internal_revenue_service number release date index number ------------------------ -------------------------- --------------------------------------------- ty ------- ty ------- legend 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 ita b02 plr-105684-11 date date taxpayer year year date date date certified public accountants certified_public_accountant a b c d ------------------------------------------ ------- ------- -------------------------- ----------------------- ------------------- ------------------------------------------------------------------------ -------------------- ------------------------------ --------- --------- --------- --------- dear -------------- this is in response to your letter dated date in the letter you request an extension of time to file an election on form_4952 investment_interest expense deduction pursuant to sec_163 of the internal_revenue_code to treat qualified dividends and net capital_gains as investment_income for the year taxable_year the request is made in accordance with sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts taxpayer is an individual and uses the cash_method_of_accounting as his overall_method_of_accounting taxpayer has a taxable_year ending date plr-105684-11 taxpayer filed his original form_1040 for the taxable_year ending date on or about date taxpayer amended the year form_1040 for reasons unrelated to this request on the original and amended year form sec_1040 taxpayer reported net capital_gains of dollar_figurea and qualified dividends of dollar_figureb in year taxpayer incurred investment_interest expense of dollar_figurec and carried over investment_interest expense of dollar_figured to year from prior years taxpayer did not make an election under sec_163 to treat qualified dividends as investment_income taxpayer engaged and relied upon the accounting firm of certified public accountants to prepare his year form_1040 during the course of the preparation the certified public accountants did not inform taxpayer that an election under sec_163 was available and taxpayer was unaware such an election existed in preparing taxpayer’s year form_1040 certified_public_accountant a member of the certified public accountants noticed that taxpayer incurred significant capital_gains and that taxpayer had significant interest_expense carryovers in looking at returns for prior years certified_public_accountant realized that there was also a significant capital_gain on the year return and that due to the certified public accountants’ oversight the certified public accountants had not advised taxpayer to make the election under sec_163 upon discovering that the election had not been made for the year taxable_year certified_public_accountant advised taxpayer to submit a letter_ruling requesting permission to file a late election law and analysis sec_163 provides that in the case of a taxpayer other than a corporation the amount allowed as a deduction for investment_interest for any taxable_year shall not exceed the net_investment_income of the taxpayer for the taxable_year sec_163 provides in part that investment_income means the sum of -- i gross_income from property_held_for_investment other than any gain taken into account under clause ii i ii the excess if any of -- i the net gain attributable to the disposition of property_held_for_investment over ii the net_capital_gain determined solely by taking into account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii ii or if lesser the net gain referred to in clause ii i as the taxpayer elects to take into account under this clause the term investment_income shall include qualified_dividend_income as defined in sec_1 only to the extent the taxpayer elects to treat such income as investment_income for purposes of this subsection plr-105684-11 sec_1_163_d_-1 of the income_tax regulations provides that the election for qualified_dividend_income must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the qualified_dividend_income is received sec_301_9100-1 of the procedure and administration regulations provides that the commissioner of internal revenue in exercising his discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i the term regulatory election is defined in sec_301_9100-1 as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government under sec_301_9100-3 except as provided in sec_301_9100-3 i through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requested relief under this section before the failure to make the regulatory election was discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the internal_revenue_service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election paragraphs b i through iii of sec_301_9100-3 provide that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the due_date for making the election that make the election advantageous to a plr-105684-11 taxpayer the service will not ordinarily grant relief in such a case the service will grant relief only when the taxpayer provides strong_proof that the taxpayer's decision to seek relief did not involve hindsight sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion taxpayer’s election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in the regulations under sec_1 d - b in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied the information and representations made by taxpayer establish that he acted reasonably and in good_faith the affidavits presented show that taxpayer reasonably relied on qualified_tax professionals for the filing of taxpayer’s return however the tax professionals failed to make or advise taxpayer to make the election the affidavits presented show that taxpayer was unaware of the necessity for the election and upon discovery of the error by certified_public_accountant promptly requested relief the information and representations presented establish that taxpayer is not seeking to alter a return position for which an accuracy-related_penalty had been or could be imposed under sec_6662 at the time relief was requested taxpayer was not informed in all material respects of the required election and its related tax consequences furthermore taxpayer is not using hindsight in requesting relief and no facts have changed since the time of the original filing deadline finally granting an extension will not prejudice the interests of the government it is represented that taxpayer will not have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election in the appropriate amount at this time than taxpayer would have had if the election were made in the appropriate amount by the original deadline for making the election taxpayer has represented that the granting of an extension will only affect the timing of when he will incur the tax_liability moreover the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected by the election had it been timely made are not closed by the period of limitations on assessment accordingly taxpayer is granted an extension of time of days from the date of this letter to make the election to treat qualified dividends and net capital_gains as investment_income for the year taxable_year the election should be made by filing a form_4952 and by including a copy of this ruling with an amended_return for the year plr-105684-11 taxable_year alternatively a taxpayer filing returns electronically may satisfy this requirement by attaching a statement to the return that provides the date and control number of the letter_ruling this ruling is conditioned upon taxpayer filing an amended_return for the year taxable_year to remove any investment_interest expense deduction that is reported on his amended year form 1040x in accordance with this letter_ruling and making any adjustments necessary to properly reflect the reporting of the investment_interest expense any such amended year form_1040 must be filed within days of the date of this letter a copy of this letter should be attached to the return if taxpayer fails to treat the interest_expense as described above this letter_ruling shall be null and void except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent 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 sincerely _______________________________ norma c rotunno senior technician reviewer branch office of the associate chief_counsel income_tax accounting ----------------------------------------- -------------------------------------------


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-164034-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities ----------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business ceased to be an employer under the railroad retirement act and the railroad unemployment insurance act effective ----------------------- ------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------------- ---------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that ------------------------------------ceased to be an employer under the railroad_retirement_tax_act effective ----------------------- please take the appropriate action regarding this business cc _____________________________ janine cook


t c summary opinion united_states tax_court david o alegria petitioner v commissioner of internal revenue respondent docket no 8620-04s filed date david o alegria pro_se douglas s polsky for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed the decision to unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure all monetary amounts are rounded to the nearest dollar be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency in petitioner’s federal_income_tax for the taxable_year of dollar_figure and an accuracy- related penalty under sec_6662 of dollar_figure the issues for decision are whether petitioner received unreported discharge_of_indebtedness income of dollar_figure in taxable_year we hold that he did whether petitioner is liable under sec_6662 for an accuracy-related_penalty we hold that he is not adjustments to the amount of petitioner’s itemized_deductions child_tax_credit and alternative_minimum_tax are purely computational matters the resolution of which is dependent on our disposition of the first disputed issue background some of the facts have been stipulated and they are so found we incorporate by reference the parties’ stipulation of facts and accompanying exhibits at the time that the petition was filed petitioner resided in topeka kansas in petitioner obtained a credit card from mbna america bank mbna which he used on occasion over the next years in petitioner sold his home in topeka kansas in date petitioner purchased a new home between the time that petitioner sold his former home and moved into his new home he received mail at a post office box address in the fall of petitioner received a statement from mbna reflecting an outstanding balance of approximately dollar_figure petitioner contacted mbna stating that approximately dollar_figure of the charges were not made by him mbna informed petitioner that such amount was traceable to a convenience check petitioner offered to pay mbna dollar_figure for about months thereafter petitioner made monthly payments to mbna of dollar_figure-300 sometime in petitioner’s mbna card was canceled in nco financial systems inc nco contacted petitioner on behalf of mbna to collect the outstanding balance on petitioner’s mbna card of approximately dollar_figure nco’s fact sheet indicated that the status of petitioner’s account was settlement and that the collection unit was purchase dispute petitioner informed nco that the charges were not his that he had a lot of debt that he could not pay and that he was willing to pay only dollar_figure petitioner admits that he has used convenience checks against his mbna card in the past the record does not disclose whether petitioner or mbna canceled the card on date nco sent petitioner a collection letter indicating that the amount owed was dollar_figure but that the amount due on date was dollar_figure the letter further indicated that your regularly scheduled payment is now due according to the terms you arranged with our office on date petitioner paid nco dollar_figure with respect to his mbna account for nco sent to petitioner a form 1099-c cancellation of debt reporting debt canceled on date of dollar_figure on his federal_income_tax return for petitioner did not report the amount reported on the form 1099-c respondent determined that petitioner failed to report on his tax_return for income from the cancellation of indebtedness of dollar_figure respondent further determined that petitioner is liable for the accuracy-related_penalty for substantial_understatement_of_income_tax discussion a discharge_of_indebtedness gross_income includes all income from whatever source derived including but not limited to discharge_of_indebtedness sec_61 sec_1_61-12 income_tax regs a discharge_of_indebtedness generally produces income in an amount equal to the difference between the amount due on the obligation and the amount_paid for the discharge see 23_f3d_1032 6th cir affg tcmemo_1992_673 as explained by the supreme court of the united_states the general theory is that to the extent that a taxpayer has been released from indebtedness the taxpayer has realized an accession to income because the cancellation of indebtedness effects a freeing of assets previously offset by the liability arising from such indebtedness 284_us_1 see 88_tc_435 if however the cancellation of all or part of a debt is made in settlement of a dispute concerning the debt no income from cancellation of indebtedness arises 40_bta_1263 345_fsupp_486 n d ala revd on other grounds 492_f2d_1096 5th cir see 85_tc_855 affd 854_f2d_1001 7th cir settlement in such circumstances does not occasion a freeing of assets and accession to income n sobel inc v commissioner supra pincite as a general_rule the commissioner’s determinations are presumed correct and the taxpayer bears the burden of proving that those determinations are erroneous rule a 290_us_111 this rule however is subject_to the provisions of sec_7491 under which the burden_of_proof may under certain circumstances be shifted to the commissioner if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the taxpayer’s income_tax_liability the legislative_history of sec_7491 defines credible_evidence as the quality of evidence which after critical analysis the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted without regard to the judicial presumption of irs correctness h conf rept pincite 1998_3_cb_747 see 116_tc_438 on the basis of the record we hold that sec_7491 does not operate to place the burden_of_proof on respondent in short petitioner did not introduce testimonial or other evidence sufficient to place in doubt the documentary_evidence in the record petitioner claims that he disputed his debt with mbna in the fall of alleging that someone not authorized by him made charges to his account which mbna informed him were attributable to a convenience check as a result petitioner contends that he offered to pay dollar_figure of charges that he admittedly made which sec_6201 also does not apply in this case to place on respondent the burden of producing evidence to supplement the information_return filed by nco financial services inc in this regard the record does not demonstrate that all of the requirements of sec_6201 were satisfied including the requirement that the taxpayer has fully cooperated with the secretary he claims that mbna agreed to accept in settlement of the dispute petitioner further claims that when nco contacted him with respect to the same debt he informed nco that mbna agreed to accept dollar_figure in settlement of the dispute at which time petitioner made full payment of the dollar_figure to nco therefore in petitioner’s view he did not realize income from the cancellation of the dollar_figure that nco claimed was owed by petitioner on the basis of the evidence in the record however we are not persuaded that petitioner did not receive income from the cancellation of indebtedness we do not doubt that petitioner communicated with mbna about his account or that petitioner paid nco dollar_figure with respect to his mbna account petitioner however did not present any documentary_evidence such as correspondence to or from mbna notes of his discussions with mbna or a copy of the alleged fraudulent convenience check demonstrating that nco accepted his dollar_figure payment as a settlement of his dispute with mbna in the amount of dollar_figure indeed nco’s fact sheet indicates that there was a purchase dispute with respect to petitioner’s mbna account but there is nothing in the record to explain the nature or the amount of the purchase dispute rather the entirety of the record indicates that nco canceled petitioner’s debt in the amount of dollar_figure because of petitioner’s inability to readily pay the outstanding balance accordingly respondent’s determination is sustained on this issue rule a welch v helvering supra b sec_6662 penalty in the notice_of_deficiency respondent determined that petitioner is liable under sec_6662 for an underpayment_of_tax that is attributable to substantial_understatement_of_income_tax sec_6662 imposes a penalty equal to percent of any underpayment_of_tax that is attributable to substantial_understatement_of_income_tax see sec_6662 and b an understatement of income_tax is substantial if it exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 an understatement is defined as the excess of the tax required to be shown on the return over the tax actually shown on the return sec_6662 tax is not understated to the extent that the treatment of the item related thereto is based on substantial_authority or is adequately disclosed in the return or in a statement attached to the return and there is a reasonable basis for the tax treatment of such item by the taxpayer sec_6662 sec_6664 there is evidence in the record including petitioner’s own testimony to suggest that petitioner was not able to pay his credit card debt without financial hardship by virtue of sec_7491 respondent has the burden of production with respect to the accuracy-related_penalty to meet this burden respondent must produce sufficient evidence indicating that it is appropriate to impose the penalty higbee v commissioner t c pincite once respondent meets this burden of production the taxpayer has the burden_of_proof with regard to whether respondent’s determination of the penalty is correct rule a higbee v commissioner supra as a defense to the penalty the taxpayer bears the burden of proving that he or she acted with reasonable_cause and in good_faith see sec_6664 see also higbee v commissioner supra sec_1_6664-4 income_tax regs respondent satisfied his burden of production under sec_7491 because the record shows that petitioner substantially understated his income_tax for see sec_6662 higbee v commissioner supra pincite accordingly petitioner bears the burden of proving that the accuracy-related_penalty should not be imposed with respect to any portion of the understatement for which he acted with reasonable_cause and in good_faith see sec_6664 higbee v commissioner supra pincite although the issue may not be free from doubt we are satisfied based on the totality of the facts and circumstances in the instant case that petitioner had reasonable_cause to believe that he did not realize income from his canceled debt and that he acted in good_faith accordingly we hold that petitioner is not liable for the accuracy-related_penalty conclusion we have considered all of the other arguments made by the parties and to the extent that we have not specifically addressed them we conclude that they are without merit reviewed and adopted as the report of the small_tax_case division to reflect our disposition of the disputed issues decision will be entered for respondent as to the deficiency in tax and for petitioner as to the penalty


t c memo united_states tax_court michelle bird meyers petitioner v commissioner of internal revenue respondent docket no filed date michelle bird meyers pro_se bryan e sladek for respondent memorandum opinion couvillion special_trial_judge this case was heard pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency of dollar_figure in petitioner's federal_income_tax unless otherwise indicated section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure after concessions by respondent the issues for decision are whether petitioner has unreported wage income of dollar_figure whether petitioner is entitled to certain medical and unreimbursed employee_business_expense deductions and whether the interest due on any deficiency in petitioner's federal_income_tax for may be abated some of the facts were stipulated and those facts with the annexed exhibits are so found and are incorporated herein by reference at the time the petition was filed petitioner's legal residence was sacramento california petitioner did not file a federal_income_tax return for during petitioner received wages from the following employers in the following amounts employer wages dollar_figure lasher service corp dollar_figure swift chevrolet inland business machines dollar_figure total dollar_figure in the notice_of_deficiency respondent determined petitioner's taxable_income and income_tax deficiency based on single filing_status one personal_exemption and the income information received from the payers shown above respondent concedes that petitioner is entitled to head of household filing_status and a dependency_exemption for her son for the determinations of the commissioner in a notice_of_deficiency are presumed correct and the burden_of_proof is on the taxpayer to prove that the determinations are in error rule a 290_us_111 sec_61 provides that gross_income means all income from whatever source derived including wage and salary income sec_1_61-1 income_tax regs accordingly the wages received by petitioner during totaling dollar_figure constitute taxable_income respondent is sustained on this issue at trial petitioner claimed that she is entitled to deductions for medical_expenses and employee business_expenses for travel incurred by her during the medical_expenses incurred by petitioner relate to two car accidents in february and date and a 30-day substance abuse program with respect to the car accidents petitioner claims that emergency room costs of approximately dollar_figure and chiropractic treatments of approximately dollar_figure were not covered by insurance with respect to the substance abuse program attended by petitioner in date petitioner claims that her medical insurance did not cover dollar_figure of the dollar_figure cost of the program other than one chiropractic statement indicating charges of dollar_figure on date petitioner did not present any documentary_evidence to substantiate the claimed expenses with respect to the unreimbursed employee business_expenses petitioner claims that while she was employed by inland business machines in outside sales she traveled in her own car sometimes several hundred miles a day selling office equipment petitioner estimated she traveled big_number business-related miles in her car during petitioner claims she is entitled to deductions of dollar_figure for mileage and dollar_figure for parking fees and tolls all taxpayers are required to keep sufficient records to enable the commissioner to determine their correct_tax liability sec_6001 43_tc_824 moreover deductions are a matter of legislative grace and the taxpayer bears the burden of proving that he or she is entitled to any deduction claimed rule a 292_us_435 welch v helvering supra this includes the burden of substantiation 65_tc_87 affd per curiam 540_f2d_821 5th cir as a general_rule if the record provides sufficient evidence that the taxpayer has incurred a deductible expense but the taxpayer is unable to adequately substantiate the amount of the deduction to which he or she is otherwise entitled the court in some situations may estimate the amount of such expense and allow a deduction to that extent 39_f2d_540 2d cir however in order for the court to estimate the amount of an expense there must be some basis upon which an estimate may be made 85_tc_731 without such a basis any allowance would amount to unguided largesse 245_f2d_559 5th cir with respect to the medical_expenses claimed by petitioner pursuant to cohan v commissioner supra the court is satisfied that petitioner incurred dollar_figure of the expenses claimed and therefore is entitled to a deduction for that amount subject_to the 5-percent limitation of sec_213 with respect to petitioner's unreimbursed employee business_expenses for travel which specifically include vehicle expenses sec_274 overrides the so-called cohan_rule 50_tc_823 affd per curiam 412_f2d_201 2d cir under sec_274 no deduction may be allowed for expenses_incurred for travel on the basis of any approximation or the unsupported testimony of the taxpayer sec_274 imposes stringent substantiation requirements to which a taxpayer must strictly adhere thus that section specifically proscribes deductions for travel_expenses in the absence of adequate_records or sufficient evidence corroborating the taxpayer's own statement petitioner failed to present sufficient evidence to meet the requirements of sec_274 with respect to unreimbursed employee_expenses for travel petitioner therefore is not allowed a deduction for these expenses finally petitioner contends that the interest due on any deficiency under sec_6601 should be abated with the exception of a limited grant of jurisdiction under sec_7481 this court has no jurisdiction to abate or reduce interest on deficiencies and thus is unable to afford the requested relief 244_f2d_11 2d cir 89_tc_1137 64_tc_589 55_tc_534 sec_7481 by its very terms is inapplicable in this case under that limited grant of jurisdiction the tax_court may reopen a closed_case under limited circumstances solely to determine if the amount of statutory interest calculated by the commissioner and paid_by the taxpayer was correctly computed 13_f3d_54 2d cir sec_6404 provides generally that the secretary may abate the assessment of all or any part of the interest on any deficiency attributable in whole or in part to any error or delay by any officer_or_employee of the internal_revenue_service acting in his official capacity in performing a ministerial_act in 89_tc_352 it was held that this court has no jurisdiction over the abatement of interest under sec_6404 as that provision by its very terms does not operate until after there has been an assessment of interest there has been no assessment of interest in this case as respondent has been precluded under sec_6213 from making any assessment until the decision of this court becomes final_decision will be entered under rule


internal_revenue_service p o box cincinnati oh number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil y name m dollars amount dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request your letter indicates you will operate a scholarship program the purpose of your scholarship program is to provide an annual non-renewable scholarship for m dollars for post-secondary education to a graduating student band member of y this scholarship is based on band participation and academic merit and is not a financial aid scholarship your scholarship is announced to the band students at y and applications are provided to all graduating senior band students letter catalog number 58263t to be eligible to apply students must be senior band members at y who are currently taking at least one band class and maintaining at least a b average in that class the applicants must regularly participate in band activities including after-school rehearsals performances auditions assessments etc the applicants are not required to declare a music-related major for eligibility all applicants must submit a completed application form by a specific date with all requested documentation this includes at least one letter of recommendation from a school source teacher counselor administrator etc and a letter of acceptance or comparable documentation to demonstrate their intent to attend an institution of higher learning all applicants must also explain how music influences their lives all applications will be reviewed and scored by your selection committee consisting of your trustees senior band students whose parents are trustees are not eligible for this scholarship the selection committee will consider the applicants’ band participation their academic records and their essays in addition the selection committee may consider the neatness and readability spelling grammar and punctuation of the applications in selecting the recipient the recipient will be announced at graduation and the scholarship money will be paid directly to the student account at their institution of higher learning you represent you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring you represent that you will maintain all records relating to individual grants including information obtained to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purposes of each grant and establish that you undertook the supervision and investigation of grants described above basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant letter catalog number 58263t the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don’t differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements letter catalog number 58263t


significant index no department of the treasury internal_revenue_service washington d c o tax exempt and kent laa jul ver ralal plan no plan re dear ein - - taxpayer this letter constitutes notice that approval has been granted for your request for an automatic_extension for amortizing the unfunded liabilities as of october for the above-named plan this approval applies to such unfunded liabilities which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning october identified in your application submission that are established as of october this approval will extend the amortization periods for years _ and applies to the eligible amortization charge bases as ' the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i ii iii iv absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years the plan_sponsor has adopted a plan to improve the plan's funding status the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and the notice required under paragraph a has been provided in accordance with section dollar_figure of revproc_2010_52 no bases established after date were identified in the application submission in granting this ruling it is expected that the plan's assumptions and methods will be reviewed and updated as appropriate so that each prescribed assumption is applied in accordance with applicable law and regulations in addition it is expected that each other assumption is reasonable taking into account the experience of the plan and reasonable expectations and such other assumptions in combination offer the best estimate of anticipated experience under the plan furthermore we are not expressing any opinion as to the accuracy of any material submitted with your request your attention is called to sec_412 of the code and sec_302 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while the amortization extension remains in place please note that any amendment that increases liabilities for a profit sharing plan or any other retirement plans whether qualified or unqualified maintained by the trustees of the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 of the code and sec_302 of erisa we have sent a copy of this letter to the manager ep classification in baltimore maryland and to the manager ep compliance unit in chicago illinois this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance concerning this matter please contact id at - sincerely yours david m ziegler manager employee_plans actuarial group cc manager ep classification baltimore maryland manager ep compliance unit chicago illinois


internal_revenue_service number release date index number -------------------------- ---------------------------------- ------------------------------------------------- --------------------------------- re -------------------------------------------- ---------------------------------------------------------- department of the treasury washington dc person to contact -------------------------- id ------------- telephone number --------------------- refer reply to cc psi b09 - plr-102211-04 date date legend legend decedent date state a child child child date trust wife year grandchild grandchild year great-grandchild ------------------- ----------------------- ------------ --------------------------------------- ---------------------------------- ------------------------------- ------------------------- ------------------------------------ ------------------------- ----------------------------------- ------- ----------------------------- -------------------------- ------- ------------------------- ------------------------ ------------------------ ------------------------------------- ---------------------------------------------------- in a letter dated date you requested rulings regarding the gift_tax plr-102211-04 great-grandchild great-grandchild trust 1-a trust 1-b dear ----- -------------- generation-skipping_transfer gst tax and income_tax consequences of a proposed partition of a_trust this letter responds to that request the facts and representations are as follows decedent died on date a date prior to date decedent a resident of state a was survived by three children child child and child decedent’s last will and testament as modified by the several codicils thereto was admitted to probate on date into three equal shares and to assign and set apart one share in trust for each of child child and child the trust created for the benefit of child is referred to herein as trust the trusts created for the benefit of child and child are not at issue in this letter_ruling child’s trust in reasonable installments to the child for whom it is set apart upon each child’s death the income of the deceased child’s trust shall be paid to his or her spouse to whom he or she was married at the time of decedent’s death and after the death of such spouse to such deceased child’s then living issue per stirpes if any child shall die leaving no spouse or surviving issue the trust estate set apart for such child shall be divided equally between the trust estates for decedent’s other surviving children and if thereafter a second child should die leaving no surviving_spouse or issue the entire property of the two trust estates shall be held as one trust estate for the benefit of the last survivor of decedent’s children clause paragraph c provides that upon the death of the last survivor of child child child and their spouses all of the trusts created for decedent’s children shall terminate and the property in each child’s respective trust will be distributed to such child’s then living issue per stirpes clause paragraph b provides that the trustee shall pay the income from each clause a of decedent’s will directs the trustee to divide the residuary_estate all of decedent’s children are now deceased pursuant to the terms of great-grandchild great-grandchild and great-grandchild intend to plr-102211-04 decedent’s will trust will terminate upon the death of wife the surviving_spouse of child child died in year and the income from her trust became payable in equal shares to her two children grandchild and grandchild grandchild is still living grandchild died in year survived by three children great-grandchild great- grandchild and great-grandchild accordingly the income from trust is currently payable as follows one-half to grandchild and one-half in equal shares to great- grandchild great-grandchild and great-grandchild petition the appropriate state court for entry of an order that would partition trust into two separate equal trusts known as trust 1-a and trust 1-b the partition of trust into trust 1-a and trust 1-b would be made on a pro_rata basis trust 1-a would be held for the benefit of grandchild and trust 1-b would be held for the benefit of great- grandchild great-grandchild and great-grandchild both trusts would be administered pursuant to the terms of decedent’s will except that i grandchild and any descendant of his shall be treated as deceased for purposes of trust 1-b while any descendant of grandchild is living and ii the descendants of grandchild shall be treated as deceased for purposes of trust 1-a while grandchild or any descendant of his is living court_proceeding to partition trust he has no objection to the partition of the trust and will consent to the entry of an order partitioning trust into trust 1-a and trust 1-b decedent’s death you now request the following rulings although grandchild does not wish to be named as a petitioner in the state it has been represented that no additions have been made to trust since the proposed partition of trust into trust 1-a and trust 1-b will not subject the partitioned trusts to the federal gst tax the proposed partition of trust into trust 1-a and trust 1-b will not result in any taxable gift_for federal gift_tax purposes the proposed partition of trust into trust 1-a and trust 1-b will not result in the recognition of gain_or_loss for federal_income_tax purposes to trust trust 1-a trust 1-b or any of the beneficiaries and the basis of the assets as well as the holding periods will remain the same after the partition as before the partition plr-102211-04 ruling sec_2601 imposes a tax on every generation-skipping_transfer section b a of the tax_reform_act_of_1986 and ' b i of the generation-skipping_transfer_tax regulations provide that the gst 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 sec_26_2601-1 provides that any trust in existence on date will be considered an irrevocable_trust except as provided in ' b ii b or c relating to property includible in the grantor's gross_estate under and sec_26_2601-1 provides that if an addition is made after sec_26_2601-1 provides rules for determining when a modification date to an irrevocable_trust which is excluded from the application of chapter by ' b a of the act a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the provisions of chapter judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraphs b i a b or c of this subsection by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter but only if -- the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in ' than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust plr-102211-04 in this case trust is considered irrevocable because neither sec_2038 nor sec_2042 apply also it is represented that no additions were made to trust after date consequently trust is currently exempt from the gst tax the proposed partition of trust into trust 1-a and trust 1-b will not shift any beneficial_interest in trust to a beneficiary who occupies a lower generation as defined in ' than the person or persons who held the beneficial_interest prior to the partition in addition the proposed partition will not extend the time for vesting of any beneficial_interest in the trusts beyond the period provided for in the original trusts thus the proposed partition of trust into trust 1-a and trust 1-b will not result in a loss of exempt status from the gst tax for trust trust 1-a or trust 1-b ruling sec_2501 imposes a tax on the transfer of property by gift by an individual sec_2511 provides that the tax imposed by sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2512 provides that if a gift is made in property the value thereof at the date of the gift shall be considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than an adequate_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration is deemed a gift in this case the dispositive provisions of trust 1-a and trust 1-b will be identical to those of trust except that trust 1-a and trust 1-b will be established for the benefit of a single family line based on the facts submitted and the representations made and provided the state a court approves the petition for partition we conclude that the partition of trust into trust 1-a and trust 1-b will not result in a transfer by any of the beneficiaries that is subject_to federal gift_tax under sec_2501 sec_1001 provides that the gain from the sale_or_other_disposition of sec_61 provides that gross_income includes gains derived from dealings ruling in property property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized of property shall be the sum of any money received plus the fair_market_value of the sec_1001 states that the amount_realized from the sale_or_other_disposition 499_us_554 concerns the plr-102211-04 property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the transaction thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender’s interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution the supreme court of the united_states in cottage savings u s pincite concluded that sec_1_1001-1 reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans cottage savings u s pincite than a transfer in trust by gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer date by transfer in trust other than by transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased by the amount of gain or decreased by the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made in addition the principles in sec_1_1015-1 concerning the uniform basis are applicable in determining the basis_of_property where more than one person acquires an interest in property by transfer in trust sec_1_1015-1 sec_1015 provides that if property is acquired by a transfer in trust other sec_1_1015-2 provides that in the case of property acquired after sec_1223 provides that in determining the period for which the taxpayer provided that the state a court approves the petition for partition it is consistent plr-102211-04 provides that property acquired by gift has a single uniform basis although more than one person may acquire an interest in the property the uniform basis of the property remains fixed subject_to proper adjustment for items under sec_1016 and sec_1017 has held property however acquired there shall be included in the period for which such property was held by any other person if the property has the same basis in the taxpayer’s hands as it would have in the hands of that other person with the supreme court’s opinion in cottage savings to find that the interests of the beneficiaries of trust 1-a and trust 1-b will not differ materially from their interests in trust in the proposed partition transaction trust will be divided on a pro_rata basis except for the changes described above all other provisions of trust will remain unchanged accordingly the proposed transaction will not result in a material difference in_kind or extent of the legal entitlements enjoyed by the beneficiaries and no gain_or_loss is recognized by the beneficiaries or the trusts on the partition for purposes of sec_1001 because sec_1001 does not apply to the partition of trust under sec_1015 the basis of the assets will be the same after the partition as the basis of those assets before the partition furthermore pursuant to sec_1223 the holding periods of the assets in the hands of trust 1-a and trust 1-b will include the holding periods of the assets in the hands of trust concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter provides that it may not be used or cited as precedent letter is being sent to the taxpayer 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 in accordance with the power_of_attorney on file with this office a copy of this this ruling is directed only to the taxpayer requesting it sec_6110 except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and plr-102211-04 the material submitted in support of the request for rulings it is subject_to verification on examination sincerely james f hogan james f hogan senior technician reviewer branch office of associate chief_counsel enclosure copy for purposes passthroughs special industries


internal_revenue_service national_office technical_advice_memorandum number release date date tam-125093-07 index uil no case-mis no director office of exempt_organizations exam taxpayer's name taxpayer's address taxpayer's identification no year s involved date of conference legend third party communication none date of communication not applicable --------------------------------------- -------------------------------------------- --------------------------------------------------------- ---------------- -------------------------------- no conference held -------------------------- foundation ---------------------------------------- country a ---------- country b ------------------ year year year year date ------------------------- ------- ------- ------- ------- -------- --------------------- ----------------------- tam-125093-07 x y z contributor ---------------------------------------------------- contributor ---------------------------------- trust ------------------------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------- treaty ------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ issue whether the foundation’s gross_investment_income should be taken into account in determining whether the foundation is eligible for benefits under paragraph of article xxi exempt_organizations of the treaty conclusion no the foundation’s gross_investment_income should not be taken into account in determining whether the foundation is eligible for benefits under article xxi of the treaty facts the foundation is a corporation created in year under the laws of country a it is a registered charity under the laws of country a in year the foundation received a determination from the internal_revenue_service that it is a sec_501 organization that is exempt from federal_income_tax under sec_501 of the internal_revenue_code the foundation files form_990-pf return of private_foundation or sec_4947 nonexempt_charitable_trust treated as a private_foundation the foundation represents that it has received only two contributions from the date of its creation the first contribution was a grant of x that the foundation received in year from contributor a u_s_person the second contribution was an endowment with a tam-125093-07 value of y donated by the trust which was created in country a by contributor the donation from the trust took effect upon contributor 2’s death in year contributor was born in the united_states and was a u s citizen until date the foundation represents that on date contributor relinquished his u s citizenship and became a citizen of country b the foundation represents that contributor was not a u s citizen or resident from date until his death in year based on the two contributions the foundation represents that substantially_all z percent of its support has come from non-u s persons currently all of the foundation’s income comes from its gross_investment_income during each of the tax years under audit the foundation received most of its gross_investment_income from u s sources the foundation’s position is that it is eligible for benefits under article xxi of the treaty because it has received substantially_all of its support from persons other than citizens or residents of the united_states with the result that its u s -source investment_income is exempt from the federal excise_tax imposed on the gross_investment_income of foreign private_foundations by sec_4948 of the internal_revenue_code the field’s position is that the foundation is not entitled to benefits under article xxi of the treaty because the term support for purposes of the treaty includes gross_investment_income and most of the foundation’s income consists of the investment_income that it receives from the united_states the field also questions contributor 2’s status as a non-u s citizen or resident on the date he created the trust and continuing until the time of his death law and analysis the excise_tax that is at issue in this case is imposed by sec_4948 in lieu of the tax imposed by sec_4940 there is hereby imposed for each taxable_year on the gross_investment_income within the meaning of sec_4940 derived from sources within the united_states within the meaning of sec_861 by every foreign organization which is a private_foundation for the taxable_year a tax equal to percent of such income the tax imposed by sec_4940 is a percent excise_tax imposed on the net_investment_income of domestic private_foundations paragraph of article xxi exempt_organization of the treaty provides tam-125093-07 a religious scientific literary educational or charitable_organization which is resident in country a and which has received substantially_all of its support from persons other than citizens or residents of the united_states shall be exempt in the united_states from the united_states excise_taxes imposed with respect to private_foundations the treasury department’s technical explanation states paragraph of article xxi provides an exemption from u s excise_taxes on private_foundations in the case of a religious scientific literary educational or charitable_organization which is resident in country a but only if such organization has received substantially_all of its support from persons other than citizens or residents of the united_states the issue that must be resolved in this case is whether the foundation has received substantially_all of its support from persons other than citizens or residents of the united_states the foundation and the field have agreed for this purpose that the term substantially_all means at least percent the question is whether for purpose of article xxi the term support includes gross_investment_income paragraph of article iii general definitions of the treaty provides as regards the application of the convention by a contracting state any term not defined therein shall unless the context otherwise requires and subject_to the provisions of article xxvi mutual agreement procedures have the meaning which it has under the law of that state concerning the taxes to which the convention applies the term support is not defined in the treaty the field’s position is that the sec_509 definition of support which includes gross_investment_income is controlling for purposes of determining whether an exempt_organization is entitled to benefits under article xxi of the treaty sec_509 provides a definition of the term support for purposes of part ii of subchapter_f of chapter and for purposes of chapter for purposes of this part and chapter the term support includes but is not limited to - gifts grants contributions or membership fees gross_receipts from admissions sales of merchandise performance of services or furnishing of facilities in any activity which is not an unrelated_trade_or_business within the meaning of sec_513 net_income from unrelated business activities whether or not such activities are carried on regularly as a trade_or_business tam-125093-07 gross_investment_income as defined in subsection e tax revenues levied for the benefit of an organization and either paid to or expended on behalf of such organization and the value of services or facilities exclusive of services or facilities generally furnished to the public without charge furnished by a governmental_unit referred to in sec_170 to an organization without charge sec_509 defines the term gross_investment_income for purposes of sec_509 to mean the gross amount of income from interest dividends payments_with_respect_to_securities_loans as defined in sec_512 rents and royalties but not including any such income to the extent included in computing the tax imposed by section such term shall also include income from sources similar to those in the preceding sentence the purpose of article xxi is to exempt private_foundations that are residents of country a from the sec_4948 excise_tax thereby facilitating investment in the united_states by such private_foundations the exemption is limited however to country a foundations that have received substantially_all of their support from persons other than u s citizens and residents by limiting the exemption in this way article xxi limits the ability of u s citizens and residents who establish and fund private_foundations in country a to use the treaty inappropriately to avoid u s excise_tax on their foundations’ u s -source investment_income in the context of article xxi we do not believe it is appropriate to use the sec_509 definition of support under that definition it would be possible for a private_foundation established and funded solely by contributions or donations from country a citizens and residents who were at no time ever u s citizens or residents to fail to qualify for the exemption under article xxi if substantially_all of its gross_investment_income were derived from investments in the united_states this would be inconsistent with the spirit and the purpose of the treaty to facilitate investment in the united_states by such private_foundations in light of the context in which the treaty uses the term support we conclude that the foundation’s gross_investment_income should not be taken into account for purposes of determining whether it is eligible for benefits under article xxi of the treaty consequently based on the foundation’s representation that its only source of support for purposes of article xxi from the date of its creation has been the contributions that it received from contributor and contributor and assuming contributor was a nonresident_alien on the date he created the trust and continuing until the date of his death then the foundation is eligible for benefits under article xxi of the treaty tam-125093-07 caveat s no opinion is expressed with respect to whether contributor was a u s citizen or resident after date and continuing until his death in year a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 4-plr-119768-98 date date in re legend decedent trust daughter individual corporation x y z this is in response to your letter of date and prior correspondence in which you requested rulings concerning the generation-skipping_transfer gst tax consequences of a division of a_trust decedent executed her will in and amended it in and article fifth of the will provides that if daughter survives decedent the residue of decedent’s estate is to be paid to trust article fifth further provides that during daughter’s lifetime the trustees shall pay and or accumulate the net_income received by the trust in each year to or for the benefit of daughter her descendants and daughter’s spouse upon daughter’s death the trustee is to pay the principal of the trust as daughter shall appoint by exercise of a non-general power_of_appointment if daughter fails to validly appoint the principal the trustee shall hold the principal for the benefit of daughter’s children grandchildren of decedent daughter and individual were the initial trustees of trust paragraph c of article thirteenth authorizes the executors at any time before the transfer of property to any trust created under the will to divide the property into as many equal or unequal shares or trusts as they in their discretion determine and to allocate decedent’s gst_exemption to each such separate share so that the inclusion_ratio under sec_2642 of the internal_revenue_code of each trust is either zero or one each separate trust shall be treated as a separate trust for all purposes with all of the same terms as those that would have applied in the absence of the division except for the purposes of computing the commissions of trustees paragraph d of article thirteenth states as follows discretionary distributions of income or principal i authorize and request my executors and or trustees in their discretion to take the following principles into account when exercising any discretion to pay or apply income or principal of any trust to or for the benefit of any beneficiary who is a permissible recipient of income and or principal of more than one trust under any one or more of this will and or any other instrument or instruments collectively ‘such trusts’ a any payment or application to or for the use or benefit of a non-skip_person as defined in sec_2613 of the code should be made out of such trusts sequentially to the exhaustion of each such trust respectively in descending order of the inclusion ratios as defined in sec_2642 of the code of such trusts b any payment or application to or for the use or benefit of a skip_person as defined in sec_2613 of the code should be made out of such trusts sequentially to the exhaustion of each such trust respectively in ascending order of the inclusion ratios of such trusts provided however that if the exclusion contained in sec_2611 of the code relating to educational or medical_expenses is applicable such payment or application should be made as provided in paragraph a of this subsection applied as if such beneficiary were a non- skip_person decedent died on date and was survived by daughter the value of decedent’s taxable_estate was x and the residue of the estate that passed to the trust totaled y daughter and another individual were appointed the trustees of trust the executor timely filed decedent’s federal estate_tax_return form_706 on the decedent’s form_706 the executor of decedent’s estate indicated that trust was to be divided into two trusts decedent’s testamentary exempt trust and decedent’s testamentary non-exempt trust on schedule r of the form_706 the executor allocated decedent’s dollar_figure gst_exemption under sec_2631 to the decedent’s testamentary exempt trust the trustees however failed to divide the trust into two trusts on date the trustees made five equal distributions of z to daughter’s two children and three grandchildren all skip-persons subsequently the individual who was the co-trustee with daughter resigned and corporation was appointed the successor co-trustee corporation determined that the trust was never severed into two separate trusts as indicated on the decedent’s federal estate_tax_return on date the trust was severed into the decedent’s testamentary exempt trust and decedent’s testamentary non-exempt trust the trusts were funded in a manner such that the date distributions were treated as having been made from the decedent’s testamentary exempt trust trustees have requested the following rulings the funding of the two separate trusts on date was consistent with the division of the trust under the terms of the governing instrument and sec_26_2654-1 decedent’s testamentary exempt trust has an inclusion_ratio of zero under sec_2642 and decedent’s testamentary non-exempt trust has an inclusion_ratio of one under sec_2642 law and analysis sec_2642 provides that except as otherwise provided in sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer shall be the excess if any of over-- a the applicable_fraction determined for the trust from which the transfer is made or b in the case of a direct_skip the applicable_fraction determined for the skip sec_2642 provides that for the purposes of sec_2642 the applicable_fraction is a fraction-- a the numerator of which is the amount of gst_exemption allocated to the trust or in the case of a direct_skip allocated to the property transferred in the skip and b the denominator of which is-- i the value of the property transferred to the trust or involved in the direct_skip reduced by ii the sum of-- i any federal estate or state death_tax actually recovered from the trust attributable to the property and ii any charitable deduction allowed under sec_2055 or sec_2522 with respect to such property sec_2654 provides that substantially separate and independent shares of different beneficiaries in a_trust shall be treated as separate trusts sec_26_2654-1 of the generation-skipping_transfer_tax regulations provides that the severance of a_trust that is included in the transferor's gross_estate or created under the transferor's will into two or more trusts is recognized for purposes of chapter if the governing instrument does not require or otherwise direct severance but the trust is severed pursuant to discretionary authority granted either under the governing instrument or under local law and a the terms of each of the new trusts provide in the aggregate for the same succession of interests and beneficiaries as are provided in the original trust b the severance occurs or a reformation proceeding if required is commenced prior to the date prescribed for filing the federal estate_tax_return including extensions actually granted for the estate of the transferor and c either-- the new trusts are severed on a fractional basis if severed on a fractional basis the separate trusts need not be funded with a pro_rata portion of each asset held by the undivided trust the trusts may be funded on a nonpro rata basis provided funding is based on either the fair_market_value of the assets on the date of funding or in a manner that fairly reflects the net appreciation or depreciation in the value of the assets measured from the valuation_date to the date of funding or if the severance is required by the terms of the governing instrument to be made on the basis of a pecuniary amount the pecuniary payment is satisfied in a manner that would meet the requirements of sec_26_2654-1 if it were paid to an individual sec_26_2654-1 provides that if the governing instrument of a_trust or local law authorizes the severance of the trust a severance pursuant to that authorization is treated as meeting the requirements of sec_26_2654-1 if the executor indicates on the federal estate_tax_return that separate trusts will be created or funded and clearly sets forth the manner in which the trust is to be severed and the separate trusts funded in this case the trust instrument authorized the trustees to divide the trust into a_trust with a zero inclusion_ratio and a_trust with an inclusion_ratio of one the executor timely filed decedent’s federal estate_tax_return form_706 on schedule r of the return the executor indicated that the trust was to be divided into two trusts decedent’s testamentary exempt trust and decedent’s testamentary non-exempt trust in addition the executor also allocated the decedent’s dollar_figure gst_exemption under sec_2631 to the decedent’s testamentary exempt trust on date after corporation was appointed co-trustee trust was severed into two trusts the two trusts were funded in a manner such that the date distributions were treated as having been made from the decedent’s testamentary exempt trust in view of the terms of paragraph d of article thirteenth of trust the funding of the trusts in this manner was consistent with the terms of the trust therefore based on the facts submitted and the representations made we conclude as follows the funding of the two separate trusts on date was consistent with the division of the trust under the terms of the governing instrument and sec_26_2654-1 decedent’s testamentary exempt trust has an inclusion_ratio of zero under sec_2642 and decedent’s testamentary non-exempt trust has an inclusion_ratio of one under sec_2642 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 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 sincerely yours assistant chief_counsel passthroughs and special industries by george masnik chief branch enclosure copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c zz contact person identification_number telephone number pv tax_exempt_and_government_entities_division date launch u ll nos employer_identification_number legend a o n o k k i t b y i z z m h h c s x dear sir or madam this is in response to x's request dated date for rulings under sec_4941 of the internal_revenue_code submitted by x's legal_representative x has been recognized as exempt under sec_501 of the code and classified as a private_foundation described in sec_509 of the code x states that in furtherance of its charitable and educational_purposes it makes charitable grants to donee organizations that are classified under sec_501 the charitable grants are made principally to donee organizations that are classified as public_charities under sec_509 or real_property n is owned by trust y x presently owns a contingent future_interest in y still owns n upon the later of the death of c and d then x wilt acquire ownership of n and certain personal_property therein if x acquires n x proposes to use it to directly engage in additional charitable and educational activities within the meaning of sec_501 and sec_170 if y among the charitable and educational activities that x anticipates n to be used for some will involve the participation of government officials n will be utilized to sponsor and conduct nonpartisan conferences for government officials who hold the offices of a s w and the leadership of t and u regardless of the politicai party or other affiliation of such government officials the participants will discuss ways of improving the functioning of the executive legislative and judicial branches of government or other important issues facing them their focus will be on how to better serve the public and the public good the conferences will be carried out and coordinated by the trustees of x who will be assisted by staff employees at n the trustees will receive advice and assistance in formulating and carrying out the conferences from an advisory board consisting of prominent and nationally recognized educators academicians scholars curators and professors x represents that the conferences will not be a forum for partisan political activity or a forum to debate specific legislative issues and that none of the conferences will involve directly or indirectly activities consisting of carrying on propaganda attempting to influence legislation or participating in any political campaign on behaif of any candidate for public_office x will sponsor a program whereby n would be made available to government officials who hold the offices of a and b for conferences with world leaders these conferences are to be held solely for the limited purpose of bringing together a or b with world leaders for the promotion of world peace and the reconciliation and facilitation of international agreement x represents that the government officials who attend the conferences will be provided with meals_and_lodging in facilities located on n’s premises x also represents that for instances where government officials in attendance may have to be lodged at locations other than n eg because of insufficient space depending upon the particular conference x may provide lodging food and reimbursement for reasonable expenses to these participants this amount is not to exceed percent of the maximum amount payable under sec_5702 of title f of the united_states_code as set forth for like employees or any lesser amount as may be determined under sec_4941 if x pays for or reimburses a government_official for transportation costs the payment or reimbursement will not exceed the actual cost of transportation all payments or reimbursement of transportation costs or lodging and meals made by x will only be for points within the united_states x has requested the following rulings the attendance or participation of a and b at conferences held at n for the purpose of bringing together world leaders in order to promote world peace and reconciliation and to facilitate international agreement will not result in an act of self-dealing under section d the attendance or participation of a s t u and w at nonpartisan conferences held at n in order to focus on ways to improve the functioning of the executive legislative and judicial branches of the federal government or other important issues facing these governmental bodies will not result in an act of self-dealing under sec_4941 s sec_170 of the code provides that the term charitable_contribution includes a contribution to an organization that is organized and operated exclusively for educational_purposes sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated for religious charitable or educational_purposes sec_4941 of the code provides for the imposition of tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 describes self dealing as any direct or indirect- a sale_or_exchange or leasing of property between a private_foundation and a disqualified_person b lending of money or other extension of credit between a private_foundation and a disqualified_person c furnishing of goods services or facilities between a private_foundation to a disqualified_person d payment of compensation or payment or reimbursement of expenses by a private_foundation to a disqualified_person transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation and e f agreement by a private_foundation to make any payment of money or other_property to government_official as defined in sec_4946 other than an agreement to employ such individual for any period after the termination of his government service if such individual is terminating his government service within a 90-day period sec_4941 of the code provides that in the case of a government_official described in sec_4946 paragraph i the term self-dealing shall not apply to any contribution or gift other than a contribution or gift of money to or services or facilities made available to any such individual if the aggregate value of such contributions gifts services and facilities to such individuals during such calendar_year does not exceed dollar_figure sec_4941 provides that in the case of a government_official as defined in sec_4946 paragraph the term self-dealing shall not apply to any payment or reimbursement of traveling expenses for expenses for travel solely from one point_in_the_united_states to another point_in_the_united_states but only if such payment or reimbursement does not exceed the actual cost of the transportation involved plus an amount for all other traveling expenses not in excess of percent of the maximum amount payable under sec_5702 of title united_states_code for like travel by employees of the united_states sec_4946 provides that the term disqualified_person means only for purposes of sec_4941 a government_official as defined in subsection c of sec_4946 sec_4946 provides that for purposes of a i and sec_4941 the term government_official means with respect to an act of self-dealing described in sec_4941 an individual who at the time of such act holds any of the following offices or positions other than as a special government employee as defined in section a of title united_states_code an elective_public_office in the executive or legislative branch of the government of the united_states an office in the executive or judicial branch of the government of the united_states appointment to which was made by the president a position in the executive legislative or judicial branch of the government of the united states-- a which is listed in schedule c of rule vi of the civil service rules or b the compensation_for which is equal to or greater than the lowest rate of basic_pay for a position under the house of representatives or the senate of the united_states held the senior executive service under sec_5382 of title united_states_code by an individual receiving gross compensation at an annual rate of dollar_figure big_number or more the government of a state possession_of_the_united_states or political_subdivision or other area of any of the foregoing or of the district of columbia held by an individual receiving gross compensation at an annual rate of dollar_figure big_number or more an elective or appointive public_office in the executive legislative or judicial branch of a position as personal or executive assistant or secretary to any of the foregoing or a member of the internal_revenue_service oversight_board sec_1_501_c_3_-1 provides that charitable as used in sec_501 is to be interpreted in its generally accepted legal sense and is therefore not to be construed as limited by the separate enumeration in sec_501 of other tax-exempt purposes which may fall within the broad outlines of charity as developed by judicial decisions among those activities considered to be charitable are ones related to the lessening of the burdens of government and the promotion of social welfare sec_1_501_c_3_-1 of the income_tax regulations provides that the term educational as used in sec_501 relates to -- capabilities or a the instruction or training of the individual for the purpose of improving or developing his b the instruction of the public on subjects useful to the individual and beneficial to the community sec_53 d -3 e of the foundation and similar excise_taxes reguiations provides that under sec_4941 in the case of a government_official sec_4941 shall not apply to- any payment or reimbursement of traveling expenses including amounts expended for meals_and_lodging regardless of whether the government_official is away from home within the meaning of sec_162 and including reasonable advances for such expenses anticipated in the immediate future for travel solely from one point_in_the_united_states to another in connection with one or more purposes described in sec_170 c or b but only if such payment or reimbursement does not exceed the actual cost of the transportation involved plus an amount for all other traveling expenses not in excess of percent of the maximum amount wl payable under u s c a for like travel by employees of the united_states sec_53 d -3 e of the foundation and similar excise_taxes regulations provides that under sec_4941 in the case of a government_official sec_4941 shall not apply -- if a government_official attends or participates in a conference sponsored by a private_foundation the allocable portion of the cost of such conference and other nonmonetary benefits for example benefits of a professional intellectual or psychological nature or benefits resulting from the publication or the distribution to participants of a record of the conference as well as the payment or reimbursement of expenses including reasonable advances for expenses anticipated in connection with such a conference in the near future received by such government_official as a result of such attendance or participation shall not be subject_to sec_4941 so long as the conference is in furtherance of the exempt purposes of the foundation revrul_77_251 1977_2_cb_389 provides that a per_diem_allowance for travel inside the u s paid to a government_official by a private_foundation in connection with its educational and charitable purposes is excepted from the tax on self-dealing under irc d g vii only if the allowance does not exceed percent of the maximum authorized rate provided by sec_5702 of title u s c notwithstanding the provision in sec_5702 allowing higher rates in designated geographical areas organizations that engage in efforts to promote international peace promote charitable and educational_purposes within the meaning of sec_501 of the code see eg revrul_67_342 1967_2_cb_190 x proposes using n to hold conferences that would allow government officials who hold the offices of a and s t u and w to meet outside the normal poiitical setting on a nonpartisan basis to determine how to more effectively serve in their official capacities an advisory board_of prominent educators academicians scholars curators and professors would provide advice and assistance in conducting the conferences the conferences would not serve as forums for debates on specific legislative issues therefore the activities would further x's educational_purposes within the meaning of sec_501 c and c b of the code and sec_1 c -1 d a of the income_tax regulations x would make n’s facilities available to government officials who hold the offices of a and b for meetings with foreign officials in order to promote world peace and international accord conferences would be held at n where government officials who hoid the offices of a and s t u and w would focus on how to better serve the public and the public good by providing the facilities and the means to carry out the activities at n x’s exempt purposes are promoted by promoting education social welfare and lessening the burdens of the government since x represents that it will provide a b s t u and w meais lodging and reasonable ay travel reimbursements in conjunction with attendance at n within the parameters of sec_53 d -3 e and of the regulations there will be no acts of self-dealing accordingly based upon the information furnished we rule as follows the attendance or participation of a and b at conferences held at n for the purpose of bringing together world leaders in order to promote world peace and reconciliation and to facilitate international agreement will not result in an act of self-dealing under sec_4941 the attendance or participation of a s t u and w at nonpartisan conferences held at n in order to focus on ways to improve the functioning of the three branches of government or other important issues facing these governmental bodies will not result in an act of self-dealing under sec_4941 this ruling applies the applicability of sec_4941 to the facts represented above we express no opinion as to the tax consequences of the transaction under any other provisions of the code this ruling is directed only to x sec_61 k of the code provides that it may not be used or cited as precedent because this letter could help resolve any future questions about tax consequences of your activities you should keep a copy of this ruling in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this ietter sincerely terrell m berkovsky manager exempt_organizations technical group


internal_revenue_service number release date index numbers -------------------------------- ------------------------------------ -------------------------------- ------------------------------------------------------------ - 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 b01 plr-139458-09 date date legend x -------------------------------------------------- ---------------------------------- ---------------------------------------- -------------------------- ---------------- y date country dear ------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts the information submitted states that x was formed on date under the laws of country at the date of formation y was the sole shareholder of x x is a foreign_entity eligible to make a classification election x intended to be classified as a disregarded_entity for federal tax purposes effective date however x failed to file a timely form_8832 entity classification election electing to be treated as a disregarded_entity effective date plr-139458-09 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability or b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an plr-139458-09 extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective date x must make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes