internal_revenue_service number release date index no cc dom p si plr mar in re legend taxpayer dear this is to notify you that the internal_revenue_service service is reconsidering the applicability of the tax exception in sec_48_4061_a_-1 of the manufacturers and retailers excise_tax regulations to trucks on which crane booms are installed in letter_ruling ltr dated date the service concluded that sec_4051 of the internal_revenue_code did not impose an excise_tax on taxpayer’s purchase and subsequent lease or sale at retail of certain trucks on which taxpayer had a third party install cranes or booms because this matter is now being reconsidered the service is revoking ltr effective date consequently taxpayer may no longer rely on ltr with respect to the purchase and the subsequent sale or lease of certain trucks on which taxpayer had a third party install cranes or booms we recognize the significance of this development to you and will attempt to resolve this matter as soon as possible sincerely assistant chief_counsel passthroughs special industries richard a kocak chief branch by


internal_revenue_service number release date department of the treasury washington dc index numbers third party communication none date of communication not applicable ---------------------------------------------- --------------------------------------------------- --------------------- ----------------------- person to contact ------------------------- id no ------------------ ----------------------------------------------------- telephone number ---------------------- refer reply to cc psi b03 plr-115362-16 date september legend ---------------------------------------------------- x ------------------------------------------ state ---------------- date ---------------------------------- dear ------------- this letter 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 for x to file an election under sec_301_7701-3 to be classified as an association for federal tax purposes the information submitted states that x is a limited_liability_company formed under the laws of state on date x is not classified as a corporation under sec_301 b or x was eligible to be classified as an association_taxable_as_a_corporation effective date however no form_8832 entity classification election was timely filed for x 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 at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and 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 plr-115362-16 sec_301_7701-3 provides that unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301 b by filing form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 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 based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective date a copy of this letter should be attached to the form_8832 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code and the regulations thereunder 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 plr-115362-16 the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination in accordance with the power_of_attorney on file with this office we are sending copies of this letter to your authorized representatives sincerely associate chief_counsel passthroughs special industries by _______________________________ mary beth carchia senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c summary opinion united_states tax_court mark s lois a freme petitioners v commissioner of internal revenue respondent docket no 320-06s filed date mark s and lois a freme pro sese lisa k hunter for respondent chiechi judge this case is before the court on respon- dent’s motion for summary_judgment respondent’s motion petitioners filed the petition in this case pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that petition was filed pursuant to sec_1hereinafter all section references are to the internal_revenue_code in effect at all relevant times all rule refer- continued b the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case background the record establishes and or the parties do not dispute the following petitioners resided in cedar rapids iowa at the time they filed the petition in this case on date petitioners jointly filed a federal_income_tax tax_return return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return and interest as provided by law on various dates after date petitioners made certain payments with respect to their taxable_year on date respondent assessed a dollar_figure addition under sec_6651 to petitioners’ tax for their taxable_year and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year continued ences are to the tax_court rules_of_practice and procedure as well as interest provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date petitioners jointly filed a return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return an addition_to_tax under sec_6651 of dollar_figure and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year as well as interest provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date petitioners jointly filed a return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return additions to tax under sec_6651 and of dollar_figure and dollar_figure respectively and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year as well as interest provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date petitioners jointly filed a return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return an addition_to_tax under sec_6651 of dollar_figure and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year as well as interest provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date petitioners jointly filed a return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return additions to tax under sec_6651 sec_6651 and sec_6654 of dollar_figure dollar_figure and dollar_figure respectively and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year as well as interest provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date petitioners jointly filed a return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return additions to tax under sec_6651 and sec_6654 of dollar_figure and dollar_figure respectively and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year as well as interest provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date respondent filed a notice_of_federal_tax_lien tax_lien_filing with respect to petitioners’ taxable years through that tax_lien_filing showed inter alia no amount with respect to petitioners’ taxable_year under the heading unpaid balance of assessment on date respondent issued to petitioners a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 notice of tax_lien with respect to petitioners’ taxable years through that notice of tax_lien showed inter alia zero dollars with respect to petitioners’ taxable_year under the heading amount owed on date in response to the notice of tax_lien petitioners filed form request for a collection_due_process_hearing petitioners’ form and requested a hearing with respondent’s appeals_office appeals_office in petitioners’ form petitioners indicated that they did not agree with the notice of tax_lien and stated payments have been made have never recieved sic accounting on date a representative of respondent respon- dent’s representative spoke on the telephone with petitioner mark freme mr freme regarding petitioners’ form during that telephone call mr freme indicated that he wanted an installment_agreement on date respondent’s represen- tative faxed inter alia form 433-a collection information statement for wage earners and self-employed individuals form 433-a to petitioners respondent’s representative did not receive from petitioners completed form 433-a on date respondent’s representative forwarded to the appeals_office petitioners’ form on date an appeals officer with the appeals_office appeals officer sent petitioners a letter that letter stated in pertinent part this letter is in response to your request for a col- lection due process hearing the appeals’ office is hereby offering you a hearing by phone letter or in- person it is important you contact me by date to discuss your hearing if you wish to propose collection alternatives such as an installment_agreement or an offer_in_compromise you must submit current financial information i have enclosed a collection information statement for wage earners and self-employed individuals form 433-a for this purpose please forward the completed form 433-a to me by date please note if i don’t hear from you to discuss your case your hearing may consist of a review by appeals of the administrative file including information you already provided we may issue you a determination_letter based upon that review on date the appeals officer and mr freme spoke on the telephone during that telephone call mr freme stated that he intended to mail on the next day ie date to the appeals officer completed form 433-a on date the appeals officer sent petitioners another letter appeals officer’s date letter that letter stated in pertinent part on date i sent you a letter offering you a hearing you have the opportunity for a conference by personal interview correspondence and or by telephone i also requested some additional information to resolve your case i asked you to contact me by date to discuss the collection_due_process_hearing that you requested on date we had telephone conversation in which you said you would be mailing in the form 433-a on date as of this date i have not received the information requested as previously stated if you wish to propose collection alternatives such as installment_agreement or an offer_in_compromise you must submit current financial infor- mation i have enclosed a form 433-a for this purpose please contact me to discuss your hearing and please forward the above requested information if i don’t hear from you by date your hearing will consist of a review by appeals of the administrative file including information already provided by you a determination_letter will be issued to you based upon that review reproduced literally petitioners did not respond to the appeals officer’s date letter at no time during the consideration by the appeals officer of petitioners’ form did petitioners provide form 433-a or any other documentary_evidence relating to their financial status or their financial situation at and after the respective times their returns for their taxable years through were filed on date the appeals_office issued to petition- ers a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination that notice stated in pertinent part summary of determination we have found that all legal and administrative re- quirements for the action taken have been met we have also considered whether the collection action taken or proposed balances the need for the efficient collection of the taxes with the legitimate concern of the tax- payer that any collection action be no more intrusive than necessary at this time grounds for withdrawal of the lien have not been established the case will be returned to the automated collection system acs for the appropriate actions an attachment to the notice_of_determination stated in pertinent part with respect to petitioners’ taxable years through summary and recommendation the taxpayers did not present any information that warrants withdrawal of the filed notice_of_federal_tax_lien brief background this appeals employee has had no prior involvement with this taxpayer with respect to these liabilities in either compliance or appeals in our letter dated date we asked the taxpayers to contact us to schedule their collection_due_process_hearing on date we received a message that the taxpayer had called in and requested we call back we made an outcall to the taxpayer who stated he just found our letter in a stack of work and called in to let us know that he would be mailing in his completed form 433-a financial statement on sep- tember on date we sent a follow-up letter again requesting the taxpayers to contact our office to schedule their collection_due_process_hearing or provide their financial information since they did not contact our office they offered no alternative to the proposed collection action there- fore we made our decision based upon the information in their case file and computer transcripts of the account history verification of applicable legal and administrative procedures to the best of our knowledge with the information available to us we have determined that compliance followed all legal and procedural requirements and the actions taken or proposed were appropriate under the circumstances issues raised by the taxpayer in their request for a hearing the taxpayers asked for an installment_agreement they failed to return the financial statement that we mailed to them challenges to the existence or amount of the liability the taxpayers’ request for a hearing did not challenge the existence or the amount of the tax_liability challenges to the appropriateness of the proposed collection action the taxpayers did not challenge the proposed collection action collection alternatives offered by the taxpayer the taxpayers offered no viable alternative to the proposed enforcement action they failed to return the financial statement we sent them balancing efficient tax collection and intrusiveness per sec_6330 the determination by appeals under this subsection shall take into consideration whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary in this case the taxpayers’ concern that the actions of the compliance division are unduly intrusive was weighed against the service’s responsibility to apply the tax law fairly to all filing a lien or issuance of a levy always creates hardship for the taxpayer and is always intrusive even so the lien or levy is sometimes necessary to collect the tax in the most efficient manner and or to secure the internal revenue service’s equity position in assets the notice_of_federal_tax_lien will not be withdrawn in the petition that petitioners filed commencing the instant case petitioners stated payments have been made yet no accounting has been provided plaintiffs are currently unable to pay the remaining deficiency balance plaintiffs request that the internal_revenue_service provide an accurate ac- counting of payments made and seek relief from interest and penalties that all lien petitions be cancelled reproduced literally discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there are no genuine issues of material fact regarding the questions raised in respondent’s motion a taxpayer may raise challenges to the existence or the amount of the taxpayer’s underlying tax_liability if the taxpayer did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the tax_liability sec_6330 petitioners’ taxable_year according to respondent’s tax_lien_filing and respondent’s notice of tax_lien petitioners do not have any unpaid liability with respect to petitioners’ taxable_year respondent’s tax_lien_filing showed no amount with respect to petitioners’ taxable_year under the heading unpaid balance of assessment and respondent’s notice of tax_lien showed zero dollars with respect to that year under the heading amount owed we conclude that the tax_lien_filing with respect to petitioners’ taxable_year was not proper see sec_6321 petitioners’ taxable years through petitioners allege in the petition that respondent failed to account for all of the payments that they made with respect to 2although the court ordered petitioners to file a response to respondent’s motion petitioners failed to do so the only filings that petitioners made in this case are the petition and the designation of place of trial the party opposing summary_judgment must set forth specific facts that show a genuine issue of material fact exists and may not rely merely on allegations or denials in the pleadings 91_tc_322 87_tc_214 petitioners may not rely on their allegations in the petition in order to establish a genuine issue of material fact each of their taxable years through petitioners thus dispute the amount of the unpaid liability for each of those years we shall review that dispute on a de novo basis 114_tc_604 114_tc_176 although petitioners allege in the petition that respondent did not account for all of the payments that they made with respect to each of their taxable years through they do not identify any such payments on the instant record we are unable to find that respondent failed to account for all of the payments that petitioners made for each of those years as we understand it petitioners advance as an alternative argument that they should be relieved from paying any addition_to_tax and interest with respect to each of their taxable years through we construe that argument as a request to review respondent’s failure to abate additions to tax and interest under sec_6404 we turn first to petitioners’ argument regarding respon- dent’s failure to abate additions to tax under sec_6404 the record does not establish that petitioners advanced that argument at the appeals_office consequently we shall not consider that matter sec_301_6320-1 q a-f5 proced admin regs 3assuming arguendo that the record before us established that petitioners raised with the appeals_office respondent’s continued see also 120_tc_114 we turn now to petitioners’ argument regarding respondent’s failure to abate interest under sec_6404 which we shall review for abuse_of_discretion see sec_6404 see also 113_tc_145 sec_6404 permits respondent to abate interest with respect to an unreason- able error or delay resulting from managerial and ministerial acts although petitioners allege in the petition that they should be relieved from paying any interest with respect to each of their taxable years through petitioners do not advance any contentions or arguments in support of that allegation on the record before us we find that petitioners have failed to show that respondent abused respondent’s discretion in failing to abate interest under sec_6404 with respect to each of those years based upon our examination of the entire record before us we reject respondent’s determination in the notice of determina- continued failure to abate additions to tax under sec_6404 on that record we hold that the court does not have jurisdiction to review petitioners’ request that we review any such failure see sec_6404 see also 120_tc_114 ndollar_figure 112_tc_230 tion with respect to petitioners’ taxable_year on that record we sustain respondent’s determinations in that notice with respect to petitioners’ taxable years through we have considered all of the contentions and arguments of the parties that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing an appropriate order and decision will be entered 4we concluded above that the tax_lien_filing with respect to petitioners’ taxable_year was not proper


department of the treasury internal_revenue_service washington d c date number release date cc pa dpl b01 ct-129778-01 uilc memorandum for area_counsel criminal tax area cc ct bal from chief branch assistant chief_counsel disclosure privacy law cc pa dpl subject criminal investigation disclosure scenarios we have reviewed the four disclosure scenarios and revised the responses to them that you forwarded to us on date this document including the attachment are not to be cited as precedent the scenarios you posed concern disclosures of return_information in grand jury investigations we are currently revisiting and refining as appropriate our guidance in the area of grand jury investigations in response to a request from the associate chief_counsel criminal tax if you have any questions or if we can provide any further assistance please call us at attachment scenario i during an ongoing gj investigation involving an sua and allegations an informant tells an fbi agent that he has specific info relative to tax matters of one of the targets of the investigation the fbi agent sets up a meeting wherein he introduces the informant to the irs agent assigned to the gj investigation question may the fbi agent be allowed to sit in on the ascertainment of this information moreover should the assigned irs agent conduct this meeting up to this point tax_administration has not been invoked through the related statute call the response depends on the purpose of the fbi agent being present and the capacity in which the irs special_agent is conducting the interview the key is the definition section b which states that returns and return_information are materials filed with or furnished to the secretary_of_the_treasury the irs agent is assisting the attorney for the government in the grand jury investigation a reasoned argument can be made that information collected by and under the control and direction of the justice_department during a grand jury investigation is not return_information certainly if the fbi agent wanted the information for his own grand jury purposes that would be permissible in addition although a title_26 investigation is not authorized law enforcement personnel assisting the attorney for the government irs or otherwise may review the information collected to determine if such a request would be appropriate the fbi and irs agent could discuss the matter to determine if they wanted to make such a request however the irs agent could not pull returns access idrs or otherwise obtain any information from irs files in connection with these discussions if circumstances warrant the agent could request that a related statute determination be made this would permit the agent to access returns and return_information however such information could not be disclosed to the fbi agent to work the sua it may be preferable to have another irs agent conduct the interview without the fbi agent determine whether the information indicates title_26 violations and pull returns and other tax information to determine whether an expansion request is warranted no related statute determination is necessary and if the tax aspect is deemed not worth pursuing the sua investigation continues as a pure nontax investigation without any untoward consequences if an expansion request is approved by tax_division all the tax information can be given to the ausa and the fbi agent pursuant to and subject_to the conditions in the regulation for joint grand juries see sec_301 h - a ii scenario ii during an ongoing gj investigation involving an sua and allegations the related statute call was made and eventually a full fledged tax gj investigation was initiated and completed the fbi agent requested access to the tax investigation files that contain both taxpayer_return_information and return_information directly from the irs agent question can or should the irs special_agent provide these records to the fbi for partial inclusion in an affidavit for a search warrant of these tax_administration records what kind of information can be provided to the fbi and what is the procedure for the exchange sec_6103 and permits disclosure to the department of justice for use in tax grand jury investigations the disclosure is made to the department of justice for use in the tax_administration matter with a proper referral the irs sa can disclose returns and return_information of the subject in the tax gj investigation such records as are appropriate to the investigation should be made available to the ausa who can use it for the tax matter under investigation in addition if there are nontax matters that arise out of the same facts and circumstances as the tax matters and the tax part of the investigation has been approved by the tax_division the tax information that has been disclosed under sec_6103 can also be used in the nontax_portion of the investigation sec_301_6103_h_2_-1 if the tax portion of the investigation is terminated the t portion that has been authorized by tax_division then an ex_parte order under sec_6103 is required to continue using returns and taxpayer_return_information information provided by or on behalf of the taxpayer or the taxpayer’s representative for the sua returns and taxpayer_return_information could continue to be used for the related statute charge assuming it has not been dropped scenario iii during an ongoing gj investigation involving an sua and allegations the related statute call is made after the related statute call is made are irs agents allowed to continue making field contacts jointly with their fbi counterparts since tax_administration has been invoked further what about after a full fledged tax investigation and the contacts are designed in part or whole to shore up the tax investigation finally should there be a free exchange of investigative information at the agents’ level while field contacts can continue to be made jointly as discussed above the related statute call does not permit disclosures to other agencies to work the sua while the fbi could theoretically have access to tax information to work the tax related charge this could be both confusing and awkward to separate the sua from the as such it may be preferable to get a sec_6103 ex_parte order for the fbi to access tax information for the sua in lieu of a related statute call it may be easier to obtain a sec_6103 ex_parte order for the both the sua and the to the extent a full fledged tax investigation has been authorized by tax_division the rules for joint grand juries described above would permit use of tax information for the tax and nontax aspects of the joint grand jury investigation with regard to the free exchange of investigative information at the agents’ level the rules in sec_6103 presuppose direction and control of the investigation and the relevant tax information by justice_department attorneys in addition as you are aware civil and criminal penalties attach to the unauthorized disclosure of sec_6103 protected information and agencies that receive returns and return_information are required to safeguard such information as such the disclosure of sec_6103 protected information like rule e protected information is not to be taken lightly finally as the irm notes disclosures to state and local law enforcement personnel of sec_6103 information is prohibited unless such personnel are appointed as federal employees or deputized as special deputy u s marshals see irm scenario iv an irs agent has a title_26 matter under investigation the agent later learns that there is a non tax gj investigation of the irs subject can the assigned agent evaluate the gj evidence to determine if irs should join the gj investigation would you set forth how we could affect the evaluation of the gj evidence and after such how we should proceed in terms of jointly participating in the gj investigation we routinely evaluate grand jury information to determine if we will join a grand jury investigation this is done in every request made by an assistant united_states attorney under tax_division directive the necessary irs personnel are granted access to the grand jury information to determine if the allegations combined with the agency’s tax_return information are sufficient to add tax charges to the on-going grand jury investigation the information gathered during the administrative investigation is no different from the tax returns and idrs information in this respect if any information relates to the investigation as proposed by the ausa then it is proper to be disclosed if we agree to join the investigation and properly refer the case under the procedures if it involves a separate allegation then the irs should refer the matter through the tax_division to complete all aspects of the matter it is almost impossible to successfully complete an administrative investigation while a grand jury investigation is going on because the records etc will probably have been submitted to the grand jury also if there is an on-going grand jury investigation involving the taxpayer summonses will generally not be enforced to the extent an agent is permitted access to grand_jury_material to determine if a joint investigation would be appropriate that agent should no longer continue to work an administrative case because of the e issues involved


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 b02 plr-150066-11 date date internal_revenue_service number release date index number ------------------------------------------ --------------------------- ------------------------------ -------------------------------- legend x --------------------------- state ------------ date --------------------- dear ------------------ this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was formed on date under the laws of state x represents that x intended to be an s_corporation effective date however a form_2553 election by a small_business_corporation was not timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary plr-150066-11 determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective date along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for date except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent 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 bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court john m cobin petitioner v commissioner of internal revenue respondent docket no 16905-05l filed date john m cobin pro_se steven m webster for respondent memorandum opinion wells judge petitioner seeks review pursuant to sec_6330 of respondent’s determination to proceed with the 1unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure collection of petitioner’s tax_liabilities of dollar_figure and dollar_figure respectively for his and taxable years the issues we must decide are whether this court has jurisdiction to review respondent’s determination to proceed with collection of a frivolous_return penalty assessed against petitioner pursuant to sec_6702 whether petitioner received and failed to report taxable_income for his and taxable years whether petitioner is liable for the addition_to_tax assessed pursuant to sec_6651 for the failure to timely file a federal_income_tax return for his and taxable years whether petitioner is liable for the addition_to_tax assessed pursuant to sec_6654 for failure to pay estimated_taxes for his and taxable years and whether respondent’s settlement officer abused her discretion in determining that respondent’s collection actions may proceed background none of the facts have been stipulated because petitioner claimed the protection of the fifth_amendment to the u s constitution in his petition petitioner stated that he was a resident of south carolina in documents that he sent to respondent petitioner made various tax-protester arguments he argued that because he was white he was a sovereign citizen of oregon and a non-resident alien of the united_states he claimed that his sovereign status made his body real_property gave him the ability to opt_out of paying federal taxes by revoking an election he had purportedly made under sec_871 and allowed him to keep all of the income his labor generated otherwise he argued making him pay taxes would subject him to involuntary servitude for his taxable_year petitioner filed a form 1040nr u s nonresident_alien income_tax return on which he listed an oregon address petitioner crossed out large portions of the form 1040nr wrote n a on several lines reported tax of dollar_figure on income not effectively connected with a u s trade_or_business sought a refund of dollar_figure based on dollar_figure paid with an extension request and altered the jurat by adding with express reservation of all my rights in law and equity and all other natures of law petitioner also attached a page from a form 1040x amended u s individual_income_tax_return on which he attempted to revoke his purported sec_871 election in the form 1040x petitioner stated in pertinent part i am a nonresident_alien_individual who at no time during the year was either engaged in or received gross_income that was effectively connected with the conduct_of_a_trade_or_business within the political jurisdiction of the united_states and pursuant to the authority of sec_871 and sec_1_871-10 and the controlling underlying substantive law i hereby revoke without the consent of the commissioner the previous election made under sec_871 each of the changes in column b page are caused by this revocation 1040nrs attached in support thereof we have arrived at these determinations after study of the i r c c f_r constitution and court cases if you have reason to believe that we are wrong in our reasons please inform us in writing at the address given on the reverse side if we have not received an answer within days we will assume that you agree with our conclusions this document serves as a confirmatory writing between merchants petitioner did not file any nonfrivolous federal_income_tax returns for taxable years and using third-party information returns and a bank_deposits analysis respondent determined tax deficiencies and additions to tax for petitioner’s taxable years and as follows year deficiency sec_6651 sec_6654 additions to tax dollar_figure dollar_figure dollar_figure big_number big_number big_number petitioner earned nonemployee compensation of dollar_figure during had capital_gains of dollar_figure and dollar_figure during and respectively and had other income of dollar_figure and dollar_figure during and respectively on the basis of bank_deposits petitioner also had gross_receipts from a business activity of dollar_figure and dollar_figure respectively for his and taxable years on date using the addresses on petitioner's earlier correspondence respondent sent petitioner a notice_of_deficiency for petitioner’s taxable years and notice_of_deficiency to three different addresses a rancho vista drive grants pass oregon grants pass address b p o box rogue river oregon c e main suite rogue river oregon all three of the envelopes containing the notice_of_deficiency were returned with a postage label that stated moved left no address unable to forward return to sender the record contains copies of the returned envelopes at that time petitioner had not filed a federal_income_tax return for any taxable_year after but the grants pass address is the address petitioner used on the 1040nr he submitted to respondent the tax_liabilities for and including additions to tax were assessed on date on date respondent assessed against petitioner a penalty of dollar_figure under sec_6702 for taxable_year for filing a frivolous document purporting to be an income_tax return on date respondent sent petitioner a final notice_of_intent_to_levy and notice of his right to a hearing regarding his tax_liabilities for taxable years and including the frivolous_return penalty for on date respondent issued a notice_of_federal_tax_lien regarding the and income_tax liabilities and the frivolous_return penalty for on date respondent sent petitioner a notice of the filing of a federal_tax_lien and of his right to a hearing regarding the lien on date petitioner timely mailed to respondent a form request for a collection_due_process_hearing in which he requested a face-to-face meeting appeals hearing request in his appeals hearing request petitioner contended that the proposed collection actions were inappropriate in part because he had six dependent_children and little income he did not substantiate his claims on date respondent’s appeals_office appeals_office sent petitioner a letter scheduling a correspondence hearing for date the letter stated that if petitioner wanted a face-to-face meeting he had to submit to the appeals_office by date the specific collection alternatives he was proposing and a completed and signed financial information statement with all necessary attachments the letter further stated that the appeals_office would not consider collection alternatives unless petitioner filed tax returns for through respondent attached to the letter a computerized transcript for each of the periods in issue in a letter dated date petitioner responded to the settlement officer assigned to the case by the appeals_office in his response petitioner contended that the requested face-to- face meeting was and is not for you to hear a response from me to you about your allegations but rather for us to hear you explain why you have made these false accusations and taken these wrongful actions against me petitioner also asserted that he had not received the notice_of_deficiency and challenged the underlying tax_liability petitioner claimed that during the years in issue he had several dependents and low pay and did not owe any income_tax petitioner asserted that he could produce documentation to support his claim that he did not owe income_tax for the years in issue petitioner did not provide at the administrative level or at trial any testimony or documentary_evidence to dispute the underlying tax_liability set out in the notice_of_deficiency petitioner did not propose specific collection alternatives nor did he provide the requested financial information and tax returns on date the settlement officer sent petitioner two notices of determination upholding the lien and levy to collect petitioner's and tax_liabilities including the frivolous_return penalty the notices stated that respondent had followed all administrative procedural and statutory requirements in filing the notice_of_federal_tax_lien and issuing the notice_of_intent_to_levy petitioner had failed to successfully challenge the assessed liabilities petitioner had failed to propose a viable collection alternative and the proposed collection actions balanced the need for efficient tax collection with petitioner’s concern that they not be more intrusive than necessary discussion sec_6330 provides that no levy may be made on any property or right to property of a person unless the commissioner first notifies the person in writing of the right to a hearing before the appeals_office sec_6330 d and e governs the conduct of a hearing requested under sec_6330 sec_6320 requires the commissioner to give any person liable to pay tax written notice of the filing of a tax_lien upon that taxpayer’s property the notice must inform the taxpayer of the right to request a hearing in the commissioner’s appeals_office sec_6320 b sec_6330 d and e governs the conduct of a hearing requested under sec_6320 sec_6320 i jurisdiction over frivolous_return penalty this court does not have jurisdiction to review a sec_6330 determination issued before to proceed with collection of a frivolous_return penalty assessed under sec_6702 533_f3d_412 6th cir 115_tc_324 dunbar v commissioner tcmemo_2006_184 accordingly we will sec_6330 was amended by the pension_protection_act of ppa publaw_109_280 120_stat_1019 for sec_6330 determinations issued after the effective date of the ppa this court does have jurisdiction over frivolous_return penalties see 130_tc_44 the ppa is effective for determinations made after date id pincite n because the notice_of_determination in the instant case was issued in the ppa does not apply dismiss on our own motion so much of the petition as seeks review of the notice_of_determination as it relates to the frivolous_return penalty under sec_6702 ii respondent’s determination to proceed with collection at a hearing requested under sec_6320 or sec_6330 the taxpayer may raise any relevant issues including appropriate spousal defenses challenges to the appropriateness of collection actions and collection alternatives sec_6330 however the taxpayer may challenge the underlying tax_liability only if the taxpayer did not receive a statutory_notice_of_deficiency for the tax_liability and did not otherwise have an opportunity to dispute the tax_liability sec_6330 in addition to considering issues the taxpayer raised under sec_6330 the appeals officer must also obtain verification that requirements of any applicable law or administrative procedure have been met sec_6330 where the validity of the underlying tax_liability is properly in issue the court will review the matter de novo 3to the extent that this court does not have jurisdiction the appeal must be filed in the appropriate district_court see sec_6330 generally petitioner would have days after a determination that this court lacks jurisdiction to file an appeal in the appropriate court see sec_6330 however it appears that the collection determination with respect to the frivolous_return penalty has already been reviewed in district_court see cobin v united_states aftr 2d d s c affd 164_fedappx_387 4th cir 114_tc_604 114_tc_176 where the validity of the underlying tax is not properly in issue however the court will review the commissioner’s determination for abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite respondent concedes that petitioner did not receive a copy of the notice_of_deficiency when it was mailed to him during and that petitioner’s underlying tax_liability is properly in issue as a general_rule the commissioner’s determinations in a notice_of_deficiency are presumed correct 290_us_111 and rule a places the burden of proving an error on the taxpayer for the presumption of correctness to apply with regard to unreported income the commissioner must provide a minimal evidentiary foundation showing that there is a link between the taxpayer and either the taxable_income or the income-producing activity 92_tc_661 dunn v commissioner tcmemo_2008_63 4for court proceedings arising in connection with examinations commenced after date the commissioner has the burden of production with respect to additions to tax sec_7491 in the instant case because the notice_of_deficiency was issued in sec_7491 does not apply respondent’s revenue_agent who conducted the audit of petitioner’s taxable years and testified at trial the revenue_agent indicated that she used third-party information returns and a bank_deposits analysis to determine petitioner’s tax deficiencies for and respondent introduced copies of petitioner’s bank statements and a summary of the third-party information returns upon which the and deficiencies were based respondent provided a minimal evidenciary foundation linking petitioner to the income that respondent sought to tax so the presumption of correctness applies petitioner did not offer any evidence at trial to refute respondent’s determination of petitioner’s unreported income on the basis of the record petitioner has failed to show that respondent’s determination of deficiencies in petitioner’s income_tax for and was not correct the only arguments that petitioner has raised are frivolous tax-protester type arguments we do not address petitioner’s frivolous and groundless arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some degree of colorable merit see 737_f2d_1417 5th cir likewise we see no reason to remand the instant case to respondent’s appeals_office since petitioner offered no substantive evidence at trial contravening the determinations in the notice_of_deficiency see 117_tc_183 accordingly we uphold respondent’s determination of deficiencies in petitioner’s income_tax for the and taxable years also to be decided is whether petitioner is liable for the additions to tax assessed by respondent under sec_6651 for failure to timely file tax returns and sec_6654 for failure to make estimated_tax payments sec_6012 requires the filing of an income_tax return by all individuals receiving gross_income in excess of certain minimums sec_6651 imposes an addition_to_tax for failure_to_file an income_tax return because petitioner’s gross_income for and as determined by respondent in the notice_of_deficiency and upheld by this court above exceeded the sec_6012 minimum petitioner was required to file federal_income_tax returns for and respondent determined on the basis of certified transcripts that petitioner did not file a valid tax_return for taxable_year or petitioner did not introduce any evidence to persuade us that respondent’s determination was not correct even where a taxpayer failed to file a return the taxpayer may be relieved of the addition_to_tax if he can demonstrate that 5petitioner’s form 1040nr and form 1040x were not valid tax returns for purposes of sec_6651 because neither contained sufficient data to calculate petitioner’s tax_liability see 82_tc_766 affd 793_f2d_139 6th cir dunham v commissioner tcmemo_1998_52 the failure is due to reasonable_cause and not due to willful neglect sec_6651 willful neglect means conscious intentional failure or reckless indifference 469_us_241 sec_301_6651-1 proced admin regs states that if a taxpayer exercises ordinary business care and prudence and is nevertheless unable to file on time then the delay is due to reasonable_cause petitioner has failed to demonstrate reasonable_cause for his failure_to_file for and citing only frivolous tax- protester arguments see yoder v commissioner tcmemo_1990_ holding misguided interpretations of the constitution are not reasonable_cause the additions to tax under sec_6651 for the taxable years in issue are accordingly sustained sec_6654 imposes an addition_to_tax for failure to pay estimated income_tax sec_6654 applies where prepayments of tax either through withholdings or by making estimated quarterly payments do not equal the percentage of total liability required under the statute unless one of the several exceptions under sec_6654 applies 99_tc_202 petitioner had tax_liabilities for the taxable years in issue yet failed to make any estimated payments the additions to tax under sec_6654 for the taxable years in issue are accordingly sustained we conclude that respondent’s determination of petitioner’s underlying tax_liabilities for and as set out in the notice_of_deficiency is correct respondent’s settlement officer verified that the requirements of sec_6330 were met petitioner did not raise any spousal defenses nor did petitioner offer any collection alternatives to the settlement officer accordingly we hold that respondent’s settlement officer committed no error and did not abuse her discretion in determining that collection could proceed iii sec_6673 penalty sec_6673 provides that this court may require the taxpayer to pay a penalty not in excess of dollar_figure whenever it appears to this court that a the proceedings were instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies petitioner was warned that this court could impose a penalty if he persisted in raising frivolous tax-protester arguments despite being warned petitioner raised frivolous arguments throughout the appeals process in his petition to this court and in his briefs accordingly we shall impose a dollar_figure penalty on petitioner pursuant to sec_6673 to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court charles f urbauer petitioner v commissioner of internal revenue respondent docket no filed date charles f urbauer pro_se mark i siegel for respondent memorandum opinion raum judge the instant matter is before us on petitioner's motion for reasonable administrative and litigation costs pursuant to section and rule neither party has requested a hearing on petitioner's motion accordingly we rule unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure on petitioner's motion on the basis of the parties' submissions and the record in the instant case as a whole we incorporate by reference herein the portions of our opinion on the merits in this case urbauer v commissioner tcmemo_1997_227 that are relevant to our disposition of the motion on date we issued our opinion on the substantive issues in the instant case pursuant to their divorce petitioner and his ex-wife sold their marital home they entered into an agreement under which the ex-wife was responsible for paying the taxes due from the sale of the marital home no joint_return was filed by petitioner and his ex-wife for the year in which the house was sold we found that despite their agreement since the divorce court did not change the result of the operation of michigan law petitioner owned a one-half interest in the house and was responsible for half the taxes due in the notice_of_deficiency the commissioner determined that petitioner owed taxes on percent of the gain from the sale however in ill-advised reliance on friscone v commissioner tcmemo_1996_193 the government reduced its claim to only percent of the taxes due on the gain accordingly we held that petitioner was charged with tax on percent of the gain from the sale of the family residence_generally sec_7430 provides for the award of reasonable administrative and litigation costs to a taxpayer who is a prevailing_party in an administrative or court_proceeding brought against the united_states involving the determination of any_tax interest or penalty pursuant to the code sec_7430 requires that to be a prevailing_party a taxpayer must establish that the position_of_the_united_states was not substantially justified the taxpayer substantially prevailed with respect to either the amount in controversy or the most significant issue or set of issues presented and the taxpayer meets the net_worth requirements of u s c sec d b sec_7430 provides that an award of litigation costs may be made only where a taxpayer has exhausted available administrative remedies no award of costs may be made with respect to any portion of an administrative or judicial proceeding that the taxpayer has unreasonably protracted sec_7430 and the costs claimed must be reasonable in amount sec_7430 petitioner bears the burden of proving each of the above requirements has been satisfied rule e sec_7430 was amended by the taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 effective with respect to proceedings commenced after date the amendments to the section place on the commissioner the burden of establishing that the position of the commissioner was substantially justified sec_7430 a judicial proceeding is commenced in this court with the filing of a petition rule a petitioner filed his petition on date accordingly the amendments to sec_7430 enacted by the taxpayer bill of right sec_2 do not apply here maggie management continued respondent contends that petitioner has not demonstrated that the position_of_the_united_states was not substantially justified or that the amounts claimed are reasonable respondent concedes that petitioner has satisfied the other requirements for the award of reasonable_litigation_costs we shall first address whether respondent's position was substantially justified respondent's position is substantially justified if it has a reasonable basis in fact and law 100_tc_457 the fact that the commissioner loses or concedes the case does not mean that the government's position was not substantially justified however it is a factor to be considered id pincite to show lack of substantial justification petitioner must demonstrate that the legal precedent does not substantially support respondent's position given the facts available to respondent 94_tc_685 petitioner makes no substantive argument about the authority or lack thereof for respondent's legal position he seems to assume that since a decision was entered under rule he is entitled to half the litigation and administrative costs the judge in the trial hearing pg of petitioner's brief suggested filing for litigation and administrative costs if you continued co v commissioner 108_tc_430 win both the irs and petitioner won therefore petitioner files for ½ of his costs time even if petitioner had put forth a substantive argument he would not be entitled to administrative and litigation costs in this case in the notice_of_deficiency the government took the position that petitioner was liable for percent of the taxes due upon the sale of his marital home that position was taken because petitioner and his wife jointly owned the home and the divorce court had not changed the ownership of the property in the property settlement accompanying the divorce decree under michigan law unless the divorce decree provides otherwise upon their divorce married property owners become tenants in common mich stat ann sec_25 law co-op shortly before the case was submitted to the court the government conceded half of the deficiency relying in error on friscone v commissioner tcmemo_1996_193 in friscone the divorce court constrained by a buy-sell_agreement divided ownership of stock between two divorcing spouses beneficially by allocating the proceeds and the tax_liability rather than directly id we subsequently held that the stock should be treated for tax purposes as though it had been divided outright id the government mistakenly believed that the private agreement petitioner and his ex-wife entered into was entitled to the same consideration in urbauer v commissioner tcmemo_1997_227 we noted that petitioner should have been liable for the taxes on percent of the gain however since the government conceded percent of the taxes due on the gain we held the government to its concession id this case is unusual in that when the government was seeking the larger deficiency amount its position was legally correct its concession resulted in a windfall for petitioner he avoided liability for taxes he otherwise legally would have owed given the benefit to petitioner and given that the court would have held for the government had it maintained its original position we hold that there was substantial justification for the government's position since we find for the government on that issue we need not consider whether the amounts claimed by petitioner as administration and litigation costs were reasonable to reflect the foregoing petitioner's motion will be denied and order and decision will be entered in accordance with respondent's rule computation


department of the treasury washington dc third party communication none date of communication n a person to contact -------------------- id no ------------- telephone number ------------------- refer reply to cc psi b02 plr-128696-08 date date internal_revenue_service number release date index number ------------------------------------------- ------------------------------- ------------------------------ --------------------------------- --- x ------------------------------- ----------------------- state -------------- date ----------------------- dear ------ -------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date under the laws of state it was intended for x to be an s_corporation effective date however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and the plr-128696-08 secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election be an s_corporation by filing a completed form_2533 with the appropriate service_center effective date within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning date a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury employer_identification_number contact person - 1d number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date legend v name w name x name y programs z names b dollars amount c quantity d quantity e quantity dear we have considered your request for advance approval of your employer-related grant- making program under sec_4945 of the internal_revenue_code dated date our records indicate that you were recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_foundation as defined in sec_509 your letter indicates that you will operate a grant-making program called y for the dependent_children of employees of z indirectly by your founder x as well as v and w v and w also each have private_foundations that have employer related scholarship programs for z’s employees applicants may apply for scholarship grants from you v foundation and w foundation however they can only receive an award from one of the foundations v foundation and w foundation were formed at a different time have separate boards and separate selection committees from you z consists of e companies owned directly or the purpose of y is to assist students who show promise to receive an education of their choice the grants are for all costs of attendance and will be up to b dollars per year made on a semester-by-semester basis for up to semesters in the future you may increase the maximum dollar amount for rising costs the number of grants you will award will be limited to or fewer of the eligible applicants who were actually considered by the selection committee in selecting recipients of grants in that year as provided by revenue procedures and you will publicize y by written announcements to employees of z if an applicant has been chosen to receive a grant from v foundation or w foundation they will not be selected to receive a grant from you the grants will not be used as a means of inducement to recruit employees nor will a grant be terminated if the employee leaves the employer the recipient will not be restricted in a course of study that would be of particular benefit to the relevant employer or to the foundation the terms of the grant and the course of study for which grants are available will meet the requirements of sec_117 of the code and the regulations there under the grants will be consistent with the disinterested purpose of enabling the recipients to obtain an education in their individual capacities solely for their personal benefit and will not include any other commitments understandings or obligations conditional or unconditional suggesting that the studies are undertaken for the benefit of you or the employers or have as their objective the accomplishment of any purpose of you or the employers other than enabling the recipients to obtain an education in their individual capacities and solely for their personal benefit eligible applicants are dependent_children of employees of z whose parents are active employees with a minimum of one-year continuous service as of the grant application filing_date dependent_children include children stepchildren legally adopted children or children under the legal guardianship of the employee the applicant must have demonstrated academic motivation and ability moreover the applicant must be enrolled full time in an accredited institution working towards a degree or diploma or meet the minimum standards for admission to and have applied to an accredited tuition charging institution in order to pursue a degree all applicants must complete an application and provide proof of dependency evidence of enrollment at an accredited school_college_or_university certified transcripts grades from the education institution reflecting the number of credit hours and academic standing higher education applicants must include evidence of full time status hours per semester while students at the high school senior level and below must provide proof they are registered as full-time students and taking sufficient classes to advance to the next grade applications for the fall semester awards must be completed by early summer while applications for spring semester awards must be completed by early winter a selection committee consisting wholly of individuals independent except for their participation on the committee and separate from you your organizer and z will select grant recipients the current committee members have demonstrated expertise in academic affairs in the event there are vacancies on the selection committee the remaining selection committee members shall nominate for approval by your board one or more persons possessing the qualifications to fill such vacancy individuals eligible include persons knowledgeable in the education field by reason of background professional training advance degree and otherwise your members and your board shareholders of the employers and their board and employees or former employees of either you or the employers are ineligible for membership on the selection committee the selection committee will choose the grant recipients based solely upon the substantial objective standards that are completely unrelated to the employment of the recipient’s parents and to z’s lines of business the standards are limited to prior academic performance and demonstrated progress toward attainment of a degree or diploma the committee will grant awards with first preference to full time hours undergraduate students enrolled at an accredited college or university based on academic grade point averages if additional grants are available the selection committee will consider full time students pursuing post-graduate studies also based upon gpa scores and then full time students beginning in grade descending to kindergarten these awards will also be based on grade point averages the grants will be awarded solely in the order recommended by the selection committee the number of grants awarded may be reduced but may not be increased from the number recommended by the selection committee only the committee may vary the dollar amount of grants a letter to the recipient will confirm the award of each grant within two months of the deadline date the letter will also contain in writing the terms and conditions of the grant and the deadlines for submitting materials in support of and to continue the grant grants will not be terminated because the recipient’s parent terminates employment with z after the awarding of the grant regardless of the reason for such termination of employment the recipient will not be considered ineligible for a renewal simply because the parent is no longer employed by z grants will be awarded for one semester and the recipient must reapply for an additional grant to continue studies for the subsequent semester certified transcripts from the education institution must be provided reflecting the number of credit hours and academic standing before a grant for the next semester is awarded the recipient must submit transcripts grades showing successful completion of the required course hours for the current semester with at least a grade point average and provide proof of enrollment for the coming semester with at least hours at the start of each semester grant checks are made payable jointly to the student and the school the funds will be credited to the student’s account for tuition fees books and other expenses continuing college students will be placed on probation if they do not complete the prior minimum twelve hours semester's courses or achieve the minimum gpa students will not be eligible for subsequent semester's funding until such time as he or she completes the twelve semester hours and achieves the minimum gpa high schoo senior level and below students will be placed on probation which will result in a suspension of funding if they fail to successfully complete sufficient courses to advance to the next grade or failure to maintain at least a grade point average you also have several procedures in place in the event the recipient withdraws leaves the program or drops out first many of the schools have policies of refunding you the tuition grant if the student drops out or is no longer attending the school second in the event the student withdraws from the school and cannot provide the transcript the student is declared ineligible for future grants until he or she successfully completes at his or her own expense sufficient courses to advance toward a degree or diploma with a minimal grade point average in the event a misuse of award funds is discovered the student is declared ineligible for future grants until he or she successfully completes at his or her own expense sufficient courses to advance toward a degree or diploma with at least a minimal grade point average until the student purges his ineligibility future grants will not be provided you agree to maintain records to include the following i ii information used to evaluate the qualifications of potential grantees identification of the grantees including any relationship of any grantee to the private_foundation iii the amount and purpose of each grant and iv v all grantee reports and other follow-up data obtained in administering the private foundation's grant program records sufficient to demonstrate that the percentage tests of the revproc_76_47 have been satisfied you indicated that you will meet the percentage_test in revproc_76_47 whether the awards of the three foundations are aggregated or not you estimate the number of children of employees for purposes of the percent test who i are eligible ii will apply for grants and iii will be considered by the selection committee in selecting grant recipients but excluding renewals of grants awarded in prior years is c the potential pool of candidates would exceed this number but you wish to use the percent test there are approximately d employees of the companies covered under the employment-related student scholarship program out of the e companies covered under the program x has a direct ownership_interest in only one of the e companies you indicate that the amount of new awards not renewals will be less than the of c you also provided data from the past academic period showing that this test was passed whether the three foundations are aggregated or not sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 ii the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i ii iii its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance revproc_76_47 1976_2_cb_670 sets forth guidelines to be used in determining whether a grant made by a private_foundation under an employer-related program to a child of an employee of the particular employer to which the program relates is a scholarship grant that meets the provisions of sec_117 of the code as that section read before the tax_reform_act_of_1986 if a private foundation’s program satisfies the seven conditions set forth in sections dollar_figure through dollar_figure of revproc_76_47 and meets the percentage_test described in sec_4 the service will assume the grants meet the provisions of sec_117 as that section read before the tax_reform_act_of_1986 you have agreed that procedures in awarding grants under your program will be in compliance with sections dollar_figure through dollar_figure of revproc_76_47 without regard to the amendments to sec_117 made by the tax_reform_act_of_1986 in particular the selection of individual grant recipients will be made by a selection committee the members of which are totally independent and separate from the private_foundation the foundation’s creator and the relevant employer the grants will not be used as a means of inducement to recruit employees nor will a grant be terminated if the employee leaves the employer the recipient will not be restricted in a course of study that would be of particular benefit to the relevant employer or to the foundation section dollar_figure of rev_proc provides a percentage_test guideline case of a program that awards grants to children of employees of a particular employee the program meets the percentage_test if either of the following tests are met the number of grants awarded under that program in any year to such children do not exceed percent of the number of employees’ children who were eligible were applicants for such grants and were considered by the selection committee in selecting the recipients of grants in that year or the number of grants awarded under the program in any year to such children does not exceed percent of the number of employees’ children who can be shown to be eligible for grants whether or not they submitted an application in that year it states in the you have agreed that your program will meet the requirements of either the percent or percent percentage_test of section dollar_figure applicable to a program that awards grants to children of employees of a particular employer records should be maintained to show that you meet the applicable_percentage test of sec_4 this determination is issued with the understanding that in applying the percent test applicable to employees’ children set forth in revproc_76_47 you will include as eligible only those children who meet the eligibility standards described in revproc_85_51 1985_2_cb_717 this determination will remain in effect as long as the procedures in awarding grants under your program remain in compliance with sections dollar_figure through dollar_figure of revproc_76_47 without regard to the amendments to sec_117 made by the tax_reform_act_of_1986 if you enter into any other program covering the same individuals the percentage_test of revproc_76_47 must be met in the aggregate based on the information submitted and assuming your award programs will be conducted as proposed with a view to providing objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are ‘scholarship or fellowship’ grants within the meaning of sec_117 of the code and are excludable from the gross_income of the recipients subject_to the limitations provided in sec_117 of the code including to the extent that such grants are used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your employer-related grant-making program is a one-time approval this determination only covers the grant programs described above thus approval shall apply to subsequent grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and histories so that any or all grant distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois g lerner director exempt_organizations


internal_revenue_service number release date index nos cc psi - plr-104379-00 date p1 x state w state y dear this is in reply to your letter dated date and subsequent correspondence submitted on behalf of p1 requesting certain rulings regarding p1’s proposal to issue unsecured debt to refinance certain outstanding debt obligations the information provided indicates that p is a state w limited_partnership x a state y real_estate_investment_trust is the managing general_partner of p1 x owns in excess of of the units the units of p1 the balance of the units are owned by individuals subject_to sec_465 of the internal_revenue_code p1 primarily acquires owns and operates multifamily residential properties directly and through subsidiary partnerships including limited_liability companies the aggregate gross fair_market_value of the property owned by p1 that is neither real_property nor property incidental to the activity of holding real_property will be less than percent of the aggregate gross fair_market_value of all assets of p1 including assets held through subsidiary partnerships p1 has acquired properties subject_to secured nonrecourse debt p1 also has available an unsecured line of credit line of credit p1 is able to draw upon the line of credit from time to time to obtain capital to meet its various needs subject_to continued compliance with certain financial and other covenants the line of credit is a general obligation of p1 p1 anticipates drawing advances under the line of credit that will be applied to refinance mortgage debt assumed by p1 in connection with the acquisition of properties in exchange for units in p1 or mortgage debt that was later incurred to refinance mortgage debt that was assumed by p1 at the time of contribution p1 owns these properties either directly or through subsidiary partnerships including limited_liability companies in which it owns substantially_all of the economic interests and controls the general_partner or is or controls the managing member to the extent that p1 draws advances under the line of credit for this purpose the proceeds of the particular advances under the line of credit used for such purpose will be traced under the principles set forth in sec_1_163-8t of the income_tax regulations to the repayment of the specific mortgage debt that is refinanced the line of credit also is used currently to fund other acquisition and development activity of p1 under the line of credit as it is currently in effect the lenders would have recourse against x in the event that a default under the line of credit were to occur p1 and x intend to pursue an amendment of the line of credit so that neither x nor any of the partners of p1 have any personal liability for repayment of the line of credit therefore the liabilities will become nonrecourse to the partners of p1 in addition p1 anticipates that it will issue unsecured debt the unsecured debt that is not recourse to any partner of p1 or a subsidiary related_person or any of the assets of any partner or related_person p1 intends that the unsecured debt will be a general obligation of p1 such that in the case of a default the holders of the unsecured debt will have a claim against all of the assets of p1 rather than against specific assets of p1 it is anticipated that the unsecured debt will be issued to refinance the mortgage debt assumed by p1 in connection with the acquisitions of properties or mortgage debt that was later incurred to refinance mortgage debt that was assumed by p1 at the time of contribution it is also anticipated that the unsecured debt will be used to fund acquisition and development activity of p1 the proceeds of the unsecured debt will be traced under the principles set forth in sec_1_163-8t to the repayment of the specific mortgage debt that is refinanced p1 represents that the unsecured debt will provide that none of the partners of p1 and no related_person to any partner as defined in sec_1_752-4 will have any liability for the repayment of the unsecured debt p1 represents that neither the unsecured debt nor the line of credit will be convertible into an equity_interest in p1 p1 further represents that to the best of its knowledge the purchasers of the unsecured debt will be qualified purchasers that satisfy the requirements of sec_49 until the earlier of two years after the unsecured debt is issued or a registration_statement with respect to the unsecured debt is declared effective under the securities act of and that during such time period substantially_all the benefits_and_burdens_of_ownership of the unsecured debt will inure to those purchasers p1 also represents that each of the lenders of the line of credit is a qualified_person within the meaning of sec_49 sec_752 provides that any increase in a partner's share of liabilities of a partnership or any increase in a partner's individual liabilities by reason of the assumption by the partner of partnership liabilities is considered a contribution of money by the partner to the partnership similarly under sec_752 any decrease in a partner's share of liabilities of a partnership or any decrease in a partner's individual liabilities by reason of the assumption by the partnership of the individual liabilities is considered a distribution of money to the partner by the partnership sec_752 provides that for purposes of sec_752 a liability to which property is subject will to the extent of the fair_market_value of such property be considered as a liability of the owner of the property sec_1_752-1 provides that a partnership_liability is a recourse_liability to the extent that any partner or related_person bears the economic risk of loss for that liability under sec_1_752-2 sec_1_752-2 provides that except as otherwise provided in sec_1_752-2 a partner bears the economic risk of loss for a partnership_liability to the extent that if the partnership constructively liquidated the partner or related_person would be obligated to make a payment to any person or a contribution to the partnership because that liability becomes due and payable and the partner or related_person would not be entitled to reimbursement from another partner or person that is a related_person to another partner sec_1_752-2 provides that the determination of the extent to which a partner or related_person has an obligation to make a payment under sec_1 b is based on the facts and circumstances at the time of the determination all statutory and contractual obligations relating to the partnership_liability are taken into account for purposes of applying sec_1_752-2 including contractual obligations outside the partnership_agreement such as guarantees indemnifications reimbursement agreements and other obligations running directly to creditors or to other partners or to the partnership sec_1_752-3 provides that the partner's share of the nonrecourse liabilities of the partnership includes the amount of any taxable gain that would be allocated to the partner under sec_704 or in the same manner as sec_704 in connection with a revaluation of partnership property if the partnership disposed of in a taxable transaction all partnership property subject_to one or more nonrecourse liabilities of the partnership in full satisfaction of liabilities and for no other consideration the gain a partner would be allocated under the hypothetical sale in sec_1_752-3 is referred to as sec_704 minimum gain sec_704 minimum gain is the amount of gain that a partner would receive under sec_704 from a hypothetical sale solely in satisfaction of the nonrecourse liabilities encumbering partnership property with limited exceptions see sec_1 e sec_704 gain is calculated on a property-by-property basis if more than one item of partnership property is subject_to a single nonrecourse_liability the partnership must allocate the nonrecourse_liability among the individual items of partnership property before the partnership can calculate each partner's share of sec_704 minimum gain the portion of the nonrecourse_liability allocated to each item of partnership property is then treated as a separate loan under sec_1 a sec_465 limits the deductions for losses for any taxable_year for an activity to the extent of the total amount for which the taxpayer is at risk for the activity at the close of the taxable_year for partnerships the sec_465 at_risk_limitation applies at the partner level under sec_465 the activity engaged in by the taxpayer in carrying_on_a_trade_or_business of holding real_property is subject_to the at_risk_limitation of sec_465 sec_465 provides that a taxpayer's at risk amount includes amounts borrowed for use in an activity to the extent that the taxpayer is personally liable for the repayment of the borrowed amounts sec_465 however allows a taxpayer to treat qualified_nonrecourse_financing as an amount_at_risk even though the taxpayer is not personally liable for the repayment of the financing sec_465 provides that notwithstanding any other provision of sec_465 in the case of an activity of holding real_property a taxpayer is considered at risk for the taxpayer's share of any qualified_nonrecourse_financing that is secured_by real_property used in the activity of holding real_property sec_465 defines qualified_nonrecourse_financing to mean any financing i that is borrowed by the taxpayer for the activity of holding real_property ii that is borrowed by the taxpayer from a qualified_person or represents a loan from any federal state_or_local_government or instrumentality thereof or is guaranteed by any federal state_or_local_government iii except to the extent provided in regulations for which no person is personally liable for repayment and iv that is not convertible debt sec_465 provides that in the case of a partnership a partner's share of any qualified_nonrecourse_financing of such partnership shall be determined on the basis of the partner's share of liabilities of such partnership incurred in connection with such financing within the meaning of sec_752 sec_1_465-27 provides that the personal liability of any partnership for repayment of a financing is disregarded and the financing is treated as qualified_nonrecourse_financing secured_by real_property if i the only persons personally liable to repay the financing are partnerships ii each partnership with personal liability holds only property described in sec_1_465-27 and iii in exercising its remedies to collect on the financing in a default or default-like situation the lender may proceed only against property that is described in sec_1_465-27 and that is held by the partnership or partnerships sec_1_465-27 provides that principles similar to those found in sec_1_465-27 apply in determining whether a financing of an entity disregarded for federal tax purposes is treated as qualified_nonrecourse_financing secured_by real_property based on the information provided and the representations made we conclude as follows for purposes of sec_752 p1 may allocate the unsecured debt and each advance under the line of credit among its multiple properties including p1's proportional share of the properties owned by the p1 subsidiaries that qualify as partnerships for federal_income_tax purposes in any amounts determined by it provided however that the aggregate allocation of the unsecured debt and the outstanding advances under the line of credit to each property may not exceed the lesser_of a the fair_market_value of the property or b the amount of debt previously allocated to the property repaid with the proceeds of the unsecured debt and the outstanding advances under the line of credit for purposes of sec_1_752-3 the unsecured debt and the outstanding advances under the line of credit will be treated as nonrecourse liabilities secured_by p1's assets including p1's proportional share of the properties owned by p1's subsidiaries that qualify as partnerships for federal_income_tax purposes for purposes of sec_752 p1 may allocate reductions in the amount of the unsecured debt among its multiple properties including p1's proportional share of the properties owned by p1's subsidiaries that qualify as partnerships for federal_income_tax purposes in the same manner and in the same proportion as the unsecured debt is initially allocated for purposes of sec_752 p1 may designate each advance under the line of credit as a separate loan with all advances on a particular date treated as a single advance for this purpose and may designate repayments under the line of credit as repayments of one or more specified advances thereunder with reductions in each advance under the line of credit allocated among p1's multiple properties including p1's proportional share of the properties owned by p1's subsidiaries that qualify as partnerships for federal_income_tax purposes in the same manner and in the same proportion as such advance is initially allocated for purposes of sec_465 the unsecured debt and the outstanding advances under the line of credit will be treated as qualified_nonrecourse_financing as to which no person has personal liability and that is considered secured_by p1's assets including p1's proportional share of the properties owned by the p1 subsidiaries that qualify as partnerships for federal_income_tax purposes except as specifically ruled upon above we express no opinion on the federal tax consequences of the transactions described above under any other provisions of the code the rulings set forth above regarding the use of the proceeds from the advances under the line of credit are conditioned on the amendment of the line of credit resulting in neither x nor any of the partners of p1 having any liability for repayment of the line of credit similarly the rulings regarding the unsecured debt are conditioned on the representation that no partner of p1 will have any personal liability for the repayment of the unsecured debt no opinion is expressed or intended as to whether the line of credit as amended or the unsecured debt will be treated as nonrecourse liabilities furthermore no opinion is expressed regarding the tax consequences of the conversion of the line of credit from a recourse_liability to a nonrecourse_liability this ruling is directed only to the taxpayers who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to p1 sincerely yours j thomas hines branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes