_period as separate from the day period or the six month period that sec_6503 requires to be added to the suspension_period therefore clark and galanis require that the additional period for assessment or collection be tacked onto the suspension_period posts-105159-04 i r s u s t c big_number e d n y the traditional elements of equitable_estoppel are that there must be a false representation or wrongful silence the error must be in a statement of fact and not in an opinion of law the person claiming the benefits of estoppel must be ignorant of the true facts and he must be adversely affected by the acts or statements of the person against whom an estoppel is claimed 67_tc_612 citing 63_tc_468 affd 535_f2d_309 5th cir see also i r s v kaplan in re kaplan 104_f3d_589 3rd cir 51_f3d_883 9th cir durant v united_states cl_ct cl_ct equitable_estoppel may also apply when a party’s willful or negligent acts or conduct cause the other party to detrimentally rely upon the state of things so indicated fdic v harrison 735_f2d_408 11th cir citing 672_f2d_1340 11th cir section d of the bankruptcy code authorizes a bankruptcy court to revoke a discharge order in a chapter bankruptcy case only after a debtor obtains a discharge through fraud disobeys a court order or refuses to respond to a material question approved by the court or to testify we think the principles of equitable_estoppel would generally prohibit the debtor from benefiting from any wrongful conduct that results in a bankruptcy court revoking a discharge pursuant to section d therefore equitable_estoppel should generally apply in these cases to prevent the debtor from asserting that the period of limitations for the service to collect a tax_liability ran during the period that the discharge order was effective see nelson u s t c big_number case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views section d of the bankruptcy code provides that a bankruptcy court shall revoke a discharge at the request of the trustee a creditor or the united_states trustee in three situations first where the debtor obtains the discharge through fraud and the requesting party does not know of the fraud until after the court grants the discharge second where the debtor knowingly and fraudulently fails to deliver surrender or report to the trustee the acquisition of property of the estate or entitlement to property that if acquired would be property of the estate third where the debtor refuses to obey any lawful order of the court other than an order to respond to a material question or to testify to respond to a material question approved by the court or to testify on the ground of privilege_against self-incrimination after the debtor has been granted immunity with respect to the matter on which the privilege was invoked or to respond to a material question approved by the court or to testify on a ground other than the properly invoked privilege_against self-incrimination posts-105159-04 please call if you have any further questions


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc corp 2-plr-127209-00 date date number release date index number legend distributing controlled dear we respond to your letter dated date in which you requested a supplemental ruling to plr issued on date prior letter_ruling additional information was submitted in a letter dated date the prior letter_ruling stated that the business_purpose of the spin-off was to facilitate a public offering of distributing’s stock the ipo although the proposed distribution has not been effectuated distributing has taken substantial steps to undertake the ipo including engaging an investment banking firm and submitting form s-1 to the securities_and_exchange_commission however distributing’s investment bankers have advised that the ipo be delayed due to the adverse changes that have occurred in distributing’s industry segment and the market generally since the issuance of the prior letter distributing has represented that all of the other representations made in the prior letter_ruling are still true and correct except that in connection with this request distributing represents consistent with section dollar_figure of appendix a of revproc_96_30 1996_1_cb_696 the stock offering will be made within one year of the distribution based upon the information and representations submitted with the original and supplemental ruling requests we rule that the rulings contained in the prior letter_ruling remain in full force and effect this supplemental ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-127209-00 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 a copy of this letter must be attached to any income_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 the taxpayer sincerely assistant chief_counsel corporate by lewis k brickates assistant to chief branch


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita postf-102646-14 uilc date date to associate area_counsel ctm area cc lb_i ctm ln from chief branch income_tax accounting subject separate and distinct trades_or_businesses this memorandum responds to your request for assistance this advice may not be used or cited as precedent legend company llc year a --------------------------------------------- ---------------------------------- ------ purchaser a ----------------- purchaser b ----------------- issue are company and llc separate and distinct trades_or_businesses within the meaning of sec_446 conclusion based upon the available information submitted we believe that company and llc are separate and distinct trades_or_businesses within the meaning of sec_446 facts postf-102646-14 llc was previously a subsidiary of company that converted in year a to a limited_liability_company whose sole member is company llc has not made an election under procedure and administration reg sec_301_7701-3 to be taxed as a corporation thus llc is not regarded as an entity separate from company for federal_income_tax purposes but is instead treated as a division of company company’s activities include sales marketing distribution sale support research_and_development and administrative and headquarters functions llc primarily manufactures products but does provide some research_and_development services to the ------purchaser of its products purchaser a purchaser a will subsequently sell these products to purchaser b who will ultimately sell the products to company company and llc have separate books_and_records these books_and_records are prepared at company’s location company and llc are in different geographical locations further company and llc do not share employees but do share the highest-level executives company and llc use the same accounting_method presumably that method is an accrual accounting_method law and analysis sec_446 permits accounting methods to be chosen at the trade_or_business level sec_1_446-1 provides factors to be used for determining that level in specific situations deciding whether company and llc are separate and distinct trades_or_businesses requires a factual determination the currently available information fails to convince us that company and llc are not separate and distinct trades_or_businesses the fact that llc has failed to make an election to be taxed as a corporation and is thus disregarded as an entity separate from company for federal_income_tax purposes does not mean that llc can never be a separate and distinct trade_or_business accordingly based on the available information our view is that company and llc are separate and distinct trades_or_businesses within the meaning of sec_446 case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine the ability of the internal_revenue_service to protect the privileged information if disclosure is determined to be necessary please contact this office for our views


internal_revenue_service number release date index number --------------------------------- ---------------------------- --------------------- ---------------------------- - department of the treasury washington dc person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc corp b01 - plr-156391-03 date december -------------------- ------------------------ --------------------------- ------------------------------------------------------------------ ------------------------------------------------------------------ legend parent ------------------------------------------------------------- sub ------------------------------------------------------------- company x date date date date company official ------------------------------------------------------------------------------------------------------------- tax professional dear --------------- this responds to a letter from your authorized representative dated date requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election additional information was received in letters dated date and date the extension is being requested for parent and sub to make an election to file a ------------------------------------------------- ----------------------------- --------------------------- ----------------------- parent and sub are calendar_year domestic c corporations sub was plr-156391-03 consolidated federal_income_tax return with parent as the common parent under sec_1_1502-75 of the income_tax regulations hereinafter referred to as the election effective for the taxable_year ending on date the material information submitted for consideration is summarized below incorporated on date parent was incorporated on date and since that time its activities have been limited to the ownership of sub on date sub acquired assets from company x and began operations prior to date both parent and sub were inactive an election under sec_1_1502-75 to file a consolidated_return for the taxable_year that ended on date was required to be filed by the due_date of parent’s return including extensions but for various reasons the election was not timely filed the statute_of_limitations on assessment under sec_6501 has not run for parent’s or sub’s taxable_year for which they want to make the election or for any taxable_year that would be affected by the election had it been timely filed sec_1_1502-75 provides that a group which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return such consolidated_return must be filed not later than the last day prescribed by law including extensions of time for filing the common parent’s return extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 under sec_301_9100-1 the commissioner has discretion to grant a reasonable sec_301_9100-1 through provide the standards the in this case the time for filing the election is fixed by the regulations ie information affidavits and representations submitted by parent company based on the facts and information submitted including the representations plr-156391-03 sec_1_1502-75 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent and sub to file the election provided parent and sub show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government_official and tax professional explain the circumstances that resulted in the failure to timely file the election the information establishes that the request for relief was initiated before the failure to make the election was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see sec_301_9100-3 made we conclude that parent and sub have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to file the election a copy of this letter must be attached to the consolidated_return for parent’s taxable_year ending on date sub’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the district director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ liability is lower sec_301_9100-3 we express no opinion with respect to whether in fact parent and sub qualify substantively to file a consolidated_return in addition we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the return or the election late that are not specifically set forth in the above ruling for purposes of granting relief under we relied on certain statements and representations made by parent company official and tax professional however the director should verify all essential facts moreover notwithstanding that the extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable still apply the above extension of time is conditioned on the taxpayers’ parent’s and this ruling is directed only to the taxpayer s requesting it sec_6110 of plr-156391-03 the code provides that it may not be used or cited as precedent letter is being sent to your authorized representative in accordance with the power_of_attorney on file with this office a copy of this sincerely ken cohen ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc