tax exempt and government entities uics division department of the treasury internal_revenue_service washington d c apr -t ep eats legend taxpayer a taxpayer b taxpayer c taxpayer d taxpayer e taxpayer f taxpayer g company m ira x trust t subtrust u subtrust v page subtrust w state u date date date date date date date date date amount gentlemen this is in response to the letter as supplemented in which your authorized representative on your behalf requests several rulings under sec_408 of the internal_revenue_code code the following facts and representations support your ruling_request taxpayer a whose date of birth was date died on date without having attained age at his death taxpayer a was a resident of state u his wife taxpayer b predeceased him having died on date taxpayer a was survived by his son taxpayer c whose date of birth was date by a grandson taxpayer d whose date of birth was date and by another grandson taxpayer e whose date of birth was date thus taxpayer c is the eldest of taxpayers c d and e page at his death taxpayer a maintained an individual_retirement_account ira ira it has been represented that ira x was is qualified within the x with company m meaning of sec_408 of the code by means of a beneficiary designation dated date taxpayer a named taxpayer b as the primary beneficiary of his ira x and named trust t as the secondary beneficiary of his ira x trust t was is valid under the laws of state u furthermore sec_2 a of trust t provides that only taxpayer a had the power_to_revoke said trust it has been represented that as noted above taxpayer b predeceased taxpayer a thus ira x passed to trust it has also been represented that as of the date of taxpayer a’s death trust t t remained the beneficiary of taxpayer a’s ira x taxpayer f and taxpayer g are the co- trustees of trust t as of taxpayer a’s date of death the value of ira x approximated amount it has been represented that as of date all of the debts expenses and taxes associated with the death of taxpayer a and with the administration of taxpayer a’s estate had been paid relevant provisions of trust t established subtrust u to benefit taxpayer c subtrust v to benefit taxpayer d and subtrust w to benefit taxpayer e relevant provisions of trust t provide that of the trust assets shall be paid to subtrust u to subtrust v and to subtrust w it has been represented that said provisions apply to taxpayer a’s ira x it has also been represented that sub-trusts u v and w are valid under the laws of state u amended was provided to company m prior on date finally it has been represented that a copy of trust t as sec_3_6 and sec_3_7 of trust t as amended govern sub-trusts u v and w pursuant to said sections of trust t taxpayers c d and e are the sole individuals who can receive distributions from taxpayer a’s ira x based on the above facts and representations you through your authorized representative request the following letter rulings that as represented above ira x is a valid ira within the meaning of code sec_408 thus distributions from said ira x are subject_to the rules of code sec_408 that trust t as amended and subtrusts u v and w constitute valid see- through trusts within the meaning of sec_1 a of the final income_tax regulations page that taxpayers c d and e are the sole individuals whose life-expectancies must be considered for purposes of determining who if anyone is the code sec_401 designated_beneficiary of taxpayer a’s ira x and that subtrust u subtrust v and subtrust w are eligible for separate share treatment as that term is defined in sec_1 a of the final regulations thus as a result the beneficiary of each subtrust may compute his code sec_401 minimum required distributions based on his life expectancy without regard to the life expectancy of the beneficiary of either of the other two subtrusts with respect to your ruling requests code sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee -- i will be distributed to such employee not later than the required_beginning_date or ii will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary sec_401 of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the ira holder attains age code sec_401 provides in general that if a plan participant ira holder dies before the distribution of his interest has begun in accordance with subparagraph a ii prior to his required_beginning_date then his entire_interest must be distributed within years of his death code sec_401 provides an exception to the 5-year rule above in general pursuant to the exception if any portion of the interest of a deceased plan participant ira holder is payable to or for the benefit of a designated_beneficiary such portion will be distributed beginning not later than year after the date of the deceased’s death or a later date as prescribed by the secretary under regulations in accordance with regulations over the life of the designated_beneficiary or a period not extending beyond the life expectancy of the beneficiary code sec_401 defines designated_beneficiary as any individual designated as a beneficiary by the employee ira holder page code sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit an ira trust is maintained with further respect to your ruling requests final income_tax regulations under code sec_401 and sec_408 were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite_19_irb_852 date the preamble to the final regulations in relevant part provide that the regulations apply for determining required minimum distributions for calendar years beginning after date in addition the final regulations have been modified in part see 2004_26_irb_1082 date the modification to the final regulations may also be relied upon with respect to required distributions for the and subsequent calendar years sec_1_401_a_9_-3 of the final regulations q a-3 a provides in general that with respect to the life expectancy exception to the 5-year rule described in code sec_401 a b iii and in a-1 distributions are required to begin to a non-spouse beneficiary on or before the end of the calendar_year immediately following the calendar_year in which the employee died this rule also applies if another individual is a designated_beneficiary in addition to the employee’s ira holder’s surviving_spouse sec_1_401_a_9_-3 of the final regulations q a-4 a provides in relevant part that in the absence of a plan provision to the contrary with respect to an individual who dies prior to reaching his required_beginning_date if said individual has designated a beneficiary distributions from his plan or ira are to be made in accordance with the life_expectancy_rule of code sec_401 and iv sec_1_401_a_9_-5 of the final regulations q a-5 b provides in general that if an employee dies before his required_beginning_date in order to satisfy the requirements of code sec_401 or iv and the life_expectancy_rule described in a-1 of sec_1_401_a_9_-3 the applicable distribution period for distribution calendar years after the distribution calendar_year containing the employee’s date of death is determined in accordance with paragraph c of this a-5 sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to a non-spouse beneficiary the applicable distribution period measured by the beneficiary’s remaining life expectancy is determined using the beneficiary's age as of the beneficiary's birthday in the calendar_year immediately following the calendar_year of the employee’s death reduced by one for each calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee’s death in subsequent calendar years the applicable distribution period is page sec_1_401_a_9_-4 of the final regulations q a-1 provides in relevant part that a designated_beneficiary is an individual who is designated as a beneficiary under a plan either by the terms of the plan or by an affirmative election by the employee a beneficiary designated under the plan is an individual who is entitled to a portion of an employee’s benefit contingent on the employee’s death or another specified event a designated_beneficiary need not be specified by name in the plan or by the employee to the plan in order to be a designated_beneficiary so long as the individual who is to be the beneficiary is identifiable under the plan q a-1 further provides that a person who takes under a will or otherwise under applicable state law will not be a designated benefi iclary unless that individual also takes under a plan sec_1_401_a_9_-4 of the final regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee's or ira holder's death generally an employee's designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death consequently any person who was a beneficiary as of the date of the employee’s death but is not a beneficiary as of that september eg because the person receives the entire benefit to which the person is entitled before that september is not taken into account in determining the employee’s designated_beneficiary for purposes of determining the distribution period for required minimum distributions after the employee’s death accordingly if a person disclaims entitlement to the employee’s benefit pursuant to a disclaimer that satisfies sec_2518 by that september thereby allowing other beneficiaries to receive the benefits in lieu of that person the disclaiming person is not taken into account in determining the employee’s designated_beneficiary sec_1_401_a_9_-5 of the final regulations q a-7 a provides in relevant part that except as otherwise provided in paragraph c of this a-7 not pertinent to this ruling_request if more than one individual is designated as a beneficiary with respect to an employee as of the applicable_date for determining the designated_beneficiary the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the applicable distribution period sec_1_401_a_9_-8 of the final regulations q a-2 a provides that if an employee’s ira holder's benefit in a defined_contribution_plan is divided into separate_accounts in accordance with the conditions contained therein distributions from the separate_account may be based on the life expectancy of the beneficiary of the separate_account without regard to the life expectancies of the beneficiaries of other separate_accounts sec_1_401_a_9_-5 of the final regulations q a-7 b provides in short that except as provided in paragraph c of this a-7 if a beneficiary's entitlement to an employee's benefit after the employee’s death is a contingent right such contingent page beneficiary is nevertheless considered to be a beneficiary for purposes of determining who if anyone is the employee’s designated_beneficiary sec_1_401_a_9_-5 of the final regulations q a-7 c provides in relevant part that a person who has any right including a contingent right to an employee’s benefit beyond being a mere potential successor in the interest of one of the employee’s beneficiaries upon that beneficiaries death must be considered for purposes of determining who if anyone is the employee’s designated_beneficiary q a-7 c provides an example pursuant to which a principal remainderman of an income_beneficiary of an employee's interest must be considered for purposes of determining who if anyone is the employee’s designated_beneficiary sec_1_401_a_9_-4 of the final regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary however q a-5 of sec_1_401_a_9_-4 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact there is no corpus the trust is irrevocable or will by its terms become irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable within the meaning of a-1 of this section from the trust instrument relevant documentation has been timely provided to the plan_administrator sec_1_401_a_9_-4 of the final regulations q a-5 c provides in relevant part that the separate_account rules of a-2 of sec_1_401_a_9_-8 are not available to trust beneficiaries with respect to the trust’s interest in the employee’s ira holder’s benefit sec_1_401_a_9_-4 of the final regulations q a-6 b provides in relevant summary that at a minimum documentation sufficient to enable an ira custodian to identify beneficiaries of an ira must be provided by a trustee to the custodian by october of the calendar_year immediately following the calendar_year in which the ira owner died sec_1_401_a_9_-9 of the final regulations q a-1 sets forth the single life table to be used to determine the life expectancy of an individual the single life table’ indicates that the life expectancy of a 42-year old i sec_41 years y page code sec_408 provides the rules governing iras code sec_408 provides that except as otherwise provided in this subsection any amount_paid or distributed out of an individual_retirement_plan shall be included in gross_income by the payee or distribute as the case may be in the manner provided under sec_72 with specific reference to your first ruling_request it has been represented that ira x is and has been at ail times relevant to this ruling_request valid within the meaning of code sec_408 additionally with specific reference to your second ruling_request it has been represented that trust t and the sub-trusts created under its terms are valid under the laws of state u and became irrevocable at the death of taxpayer a furthermore it has been represented that a copy of the documentation required under the final regulations promulgated under code sec_401 was timely given to the custodian of ira x finally the identity of the beneficiaries of trust t may be determined by perusing its terms thus in response to your initial two ruling requests we conclude as follows that as represented above ira x is a valid ira within the meaning of code sec_408 thus distributions from said ira x are subject_to the rules of code sec_408 and that trust t as amended and subtrusts u v and w constitute qualified see- through trusts within the meaning of sec_1_401_a_9_-4 of the final income_tax regulations question and answer-5 with respect to your third and fourth ruling requests since trust t and its sub- trusts constitute valid see-through trusts it is necessary to determine who if anyone is the designated_beneficiary within the meaning of code sec_401 and sec_408 of taxpayer a’s ira x in this regard we note that ira x is initially payable to trust t prior to being divided among the beneficiaries of the three subtrusts created under the provisions of trust t as noted above taxpayers c d and e are the only beneficiaries of trust t’s subtrusts who will receive the amounts distributed from taxpayer a’s ira x and the only beneficiaries who must be considered for purposes of determining who is the designated_beneficiary within the meaning of code sec_401 of ira x as noted previously taxpayer c is older than either taxpayer d or taxpayer e page thus with respect to your third and fourth ruling requests based on the above we conclude as follows that taxpayers c d and e are the sole individuals whose life-expectancies must be considered for purposes of determining who if anyone is the code sec_401 designated_beneficiary of taxpayer a’s ira x and since distributions from taxpayer a’s ira x will be made to taxpayer a’s trust t prior to being distributed to either taxpayer c taxpayer d or taxpayer e distributions from ira x are not eligible for separate share treatment as provided in sec_1_401_a_9_-8 of the final regulations q a-2 a code sec_401 minimum required distributions to each subtrust referenced herein and the beneficiary of each must be calculated based on the life expectancy of taxpayer c the eldest of taxpayers c d and e using the single life table found in the final regulations thus this ruling letter is based on the assumption that ira x meets the requirements of code sec_408 at all times relevant to furthermore this ruling letter rests on the assumption that trust t and its related sub-trusts are valid under the laws of state u as represented it also assumes the correctness of all facts and representations contained therein a copy of this letter has been sent to your authorized representatives in accordance with a power_of_attorney on file in this office if you have any questions concerning this letter_ruling please contact esquire id who may be reached at not a toll-free number or fax sincerely yours frances v slo employee_plans technical group anager enclosures deleted copy of this letter notice of intention to disclose


significant index no department of the treasury k internal_revenue_service washington d c tax_exempt_and_government_entities_division apr tep rata re substitute mortality_table ruling taxpayer plan ein ein plan no plan populations for which substitute mortality tables are requested e e male annuitants female annuitants other plan populations in controlled_group e e e male nonannuitants female nonannuitants disabled participants dear mr this letter is to inform you that your request to use substitute mortality tables for making computations under sec_430 of the internal_revenue_code the code’ for the plan has been granted with respect to the populations specified in this letter effective for a your period of plan years beginning with the plan_year commencing january request has been granted in accordance with sec_430 of the code and sec_303 of the employee_retirement_income_security_act_of_1974 this approval applies to the following specific populations e e male annuitants excluding disabled participants female annuitants excluding disabled participants based on the information provided by the taxpayer the following plan populations do not have credible mortality experience and therefore the standard mortality tables will be used for calculations under sec_430 of the code e e male nonannuitants female nonannuitants revrul_96_7 mortality tables will be used for disabled participants in granting this approval we have only considered whether the substitute mortality rates were developed in accordance with sec_1_430_h_3_-2 of the treasury regulations regulations and revproc_2017_55 accordingly we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request permission is hereby granted to use the substitute mortality rates shown in the table below for the plan approved for use beginning with the plan_year commencing january substitute mortality tables base_year male female annuitants annuitants n w r a d o n o p d a n w a m a n y d o d m o s o o m ’ - - o n male female annuitants annuitants age 28u21 male female annuitants annuitants age 2k male annuitants female annuitants age the above rates were developed based on an experience study period from january through december with a base_year of the rates were calculated by adjusting the applicable standard mortality tables in sec_1_430_h_3_-1 of the regulations using the mortality ratio and credibility weighting factor determined by aggregating male and female experience as shown in the table below annuitants mortality ratio credibility weighting factor the internal_revenue_service has reviewed the substitute mortality rates and supporting information and has determined that based on the information submitted the rates were developed in accordance with sec_1_430_h_3_-2 of the regulations and revproc_2017_55 the above rates must be applied on a generational basis as provided in sec_1_430_h_3_-2 of the regulations your attention is called to sec_430 of the code and sec_1 h - d of the regulations which describe the circumstances in which the use of the substitute mortality_table will terminate before the end of the 5-year period described above in general the substitute mortality tables can no longer be used as of the earliest of 28u02h for a plan using a substitute mortality_table for only one gender the first plan_year for which there is full or partial credible mortality information with respect to the other gender that had lacked credible mortality information unless an approved substitute mortality_table is used for that gender the first plan_year in which the plan fails to satisfy the requirements of sec_1_430_h_3_-2 of the regulations regarding the requirement that other plans and populations in the controlled_group must also use substitute mortality tables unless it can be demonstrated that they do not have credible mortality information taking into account the transition_period for newly affiliated companies in sec_1_430_h_3_-2 of the regulations the second plan_year following the plan_year for which there is a significant change in individuals covered by the plan as described in sec_1_430_h_3_-2 of the regulations the plan_year following the plan_year in which a substitute mortality_table used for a plan population is no longer accurately predictive of future mortality of that population as determined by the commissioner or as certified by the plan’s actuary to the satisfaction of the commissioner or the date specified in guidance published in the internal_revenue_bulletin pursuant to a replacement of mortality tables specified under sec_430 of the code and sec_1_430_h_3_-1 of the regulations other than annual updates to the static mortality tables issued pursuant to sec_1_430_h_3_-1 of the regulations or changes to the mortality improvement rates pursuant to sec_1_430_h_3_-1 of the regulations in particular sec_1_430_h_3_-2 provides that the use of substitute mortality tables must be discontinued after a significant change in coverage unless the plan’s actuary certifies in writing to the satisfaction of the commissioner that the substitute mortality tables used for the population continue to be accurately predictive of future mortality of the population taking into account the effect of the change in the population for this purpose a significant change in coverage occurs if the number of individuals covered by the substitute mortality_table for a plan_year is less than percent or more than percent of either the average number of individuals in that population over the years covered by the experience study on which the substitute mortality_table is based or the number of individuals covered by the substitute mortality_table in a plan_year for which a certification described in sec_1 h - c iii a of the regulations was made this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan years for which the substitute mortality tables are used please note the information that is required to be attached to schedule sb actuarial information in accordance with the instructions to that form we have sent a copy of this letter to your authorized representative pursuant to a power_of_attorney on file in this office and to the manager ep classification in columbus ohio and to the manager ep compliance unit in chicago illinois if you require further assistance in this matter please contact id yat - sincerely david m ziegler manager employee_plans actuarial group cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa bgdusenberry posts-121874-12 uilc date date to doris kenwright program manager attn rose kincade from associate chief_counsel procedure administration third party communication date of communication month dd yyyy subject application of overpayment requested on original return this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend legend a year year year year ------------------ ------- ------- ------- ------- amount a amount b amount c amount d amount e amount f amount g amount h ---------------- ----- ----------------- ----------------- ----------------- ----------------- ------------------- -------------- posts-121874-12 amount m --------------- ---------------- amount n amount p ---------------- amount q --------------- amount r --------------- ------------------------ -------------------------- ------------------------ ---------------------- date date date date issue whether taxpayer’s request to apply an overpayment to particular periods may be honored conclusion taxpayer’s request may be honored facts taxpayer a is the subject of a notice_of_proposed_deficiency dated date asserting adjustments to tax and sec_6662 penalties as follows year amount a c e g penalty b d f h taxpayer appears to have filed a protest and the years appear to be pending in appeals the amounts of the proposed deficiencies have not been assessed in taxpayer filed it sec_2010 tax_return pursuant to an extension on date reporting it was due a refund of amount m in correspondence dated date and date and on it sec_2010 return filed on date taxpayer requested the service apply the overpayment as an advance_payment of the year and year proposed deficiencies and requested the service_credit the payment as of date the due_date of it sec_2010 return the service declined to honor this request and the funds were returned to the taxpayer taxpayer subsequently returned the funds to the service and repeated its request that the refund be applied as an advance_payment of the year and year proposed deficiencies with a credit date of date posts-121874-12 taxpayer continues to request that amount m be allocated among the year and year tax and interest liabilities as follows it requests we apply amount n million to the tax and amount p to the interest for year it further requests we apply amount q to the tax and amount r to the interest for year applying these amounts as requested would not discharge either of the proposed liabilities for year sec_2 or law and analysis sec_6402 provides that the service may credit overpayments against any liability the taxpayer has for an internal revenue tax the authority is not limited to credits against assessed liabilities the service has taken the position that it will make such credits in situations where the amount of the unassessed liability has been determined with specificity such as by a notice_of_deficiency or a proof_of_claim in bankruptcy revrul_2007_51 2007_2_cb_573 revrul_2007_52 2007_2_cb_575 here the taxpayer’s request that the overpayment amounts be treated as advance_payments against tax_liabilities for year sec_2 and provides sufficient specificity for the service to make the requested credits even prior to the enactment of sec_6603 service practice permitted taxpayers to make an advance_payment of a proposed deficiency reg sec_301_6213-1 provides in pertinent part that if any payment is made before the mailing of a notice_of_deficiency the director of the regional service_center is not prohibited by sec_6213 from assessing such amount and such amount may be assessed if such action is deemed to be proper language explicitly implementing this regulatory language appeared in revproc_63_11 1963_1_cb_497 and was carried forward into revproc_84_58 1984_2_cb_501 when revproc_2005_18 2005_1_cb_798 was promulgated it focused on the legislative changes made to the cash bond deposit procedure and neglected to mention that no changes were intended to the advance_payment procedures since the service_center had the discretion to apply the overpayment as requested by the taxpayer at the time the overpayment arose we recommend you now allocate the amounts as requested by the taxpayer as of the date of the overpayment date the service may assess the amounts of the advanced payments pursuant to sec_6213 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 please call if you have any further questions


internal_revenue_service number release date index numbers department of the treasury washington dc person to contact telephone number refer reply to cc corp plr-144749-02 date date legend distributing controlled subsidiary subsidiary subsidiary subsidiary subsidiary subsidiary subsidiary sub sub sub sub business a agency state x b dear this letter responds to your letter dated date in which rulings were requested as to the federal_income_tax consequences of a proposed transaction additional information was submitted in letters dated november november november november and date the information submitted for consideration is summarized below distributing is a closely held state x corporation and the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing is indirectly engaged in business x through subsidiary subsidiary subsidiary subsidiary subsidiary subsidiary and subsidiary collectively the active subsidiaries each of which is controlled by distributing subsidiary owns all the stock of sub subsidiary owns all the stock of sub subsidiary owns all the stock of sub and subsidiary owns all the stock of sub sub sub sub and sub collectively are referred to as the investment subsidiaries distributing has two classes of common_stock outstanding -- the class a shares which are voting shares for federal_income_tax purposes and the class b shares which are non-voting shares for federal_income_tax purposes at the time of the proposed distribution approximately b percent of distributing’s class a shares will be subject_to a shareholders agreement the distributing shareholders agreement upon termination of employment a party to the distributing shareholders agreement is required to sell all of his or her distributing class a shares to i his or her successor-in-function ii distributing or iii the remaining class a shareholders that are subject_to the distributing shareholders agreement all the parties to the distributing shareholders agreement will execute an agreement with respect to dispositions of the controlled class a shares described below that is the same as the distributing shareholders agreement in all material respects the controlled shareholders agreement financial information has been submitted indicating that each of the active subsidiaries has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years financial information including detailed growth projections has been submitted indicating that the proposed distribution will enable distributing to achieve significant cost savings by relieving distributing of an agency requirement that would be imposed absent the distribution therefore the following transaction has been proposed i distributing will contribute its controlling interests in subsidiary subsidiary and subsidiary to a newly formed corporation controlled solely in exchange for class a shares and class b shares of controlled the contribution the class a shares and class b shares of controlled will have rights identical to the rights of distributing’s class a shares and class b shares respectively and will equal the number of class a shares and class b shares of distributing respectively that are outstanding immediately before the distribution ii immediately following the contribution distributing will distribute all the stock of controlled pro_rata with respect to both the class a shares and the class b shares to its shareholders the distribution distributing and controlled generally will agree to indemnify each other for certain liabilities that include i any indebtedness incurred under a tax_sharing_agreement ii any indebtedness incurred under a tax_matters_agreement and iii any indebtedness that may arise in connection with transactions between distributing and controlled following the distribution the following representations have been made with respect to the proposed transaction a indebtedness owed by controlled to distributing after the distribution will not constitute stock_or_securities b no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing c immediately after the distribution at least percent of the fair_market_value of the gross assets of distributing will consist of stock and securities of controlled corporations specifically subsidiary subsidiary subsidiary and subsidiary that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 of the internal_revenue_code the code immediately after the distribution at least percent of the fair_market_value of the gross assets of controlled will consist of stock and securities of controlled corporations specifically subsidiary subsidiary and subsidiary that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 d e the fair_market_value of each of the active subsidiaries’ active businesses presently constitutes and will constitute at least five percent of the total fair_market_value of all of such corporation’s gross assets for purposes of this representation stock owned by any of the active subsidiaries in investment subsidiaries is treated as an inactive asset f the five years of financial information submitted on behalf of each of the active subsidiaries is representative of each corporation's present operations and with regard to each such corporation there has been no substantial operational changes since the date of the last financial statements submitted g following the distribution distributing and controlled will each continue the active_conduct of business x indirectly through the active subsidiaries independently and with its separate employees h the distribution is to be carried out for the following corporate business_purpose cost savings the distribution is motivated in whole or substantial part by this corporate business_purpose i there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in either distributing or controlled after the distribution also any shareholder that is required to dispose_of all of its class a shares of distributing pursuant to the distributing shareholders agreement will be required to simultaneously dispose_of all of its class a shares of controlled pursuant to the controlled shareholders agreement similarly any shareholder that is required to dispose_of all of its class a shares of controlled pursuant to the controlled shareholders agreement will be required to simultaneously dispose_of all of its class a shares of distributing pursuant to the distributing shareholders agreement j there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 k there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business l except for any potential liabilities assumed in connection with the tax_sharing_agreement or the tax_matters_agreement controlled will not assume any liabilities or take any assets subject_to liabilities in the contribution m distributing has neither accumulated its receivables nor made any extraordinary payment of its payables in anticipation of the distribution n no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution other than i any indebtedness incurred under a tax_sharing_agreement ii any indebtedness incurred under a tax_matters_agreement and iii any indebtedness that may arise in connection with transactions between distributing and controlled following the distribution o transaction no indebtedness has been or will be cancelled in connection with the p immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations furthermore distributing's excess_loss_account if any with respect to the stock of controlled subsidiary subsidiary and subsidiary will be included in income immediately before the distribution q payments made in connection with all continuing transactions if any between distributing controlled and their affiliates will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length r no two parties to the transaction are investment companies as defined in sec_368 and iv s the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled based solely on the facts submitted and the representations made above it is held as follows the contribution and the distribution will collectively qualify as a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss upon the transfer of assets to controlled in exchange for controlled stock and any assumption_of_liabilities sec_361 and sec_357 controlled will recognize no gain_or_loss on the receipt of assets in exchange for controlled stock and any assumption_of_liabilities sec_1032 controlled's basis in each asset received from distributing will be equal to the basis of such asset in the hands of distributing immediately prior to the transfer of assets to controlled sec_362 controlled's holding_period for each asset received from distributing will include the period during which distributing held such asset sec_1223 distributing will recognize no gain_or_loss upon the distribution of controlled to the distributing shareholders sec_361 and sec_355 distributing shareholders will recognize no gain_or_loss and no amount will be included in the income of the distributing shareholders upon receipt of the controlled stock sec_355 the aggregate basis of the distributing stock and the controlled stock held by each distributing shareholder will equal the aggregate basis of such shareholder's distributing stock immediately before the distribution allocated between the distributing stock and the controlled stock in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 b and c the holding_period of the controlled stock received by distributing's shareholders will include the holding_period of the distributing stock with respect to which the distribution is made provided that such distributing stock is held as a capital_asset on the date of the distribution sec_1223 proper allocation of earnings_and_profits between distributing and controlled will be made in accordance with sec_1 a and e payments made by distributing to controlled or its subsidiaries or by controlled or its subsidiaries to distributing under the tax_sharing_agreement and tax_matters_agreement i that have arisen or will arise for a taxable_period beginning on or before and ending after the distribution and ii that will not become fixed and ascertainable until after the distribution will be treated as occurring immediately before the distribution no opinion is expressed about the tax treatment of the transaction under other provisions of the code and income_tax regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated the rulings contained in this letter are predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of the audit process pursuant to the power_of_attorney on file in this office a copy is being sent to your representatives sincerely by michael j wilder senior technician reviewer branch associate chief_counsel corporate


t c summary opinion united_states tax_court alfred welles sumner petitioner v commissioner of internal revenue respondent docket no 12150-07s filed date alfred welles sumner pro_se robert w mopsick for respondent thornton 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 all subsequent section references are to the internal_revenue_code as amended this opinion shall not be treated as precedent for any other case petitioner commenced this action in response to a notice_of_determination concerning collection action s under sec_6320 and or the notice_of_determination relating to petitioner’s federal income taxes for and petitioner contends primarily that respondent erred in refusing to credit his dollar_figure overpayment from against these outstanding tax_liabilities respondent contends that the dollar_figure overpayment is not available for credit against these outstanding tax_liabilities because it is barred by the refund period of limitations under sec_6511 background the parties have stipulated some facts which are so found when he petitioned the court petitioner resided in new jersey petitioner is an attorney petitioner’s overpayment for petitioner made tax_payments totaling dollar_figure this amount comprised a dollar_figure overpayment from petitioner’s tax_return on which he requested that the overpayment be applied to his estimated_tax a dollar_figure estimated_tax petitioner’s federal_income_tax return actually reported a dollar_figure overpayment but respondent applied dollar_figure of this amount to cover petitioner’s outstanding tax_liability discrepancies due to rounding payment that petitioner made on date and dollar_figure of wage withholding respondent’s records indicate that petitioner never filed a tax_return after an investigation respondent’s revenue_officer closed out the matter noting that no return had been secured but concluding that there would have been little or no tax due for on date respondent transferred dollar_figure of petitioner’s overpayment to an excess collections account petitioner’s return on date petitioner filed his return showing a dollar_figure underpayment after applying available credits from and respondent determined petitioner’s outstanding liability to be dollar_figure petitioner’ sec_2002 liability petitioner filed no tax_return for in a statutory_notice_of_deficiency issued date respondent determined a dollar_figure deficiency on date respondent assessed this deficiency plus penalties petitioner subsequently paid dollar_figure toward hi sec_2002 liability the record does not reflect respondent’s treatment of the dollar_figure wage withholding that makes up part of petitioner’s dollar_figure overpayment for petitioner’s tax_return on date petitioner filed his return showing a dollar_figure underpayment collection proceedings respondent sent petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 dated date for income taxes owed for tax years and petitioner timely filed a form request for a collection_due_process_hearing in an attachment to the form petitioner asserted that respondent had failed to credit me with all tax_payments actually made if the service were to credit me with those payments it would find that the amounts claimed to be owed on the service’s notice_of_federal_tax_lien filing are in fact not owed on the form petitioner requested that the internal_revenue_service irs contact me only in writing by letter dated date respondent advised petitioner that since he had requested that all contacts be in writing his conference would be held through correspondence the appeals settlement officer indicated however that if petitioner preferred he could have a face-to-face meeting the appeals settlement officer requested petitioner to respond in days to set up a date and location for the hearing the appeals settlement officer also noted that the form failed to specify which payments petitioner believed should have been credited to him the appeals settlement officer requested petitioner to describe the years and amounts of these payments and to provide verification of them along with other information the appeals settlement officer also indicated that before collection alternatives could be considered petitioner would need to make estimated_tax payments for file his and returns and submit a completed form 433-a collection information statement for wage earners and self-employed individuals petitioner never responded to the appeals settlement officer and never requested a face-to-face hearing in the notice_of_determination dated date respondent’s appeals_office sustained the filing of the notice of tax_lien the notice_of_determination concluded that the irs had met the requirements of all applicable laws that the appeals settlement officer assigned to the case had no prior involvement with petitioner’s case and that petitioner had failed to present any information that would warrant relief discussion the parties agree that petitioner overpaid his federal_income_tax and that if the overpayment were credited against his and liabilities which are the subject of the notice of filing of tax_lien those liabilities would be satisfied respondent contends however that application of the overpayment is barred by sec_6511 for the reasons described below we agree under sec_6511 a claim for credit or refund of overpayments ordinarily must be filed within years from the time the return was filed or years from the time the tax was paid whichever is later even if the claim is timely filed sec_6511 limits the amount recoverable by reference to two so-called lookback periods if the taxpayer files the claim within years of filing a return the credit or refund is generally limited to the amount_paid during the years immediately before the claim was filed and if the claim is not filed within years of filing a return the credit or refund is generally limited to the amount_paid during the years immediately before the claim was filed see 516_us_235 in applying these limitations to petitioner’s claim for credit of his overpayment the threshold inquiry is whether petitioner ever filed his return respondent’s records indicate that he did not the only evidence that petitioner has offered as to the filing of his return is his testimony that in late spring he hand-delivered his and tax returns to respondent’s mountainside new jersey office credible testimony by respondent’s revenue_officer however explicating respondent’s records persuades us that it was actually petitioner’s and tax returns rather than his and returns that he delivered to respondent’s office in late spring although we do not question petitioner’s good_faith or motives petitioner himself acknowledged at trial that the events in question were a long time ago and that it was possible he misremembered them on a preponderance_of_the_evidence we conclude that petitioner never filed his return under sec_6511 then the relevant period for petitioner to have filed his claim_for_refund_or_credit of his overpayment wa sec_2 years from the date he paid the tax petitioner is deemed to have made the payments making up the overpayment on date the record does not suggest that petitioner filed a claim for credit or refund of his overpayment within years of date accordingly as previously indicated the overpayment included a dollar_figure overpayment from petitioner’s tax_return which he requested to be applied to his estimated_tax consequently this amount was applied as a payment on account for petitioner’s estimated_tax for see sec_6402 sec_301_6402-3 proced admin regs and was deemed to have been paid on date see sec_6513 similarly the other components of petitioner’s overpayment ie the dollar_figure estimated_tax payment and the dollar_figure of wage withholdings are deemed to have been paid on date see sec_6513 and petitioner suggests that even if he never filed a return he should be deemed to have made a claim for credit or refund of his overpayment by virtue of filing his return the problem for petitioner is that he was given credit for his overpayment in the manner he requested except for continued refund_or_credit of petitioner’s overpayment is barred by the limitations_period under sec_6511 petitioner claims that he was improperly denied a face-to- face hearing petitioner admits however that he never requested a face-to-face hearing and never responded to respondent’s date letter offering him one petitioner claims that he declined to respond to this offer because he was convinced it was not going to be a fair proceeding in particular petitioner complains that before communicating with him the appeals settlement officer had received and reviewed his administrative file ex_parte the transmission of the administrative file however is not considered an ex_parte_communication revproc_2000_43 sec_3 q a-4 2000_2_cb_404 petitioner does not allege and the record does not suggest that the transmission of the administrative record to the appeals settlement officer was accompanied by any cover letter or other communication that would even appear to compromise her independence cf indus investors v commissioner tcmemo_2007_93 similarly petitioner contends that respondent’s date letter improperly set preconditions on any hearing by continued the dollar_figure applied to his outstanding liability see supra note by applying it to his estimated_tax thus contributing to his overpayment for which as just discussed he failed to make a timely claim for credit or refund insisting that petitioner make estimated_tax payments for file his and returns and submit a completed collection information statement petitioner’s contention is without merit the appeals settlement officer did not abuse her discretion in advising petitioner of the eligibility requirements for considering collection alternatives and in giving him the opportunity to demonstrate his eligibility in his petition petitioner requests additional relief in the form of an accounting from respondent of payments made a letter of apology from respondent or a new hearing in the light of the foregoing discussion these claims are moot or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number -------------------------- ------------------------------------------- -------------------------------- in re -------------------------- department of the treasury washington dc person to contact -----------------------id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-131768-02 date november legend legend settlor wife daughter daughter son stepdaughter son-in-law son-in-law son-in-law date date date date date date county court a b c d company trust judgment order modification state law ---------------------------------------------------- ------------------------------------------------------------- ----------------------- -------------------------------- ------------------------------ ------------------ -------------- ------------------------ -------------------- ------------------- --------------------- -------------------------- --------------------- -------------------------- ---------------------- --------------------------------------------------- --------- -------------- --------- ----------- ---------------------- ------------------------------------------------------ -------------------------------------------------------------- ------- -------------------------------------------------------------- ----------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------- -------------------------------------------------- plr-131768-02 dear ------------------- requesting a ruling concerning the federal income gift and estate_tax consequences of the creation of a_trust this is in response to your date letter and other correspondence you have requested the following rulings the funding of trust pursuant to the judgment qualifies for nonrecognition of gain pursuant to either sec_1001 or sec_1041 of the internal_revenue_code the modification will not cause recognition of gain_or_loss on the transfer to trust pursuant to either sec_1001 or sec_1041 sec_682 governs the income_taxation of trust the funding of trust pursuant to the judgment to the extent of the annuity interest of wife will constitute a transfer for full and adequate_consideration under sec_2516 and the only gift will be the gift of trust remainder to settlor’s children no portion of trust will be included in the gross_estate of settlor under sec_2036 sec_2038 sec_2039 and sec_2041 if trust is created settlor will not have a retained_interest for purposes of sec_2702 no portion of trust will be included in the estate of settlor if he is the trustee of trust under sec_2036 sec_2038 sec_2039 and sec_2041 no portion of trust will be included in the gross_estate of wife under sec_2036 sec_2038 sec_2039 and sec_2041 the facts submitted are as follows on date settlor and wife were married due to irreconcilable differences settlor and wife separated on date on date settlor and wife dissolved their marriage and entered into a judgment of dissolution judgment in county court to settle and determine all existing personal and property rights of settlor and wife with respect to each other plr-131768-02 the judgment provides in part that settlor will pay wife dollar_figurea per month in the form of spousal support until the death of wife upon the occurrence of a triggering event including the sale of company settlor shall either purchase an annuity_contract or establish a_trust for the benefit of wife in the event that settlor elects to establish an irrevocable_trust settlor shall deposit into such trust sufficient funds to generate sufficient income for the payment of spousal support payments to wife for the remainder of her life the trustee of the trust shall thereafter make the monthly payments to wife in satisfaction of settlor’s spousal support obligations under the judgment in the event trust funds are insufficient to generate sufficient income to pay wife the required spousal support the principal of the trust shall be invaded to make up the difference after date settlor began paying dollar_figurea per month in spousal support to wife on date company was sold settlor and wife’s representatives met to discuss changes required by the judgment as a result of company’s sale ultimately it was determined that trust would be created and funded with dollar_figureb in municipal_bonds before funding the trust settlor and wife requested this ruling in the interim on date county court issued an order that settlor will pay wife dollar_figurec per month on a non-taxable basis instead of dollar_figurea per month on a taxable basis in the form of spousal support until settlor establishes a_trust for the benefit of wife non-taxable basis was defined to mean not taxable to wife and not deductible to settlor for federal tax purposes modification the modification provides that upon the issuance of this private_letter_ruling settlor shall cause trust to pay wife dollar_figurec per month on a non-taxable basis until her death upon acknowledgment by trust of the instruction to pay dollar_figurec per month to wife on a non-taxable basis until her death and its agreement to do so and upon acknowledgment of the full funding of trust as provided therein settlor shall be relieved of all further personal liability for the payment of spousal support to wife upon acknowledgment by trust of the instruction to pay dollar_figurec per month to wife on a non-taxable basis until her death and its agreement to do so all orders in any other document pertaining to settlor’s obligation to pay spousal support to wife and or his obligation to provide security for the payment of spousal support to wife shall immediately terminate wife executed the stipulation consenting to be bound by the terms of the modification of trust agreement provides that the purpose of trust is to satisfy settlor’s spousal support obligations to wife and to provide a distribution of the remainder to settlor’s children on the death of wife municipal_bonds which are presently in the form of the municipal_bond portfolio notwithstanding any other provision of trust settlor shall not have a any right to the settlor proposes to fund trust pursuant to the terms of modification sec_1 sec_1 provides in part that the principal of trust shall consist solely of on date the order was modified by county court in a stipulated order sec_3_1 provides that trust is irrevocable sec_3_2 provides that plr-131768-02 possession or enjoyment of the principal or income of the trust estate or any right either alone or in conjunction with any other person to designate the persons who will possess or enjoy the principal or income of the trust estate b any right to vote directly or indirectly any shares of stock of a controlled_corporation that may be part of the trust estate c any power or direction in any capacity either alone or in conjunction with any other person to alter amend revoke or terminate the enjoyment of the trust estate d any power that is exercisable in favor of settlor settlor’s estate settlor’s creditors or the creditors of settlor’s estate or any other power that would constitute a general_power_of_appointment e any incidents_of_ownership in any insurance_policy that is part of the trust estate f any power or discretion that would cause the trust estate or any part of the trust estate to be included in the gross_estate of settlor and g any power or discretion that would cause the trust estate or any part of the trust estate to be included in the gross_estate of wife sec_4 provides that until the death of wife the trustee shall pay to or apply for the benefit of wife for each taxable_year of the trust an annuity amount equal to dollar_figured any income of the trust for a taxable_year in excess of the annuity amount shall be added to principal payment of the annuity amount shall not be made by the issuance of a note other debt_instrument option or similar financial arrangement however it shall be acceptable for the payment of the annuity to be made by an in_kind payment in the form of municipal_bonds or other assets in the event is wise to no longer use municipal_bonds because of for example changes in the tax law although this is a very unlikely event in the event any such payment in_kind is made the bonds or other assets distributed to wife must be immediately saleable by her for the value established by the trustee on an established_securities_market the trustee shall make no distribution to any beneficiary other than wife during her life sec_4 provides that the trustee shall pay the annuity amount in monthly installments on the first day of each month sec_4 provides that commutation of wife’s interest is prohibited sec_4 provides in part that settlor intends that the trust be treated as a grantor_trust for income_tax purposes settlor without consent of any fiduciary of this trust shall have the power at any time to reacquire the trust corpus by substituting other_property of an equivalent value provided however that this power shall not apply to the right to reacquire or acquire any insurance_policy on the life of settlor the power is exercisable by settlor solely in a nonfiduciary capacity and no fiduciary duty imposed upon the trustee or any other person may be asserted as a defense to the exercise of the power on the death of wife in the event settlor is still alive the grantor_trust status shall apply to the entire trust on the death of settlor the grantor_trust status shall terminate trust property into as many shares of equal value as are necessary to create one share for each child of settlor who is then living and one share for each child of settlor who is not then living but leaves issue then living each share created for such child who is sec_4 provides that upon the death of wife the trustee shall divide the plr-131768-02 then living other than son shall be distributed outright to that child the share created for son if he is then living shall be held administered and distributed in a separate trust for son as set forth in sec_4 each share created for such child who is not then living but who leaves issue then living will be divided among that child’s issue in the manner provided by state law sec_5 provides that if stepdaughter dies becomes incapacitated or is sec_4 provides that the share of the trust estate that is allocated to the trust for son shall be held administered and distributed by the trustee as a separate trust the trustee shall pay to or apply for the benefit of son all of the net_income of the trust in monthly or other convenient installments but not less often than annually for the term of the trust the trustee shall not pay any principal of the trust to son the trust shall terminate on the death of son upon the death of son the trustee shall allocate the remaining trust property to the then-living grandchildren of settlor in equal shares otherwise unable or unwilling to act as cotrustee with settlor then the following persons in the order indicated shall act as cotrustee with settlor a daughter b daughter c son-in-law husband of stepdaughter d son-in-law husband of daughter and e son-in-law husband of daughter if settlor dies becomes incapacitated or is otherwise unable or unwilling to act as cotrustee with stepdaughter or any successor to her as provided above there shall be three cotrustees who shall be stepdaughter daughter and daughter in the event any or all of the foregoing persons die become incapacitated or are otherwise unable or unwilling to act as cotrustee then the successor cotrustee shall be son-in-law and if necessary son-in-law and if necessary son-in-law such that there shall always be three cotrustees when settlor is no longer acting as a cotrustee lifetime of wife since the only principal of the trust is expected to be the municipal_bond portfolio only those provisions that have meaning in connection with the municipal_bond portfolio shall govern and all other provisions shall have no meaning during her lifetime unless circumstances change as described in sec_4 above after the death of wife the following powers shall apply sec_5 provides that the powers of the trustee shall be limited during the a with or without court authorization the right to sell convey exchange partition and divide trust property grant options for the sale_or_exchange of trust property for any purpose whether the contract is to be performed or the option is to be exercised within or beyond the term of the trust and lease trust property for any purpose h with respect to securities held in trust exercise all the rights powers and privileges of an owner including but not limited to the power to vote give proxies and pay assessments and other sums deemed by the trustee necessary for the protection of the trust property participate in voting trusts pooling agreements foreclosures reorganizations consolidations mergers and liquidations and in connection therewith deposit securities with and transfer title plr-131768-02 to any protective or other committee under such terms as the trustee deems advisable exercise or sell stock subscription or conversion rights and accept and retain as investments of the trust any securities or other_property received through the exercise of any of the foregoing powers i hold securities or other trust property in the trustee’s own name or in the name of a nominee without disclosure of the trust or in unregistered form so that title may pass by delivery sec_5 provides that during the lifetime of wife the bonds in the municipal section dollar_figure provides that notwithstanding any other provision of the instrument bond portfolio shall be the only assets of the trust unless circumstances change as described in sec_4 above the municipal_bond portfolio may be modified from time to time as necessary but shall at all times be invested in investment grade tax-free municipal_bonds rated by standard poor as bbb- or higher or by moody as baa or higher the powers of the trustee shall be subject_to the following limitations a the trustee shall have no power or discretion with respect to any life_insurance_policy on the life of the trustee that constitutes an incident_of_ownership in that policy b except with regard to the obligation discussed at the beginning of sec_1 hereof the trustee shall have no power or discretion with respect to the distribution of income or principal to or for the trustee’s benefit or in satisfaction of the trustee’s legal obligations c if the trustee would but for this provision have had any power or discretion described in a or b above that power or discretion shall be exercised by the cotrustee if any and if there is no cotrustee by the next-named successor trustee acting as special cotrustee law and analysis ruling sec_1 and sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided sec_1041 provides that no gain_or_loss shall be recognized on a transfer of property from an individual to or in trust for the benefit of a former spouse but only if the transfer is incident to the divorce sec_1041 provides that the transferred property described in sec_1041 shall be treated as acquired by the transferee by gift and the basis of the transferee in the property shall be the adjusted_basis of the transferor alternatively if trust is not treated as a grantor_trust settlor will be considered to in this case settlor proposes to transfer funds to trust pursuant to the plr-131768-02 sec_1041 provides in part that a transfer of property is incident to a divorce if such transfer is related to the cessation of the marriage under sec_1_1041-1t q a-7 of the income_tax regulations a transfer of property is treated as related to the cessation of the marriage if the transfer is pursuant to a divorce_or_separation_instrument and the transfer occurs not more than years after the date on which the marriage ceases a divorce_or_separation_instrument includes a modification or amendment to such decree or instrument modification in the event trust is treated as a grantor_trust settlor is treated as the owner of the trust therefore settlor will not be considered to have made a transfer of property for federal_income_tax purposes and there is no sec_1041 issue to consider thus if trust is a grantor_trust no gain_or_loss would be realized by husband under sec_1001 have made a transfer of property but no gain_or_loss would be recognized by settlor under sec_1001 to the extent that settlor’s proposed transfer of assets to the trust is for the benefit of wife any realized gain on the transfer would not be recognized under sec_1041 to the extent that settlor’s transfer of assets to the trust is considered as a gift to settlor’s children no gain_or_loss would be recognized transfer of property to trust for wife’s benefit is a transfer that is incident to the divorce within the meaning of sec_1041 and sec_1_1041-1t q a-7 the transfer is pursuant to a divorce_or_separation_instrument and occurs not more than years after the date on which the marriage ceased thus no gain_or_loss is recognized on such transfer ruling sec_71 provides for the income_tax treatment for alimony and separate_maintenance payments generally gross_income includes amounts received as alimony or separate_maintenance payments as a deduction an amount equal to the alimony or separate_maintenance payments paid during such individual’s taxable_year sec_671 provides in general that if the grantor of a_trust or another person is treated as the owner of any portion of the trust that person's taxable_income and credits shall include the income deductions and credits of the trust attributable to that portion of the trust to the extent that such items would be considered in computing the taxable_income or credits of an individual sec_673 through specify the circumstances sec_215 provides that in the case of an individual there shall be allowed the transfer of property will be made pursuant to the modification settlor’s sec_675 provides that the grantor shall be treated as the owner of any sec_682 provides that there shall be included in the gross_income of a wife sec_682 provides that for purposes of computing the taxable_income of the plr-131768-02 under which the grantor or another person will be regarded as the owner of a portion of a_trust portion of a_trust in respect of which a power_of_administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity the term power_of_administration includes a power to reacquire the trust corpus by substituting other_property of an equivalent value who is divorced or legally_separated under a decree of divorce or of separate_maintenance or who is separated from her husband under a written_separation_agreement the amount of the income of any trust which such wife is entitled to receive and which except for this section would be includible in the gross_income of her husband and such amount shall not despite any other provision of subtitle a of the code be includible in the gross_income of such husband estate_or_trust and the taxable_income of a wife to whom sec_682 applies such wife shall be considered as the beneficiary specified in part i of subchapter_j of chapter of the code if the husband and wife therein referred to are divorced wherever appropriate to the meaning of such sections the term wife shall be read former wife and the term husband shall be read former husband and if the payments described in such sections are made by or on behalf of the wife or former wife to the husband or former husband instead of vice versa wherever appropriate to the meaning of such sections the term husband shall be read wife and the term wife shall be read husband not exercisable by a person as trustee the determination of whether the power is exercisable in a fiduciary or a nonfiduciary capacity depends on all the terms of the trust and the circumstances surrounding its creation and administration trusts formed in contemplation of divorce such as the one at issue here however in the tax_reform_act_of_1984 p l congress amended sec_71 and sec_682 the legislative_history shows that the changes were intended to have sec_682 apply to grantor trusts in the case of divorce regardless of whether they were formed in contemplation of the divorce prior to the sec_682 regulations provided that sec_71 would govern sec_7701 provides that as used in sec_152 sec_682 and sec_2516 sec_1_675-1 of the income_tax regulations provides that if a power is where an annuity is transferred or a beneficial_interest in a_trust is transferred or created incident_to_divorce_or_separation the transferee will be entitled to the usual annuity treatment including recovery_of the transferor’s investment in the contracts under plr-131768-02 sec_72 or the usual treatment as the beneficiary of a_trust by reason of sec_682 notwithstanding that the annuity payments or payments by the trust qualify as alimony or otherwise discharge a support obligation h_r rept no pt pincite trust to be established incident to settlor's divorce will be subject_to sec_682 and income from trust to which wife is entitled is includible in her gross_income and not in settlor’s gross_income for purposes of computing the taxable_income of trust and the taxable_income of wife she will be considered as the beneficiary of trust the circumstances surrounding trust’s administration will determine whether the power_of_administration is exercisable in a fiduciary or a nonfiduciary capacity this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination provided that the circumstances surrounding trust’s administration indicate that the power_of_administration held by settlor over trust ie the power to substitute assets for assets of equivalent value is exercisable by settlor in a nonfiduciary capacity without the approval or consent of a person in a fiduciary capacity settlor will be treated as the owner of trust we further conclude that while both settlor and wife are alive sec_682 governs the income_taxation of trust accordingly distributions from trust to wife are deductible by trust and includible by wife in her gross_income to the extent provided in sec_661 and sec_662 under the terms of trust capital_gains are not includible in the distributions to wife accordingly capital_gains are not included in the distributions to wife and are included in the gross_income of settlor under sec_675 subject_to the conditions noted above regarding sec_675 sec_682 would no longer apply and trust will be treated as a grantor_trust with settlor as owner provided that after the death of wife settlor retains the same powers of administration that cause trust to be a grantor_trust under sec_675 subject_to the conditions noted above regarding sec_675 if settlor predeceases wife sec_682 no longer applies and payments to wife will be deductible to trust under sec_661 and includible in wife’s gross_income under sec_662 income allocable to principal will be taxable to trust if neither settlor nor wife are alive then the income_taxation of trust is also governed by the rules of subchapter_j other than the grantor_trust_rules and sec_682 ruling property by gift during the year by an individual or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2511 provides that the gift_tax shall apply whether the transfer is in trust we further conclude that if wife predeceases settlor upon the death of wife sec_2501 imposes a gift_tax for each calendar_year on the transfer of sec_2516 provides that where husband and wife enter into a written sec_2512 provides that where property is transferred for less than an in this case settlor and wife entered into judgment relative to their marital and plr-131768-02 adequate_and_full_consideration in money_or_money's_worth the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift agreement relative to their marital and property rights and divorce occurs within the 3-year period beginning on the date year before such agreement is entered into whether or not such agreement is approved by the divorce decree any transfers of property or interests in property made pursuant to such agreement to either spouse in settlement of his or her marital or property rights or to provide a reasonable allowance for the support of issue of the marriage during minority shall be deemed to be transfers made for a full_and_adequate_consideration_in_money_or_money's_worth property rights on date the transfers by settlor to the trust are made pursuant to judgment the transfer to trust is in full satisfaction of settlor’s support obligation to wife accordingly based on the facts submitted and representations made we conclude that to the extent of the annuity interest of wife the transfer to trust will constitute a transfer for full and adequate_consideration under sec_2516 and the only taxable gift by settlor will be the gift of trust remainder to settlor’s children under sec_2511 ruling sec_5 and sec_2031 provides that the value of the gross_estate of the decedent shall be determined by including to the extent provided for in this part the value at the time of his death of all property real or personal tangible or intangible wherever situated all property to the extent of the interest therein of the decedent at the time of his death value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in a case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period that does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom right to designate the person or persons who shall possess or enjoy the transferred property or the income therefrom includes a reserved power to designate the person or sec_20_2036-1 of the estate_tax regulations provides that the phrase sec_2036 provides that the value of the gross_estate shall include the sec_2033 provides that the value of the gross_estate shall include the value of plr-131768-02 persons to receive the income from the transferred property during the decedent's life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death with respect to such a power it is immaterial i whether the power was exercisable alone or only in conjunction with another person or persons whether or not having an adverse_interest ii in what capacity the power was exercisable by the decedent or by another person or persons in conjunction with the decedent and iii whether the exercise of the power was subject_to a contingency beyond the decedent's control which did not occur before his death eg the death of another person during the decedent's lifetime the phrase however does not include a power over the transferred property itself which does not affect the enjoyment of the income received or earned during the decedent's life nor does the phrase apply to a power held solely by a person other than the decedent but for example if the decedent reserved the unrestricted power to remove or discharge a trustee at any time and appoint himself as trustee the decedent is considered as having the powers of the trustee sec_20_2036-1 provides that the term use possession right to the income or other enjoyment of the transferred property is considered to have been retained by or reserved to the decedent to the extent that the use possession right to the income or other enjoyment is to be applied toward the discharge of a legal_obligation of the decedent or otherwise for his pecuniary benefit sec_2038 provides that the value of the gross_estate includes the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in the case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of death to any change through the exercise of a power by the decedent to alter amend revoke or terminate the interest in the property or where the decedent relinquished such power within the three-year period ending on the date of the decedent's death annuity_payment or other payment receivable by any beneficiary by reason of surviving the decedent under any form of contract or agreement entered into after date other than as insurance under policies of the life of the decedent if under such contract or agreement an annuity_or_other_payment was payable to the decedent or the decedent possessed the right to receive such annuity or payment either alone or in conjunction with another for his or her life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death value of all property to the extent of any 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 such property would be includible in the decedent's sec_2041 provides that the value of the gross_estate shall include the sec_2039 provides that the gross_estate shall include the value of an furthermore sec_3_2 of trust prevents settlor from having any right to the in the instant case settlor’s proposed transfer of property to trust satisfied his moreover wife will receive an annuity amount of dollar_figured per year upon wife’s plr-131768-02 gross_estate under sec_2035 to inclusive for purposes of sec_2041 the power_of_appointment shall be 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 spousal support obligation settlor will not continue to have any legal_obligation to support wife accordingly based on the facts submitted and representations made we conclude that no portion of trust will be included in the estate of settlor possession or enjoyment of the principal or income of trust estate or any right to designate the persons who will possess or enjoy the principal or income of trust estate as trustee of trust settlor would merely control the investments of the trust assets in a fiduciary capacity accordingly based on the facts submitted and representations made we conclude that no portion of trust will be included in the estate of settlor if he serves as trustee of trust death her interest in trust will terminate wife will have no interest that she can transmit to others upon her death accordingly based on the facts submitted and representations made we conclude that no portion of trust will be included in the gross_estate of wife ruling whether a transfer in trust to or for the benefit of a member_of_the_transferor's_family is a gift and the value of such transfer the value of any interest in such trust retained by the transferor or by any applicable member_of_the_transferor's_family as defined in sec_2701 shall be determined as provided in paragraph a qualified_interest shall be treated as zero qualified_interest shall be determined under sec_7520 which consists of the right to receive fixed amounts payable not less frequently than annually sec_2702 provides in general that solely for purposes of determining sec_2702 provides that the value of any retained_interest which is not sec_2702 provides that the term qualified_interest means any interest sec_2702 provides that the value of any retained_interest which is a sec_2702 provides that the term qualified_interest means any except as expressly provided herein no opinion is expressed or implied sec_2701 provides that the term applicable_family_member means in accordance with the power_of_attorney on file with this office a copy of this plr-131768-02 noncontingent remainder_interest if all of the other interests in the trust consist of interests described in paragraph or with respect to any transferor - a the transferor’s spouse b an ancestor of the transferor or the transferor’s spouse and c the spouse of any such ancestor in the instant case settlor has not retained any interest in trust wife will have the right to annuity payments from the income and principal of trust and the remainder will pass to settlor’s children accordingly sec_2702 does not apply to this transaction letter is being sent to your authorized representative concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 provides that it may not be used or cited as precedent enclosure copy of letter for sec_6110 purposes _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries this ruling is directed only to the taxpayer s requesting it sec_6110 the rulings contained in this letter are based upon information and sincerely


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-127203-01 date date x a d1 year dear this responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in d1 of year a the president of x represents that x was intended to be an s_corporation from its inception this intent is evidenced by the corporate minutes of x which include a resolution that x would elect under sec_1362 however a form_2553 election by a small_business_corporation was not timely filed for x for its year taxable_year sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 plr-127203-01 -2- 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 shannon cohen assistant to the branch chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes