t c summary opinion united_states tax_court joseph brian whiteford and gwenn catherine whiteford commissioner of internal revenue respondent petitioners v docket no 4711-17s filed date joseph brian whiteford and gwenn catherine whiteford pro sese christian a ehehalt edward j laubach jr and erin k neugebauer for respondent summary opinion ruwe judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed 1unless otherwise indicated all section references are to the internal continued pursuant to sec_7463 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 respondent determined deficiencies in petitioners’ federal_income_tax and accuracy-related_penalties as follows year deficiency penalty sec_6662 dollar_figure big_number dollar_figure dollar_figure the issues for decision are whether petitioners failed to report other income of dollar_figure for and dollar_figure for whether petitioners failed to report additional rental income on schedule e supplemental income and loss of dollar_figure for whether petitioners can substantiate expenses underlying deductions claimed on schedule c profit or loss from business for other expenses of dollar_figure for car and truck expenses of dollar_figure for and dollar_figure for contract labor expenses of dollar_figure for and dollar_figure for interest_expenses of dollar_figure for and utilities expenses of dollar_figure for whether petitioners can substantiate for expenses underlying deductions claimed on a second schedule c for utilities expenses of dollar_figure legal and continued revenue code in effect for the years in issue professional fees of dollar_figure and car and truck expenses of dollar_figure whether petitioners can substantiate expenses underlying deductions claimed on schedule e for utilities expenses of dollar_figure for and dollar_figure for other expenses of dollar_figure for and depreciation of dollar_figure for and whether petitioners are liable for the sec_6662 and b accuracy-related_penalty for substantial understatements of income_tax background petitioners filed joint federal_income_tax returns for and and reported their income and expenses on the cash_basis petitioners both received income for and reported on forms w-2 wage and tax statement additionally petitioners included two schedule c businesses on the filed and federal_income_tax returns schedule c1 was related to real_estate activities schedule c2 was for petitioner husband’s home care pt business petitioners also reported rental property activity on schedule e for both and respondent issued a notice_of_deficiency on date determining deficiencies of dollar_figure for and dollar_figure for and penalties under sec_6662 and b of dollar_figure for and dollar_figure for at trial petitioners presented no documentary_evidence to support their position petitioners relied solely upon the testimony of petitioner husband which did not address the substantive issues of the case discussion respondent used the bank_deposits method to compute additional income of dollar_figure and dollar_figure for and respectively the commissioner’s use of the bank deposit s method for computing unreported income has long been sanctioned by this court when a taxpayer fails to keep adequate books_and_records 102_tc_632 bank_deposits are prima facie evidence of income id citing 87_tc_74 respondent properly used the bank_deposits method by totaling deposits and removing previously reported income and nontaxable deposits petitioners offered no testimony or other evidence to contest respondent’s computations 2respondent’s determination of income_tax deficiencies is presumed correct thus petitioners not respondent bear the burden of proving that respondent’s determinations of unreported income computed using the bank_deposits method of reconstructing income are incorrect see 94_tc_654 70_tc_1057 additionally petitioners agree that for the rental income on schedule e should have been dollar_figure which is dollar_figure more than reported petitioners deducted schedule c2 expenses for but failed to provide any evidence at trial to substantiate the reported expenses petitioners deducted schedule c1 expenses for both and which related to rental properties they owned but failed to substantiate any of these expenses petitioners failed to provide any supporting evidence to substantiate the reported schedule e expenses the parties were ordered to file posttrial memoranda but petitioners failed to do so at trial petitioner husband testified that excise and personal duties are all that is lawfully taxable in this country m e and my wife are not exercising in federal activity there’s a reason they call them federal taxes no amendment has ever overturned article section of the constitution allowing direct taxes the 16th amendment if ratified only conferred reaffirmation of indirect taxes and cited no new power of taxation under stanton v baltic mining therefore direct taxes still remain unconstitutional in this country today i will reference sec_3401 of the internal_revenue_code section a defines what wages are and references employees employees are defined under c me and my wife are not officers employees or elected officials of the united_states c defines unequivocally who an employee is and it’s not us we will not painstakingly address petitioner’s tax-protester arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir sec_6662 and b imposes a accuracy-related_penalty on any portion of an underpayment attributable to a substantial_understatement_of_income_tax an understatement of income_tax is substantial when it exceeds the greater of of the tax required to be shown on the return or dollar_figure sec_6662 the amounts of the deficiencies in the notice_of_deficiency which in this case equal the understatements were dollar_figure for and dollar_figure for both of which exceed dollar_figure and of the tax required to be shown on the relevant return under sec_7491 respondent bears the burden of production with respect to the penalties respondent properly documented the required managerial approval under sec_6751 for the assertion of the penalties under sec_6662 against petitioners the deficiencies determined in the notice_of_deficiency which we uphold are equal to the understatements which are greater than the 3petitioners reported a dollar_figure tax_liability on their return but the correct liability to be shown on the return was dollar_figure petitioners reported an dollar_figure tax_liability on their return but the correct liability to be shown on the return was dollar_figure threshold under sec_6662 and thus satisfy respondent’s burden of production in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------ ------------------------------------------ ---------------------------- ---------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number -------------------- refer reply to cc psi b02 plr-115416-08 date date legend x state d1 dear --------------- ------------------------------------------ ------------------------ ------------- ------------------- this is in response to a letter dated date and subsequent correspondence submitted by x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as an association_taxable_as_a_corporation for federal tax purposes facts the information submitted states that x was formed as a limited_liability_company in state on d1 x’s default status was as a partnership for federal tax purposes x intended to be classified as an association_taxable_as_a_corporation for federal tax purposes effective d1 however a form_8832 entity classification election for x to elect to be treated as an association_taxable_as_a_corporation effective d1 was not timely filed plr-115416-08 law and analysis sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301 b 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 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing a 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 on the election form the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after 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 six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-115416-08 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective d1 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_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 will be sent to x’s authorized representative sincerely curt g wilson deputy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi 9-plr-110816-03 date date legend date taxpayer trust trust interest x taxpayer year son son date year dear this is in response to your letter dated date and prior correspondence requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make allocations of generation-skipping_transfer gst tax exemption plr-110816-03 the facts and representations submitted are summarized as follows on date taxpayer created two irrevocable trusts trust and trust for the benefit of each of his children taxpayer transferred interest to each trust which he valued at dollar_figurex for gift_tax purposes taxpayer and taxpayer elected on their year form sec_709 united_states gift and generation-skipping_transfer_tax returns to treat taxpayer 1's transfers as being made one-half by taxpayer and one-half by taxpayer pursuant to item i paragraph a of trust during the beneficiary’s lifetime when a contribution is made to the trust the beneficiary has a non-cumulative right to direct the trustee to distribute outright to the beneficiary or for the beneficiary’s benefit a sum of money or property the amount not to exceed the lesser_of the value of the contribution or the present_interest exclusion to which the donor of the contribution is entitled under sec_2503 of the internal_revenue_code for gifts to the beneficiary during the calender year in which the contribution is made item i paragraph a provides that if the aggregate amount of the contributions to the trust in any calender year exceeds the amount that the beneficiary is entitled to withdraw and or the beneficiary disclaims all or any portion of his right to receive any contribution each child of the beneficiary who is living at the time of each contribution has the right to direct the trustee to distribute to such child or for such child’s benefit a sum of money or property the amount of which may not exceed the lesser_of such child’s pro_rata share of the excess of the aggregate amount of the contribution over the amount of the contribution which the beneficiary is entitled to withdraw or the present_interest exclusion to which the donor of the contribution is entitled under sec_2503 for gifts to such child during the calender year in which the contribution was made item i paragraph a provides that in making distributions to or for the benefit of the beneficiary and or the beneficiary’s children the trustee in his discretion is authorized to make distributions from the contributions received by the trust during the calender year and or from other principal in the trust item i paragraph b provides that all property in the trust not withdrawn pursuant to the provisions of paragraph a becomes part of the principal of the trust paragraph b provides that until the beneficiary’s death the trustee may distribute to or for the benefit of the beneficiary and or any of the beneficiary’s issue as much of the income or principal of the trust as the trustee deems necessary to provide for the health maintenance and support of the beneficiary and his issue any income not distributed is accumulated and added to the principal of the trust item i paragraph b provides that the trust terminates upon the beneficiary’s death at such time all property remaining in the trust is to be distributed to such persons as the beneficiary may direct in his will by express reference to this power plr-110816-03 except the beneficiary may not appoint the property to himself to his estate to his creditors or to the creditors of his estate to the extent the beneficiary does not exercise this limited_power_of_appointment the property is to be distributed per stirpes among the beneficiary’s issue who survive him if any and if none per stirpes among taxpayer 1's issue who survive the beneficiary if any and if none to taxpayer 1's heirs excluding taxpayer the terms of trust and trust are the same except the beneficiary of trust is son and the beneficiary of trust is son taxpayer and taxpayer were advised by their attorney that trust and trust should have an inclusion_ratio of zero so each trust could make distributions to their grandchildren free of gst tax on date taxpayer and taxpayer timely filed their form sec_709 reporting the date transfers taxpayer and taxpayer 2's accountant however inadvertently failed to allocate a portion of their unused gst exemptions to trust and trust when preparing the form sec_709 the failure to allocate the gst_exemption was discovered by taxpayer and taxpayer 2's attorney in year taxpayer and taxpayer have requested an extension of time under sec_301_9100-3 to allocate a portion of their unused gst exemptions to the date transfers to trust and trust sec_2601 imposes a tax on every generation-skipping_transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such plr-110816-03 transfer or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-110816-03 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer and taxpayer are granted an extension of time of days from the date of this letter to make allocations of their available gst tax exemptions in respect to the date transfers to trust and trust the allocations will be effective as of date the date of the transfers to trust and trust and the gift_tax value of the transfers will be used in determining the amount of gst_exemption to be allocated to each trust the allocations should be made on supplemental form sec_709 and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose the rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to the trusts in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayers this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


t c memo united_states tax_court daryl a norblom petitioner v commissioner of internal revenue respondent docket no filed date daryl a norblom pro_se virginia l hamilton for respondent memorandum opinion dinan special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable_year in issue all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioner's federal_income_tax in the amount of dollar_figure and additions to tax under sec_6651 and sec_6654 in the amounts of dollar_figure and dollar_figure respectively after a concessions by the parties the issues for decision are whether the wages received by petitioner are taxable whether petitioner is liable for the addition_to_tax for failure_to_file a return pursuant to sec_6651 in the amount of dollar_figure and whether petitioner is liable for the addition_to_tax for underpayment of estimated_tax pursuant to sec_6654 in the amount of dollar_figure no facts have been stipulated petitioner resided in golden colorado on the date the petition was filed in this case in petitioner worked for aspen office furniture and denver post from which he received wages in the amounts of dollar_figure and dollar_figure respectively the wages from aspen office furniture were reported on a form_w-2 wage and tax statement and dollar_figure of federal_income_tax was withheld the wages received from denver post were self-employment_income reported on form- miscellaneous income in addition petitioner received a taxable state_income_tax refund from the colorado department of respondent conceded that the notice_of_deficiency did not reflect petitioner's withholding of dollar_figure petitioner conceded that he must include in his gross_income a refund of state_income_tax revenue in the amount of dollar_figure petitioner failed to file a federal_income_tax return petitioner testified that he worked for aspen office furniture and denver post where he earned wages not income during the taxable_year petitioner's contention that he had no tax_liability is based on various tax_protester arguments petitioner is a classic tax_protester raising traditional protester arguments such arguments are repeatedly rejected 640_f2d_1014 9th cir and need not be addressed by this court 737_f2d_1417 5th cir 80_tc_1111 nieman v commissioner tcmemo_1993_533 the second issue is whether petitioner is liable for the addition_to_tax pursuant to sec_6651 petitioner bears the burden of proving that respondent's determination is incorrect rule a 290_us_111 sec_6651 imposes an addition_to_tax for failure to timely file a return unless the taxpayer establishes the failure did not result from willful neglect and the failure was due to reasonable_cause willful neglect has been interpreted to mean a conscious intentional failure or reckless indifference 469_us_241 reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence and was nonetheless unable to file a return within the prescribed time united_states v boyle supra pincite sec_301 c proced and admin regs the addition_to_tax equal sec_5 percent of the tax required to be shown on the return for the first month with an additional percent for each additional month or fraction of a month during which the failure_to_file continues not to exceed a maximum of percent sec_6651 petitioner testified that he did not file a federal_income_tax return for because he had no tax_liability for that year based on the record we find petitioner intentionally failed to file his federal_income_tax return and is liable for the addition_to_tax pursuant to sec_6651 finally we address the issue of the addition_to_tax for failure to pay estimated income_tax under sec_6654 for the tax_year this court stated in 33_tc_1071 this section has no provision relating to reasonable_cause and lack of willful neglect it is mandatory and extenuating circumstances are irrelevant petitioner has failed to show that he did not underpay his estimated_tax accordingly respondent's determination is sustained to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court valteau harris koenig and mayer petitioner v commissioner of internal revenue respondent docket no 5584-09l filed date james r washington iii and jason r anders for petitioner ardney j boland iii and steven gallo student for respondent memorandum findings_of_fact and opinion goeke judge this is a collection_due_process cdp appeal pursuant to sec_6330 for petitioner’s employment_tax unemployment tax and income unless otherwise indicated all section references are to the internal_revenue_code code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure tax_liabilities for different periods periods at issue the unpaid balances for the various accounts are as follows type employment employment employment employment employment employment employment employment employment employment employment employment employment employment employment employment employment employment employment employment form form_941 form form_941 form form_941 form form_941 form form_941 form form_941 form form_941 form form_941 form form_941 form form_941 form period balance1 dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure employment unemployment unemployment unemployment income_tax income_tax form_941 form form_940 form form_1065 form_1065 dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure amounts are exclusive of accrued but unassessed interest after concessions two issues remain for our consideration whether respondent is required to apply certain fund transfers as petitioner directed on its federal_tax_deposit forms we hold he is not whether petitioner is entitled to an abatement of the tax additions to tax or tax penalties for any of the periods at issue we hold that it is not findings_of_fact petitioner is a new orleans law firm that began operations in and had a principal_place_of_business in louisiana when it filed its petition before the periods at issue petitioner relied on a certified_public_accountant c p a to help it in keeping with a irs appeals_office decision respondent has relieved petitioner of its liability for penalties and additions to tax resulting from the following its failure to timely file its employment_tax returns for the third and fourth quarters of its failure to timely file its federal unemployment tax_return for and its failure to timely make payments and deposits for those periods meet its various tax obligations at some point petitioner terminated its relationship with the c p a and edmond harris petitioner’s tax_matters_partner assumed responsibility for filing petitioner’s tax returns and for meeting various remittance deadlines petitioner failed to timely file any of the returns for the periods at issue it did however make separate remittances partially satisfying the liabilities it incurred during those periods petitioner made the remittances as if they were federal tax deposits it prepared forms 8109-b federal_tax_deposit coupon ftd coupon or coupon and submitted them with the remittances to banks authorized to accept tax deposits the ftd coupons indicated the period to which the remittances were to apply as did the memo line of each check petitioner designated many of the remittances to satisfy past due liabilities because the coupons and payments were submitted to banks rather than to respondent respondent did not always receive petitioner’s designation instructions respondent allocated only of the payments in accordance with petitioner’s instructions although it failed to timely pay its employment and unemployment taxes during the periods at issue petitioner continued to operate as usual petitioner never missed a payroll and continued to make bonus payments to its employees petitioner also organized yearend parties for its employees and took only minimal steps to reduce its expenses respondent determined that petitioner had underpaid its employment and unemployment taxes for the periods at issue and that petitioner is liable for additions to tax under sec_6651 for failing to timely file employment and unemployment tax returns he also determined that petitioner is liable for penalties under sec_6656 for failing to make tax deposits and under sec_6698 for failing to file its partnership returns if respondent had allocated petitioner’s payments as it had requested its penalties and additions to tax would have been less between february and date respondent issued petitioner two notices of intent to levy and four notices of federal_tax_lien filing for collection of the tax_liabilities for the periods at issue petitioner timely requested cdp hearings for the various collection notices petitioner’s cdp hearing was assigned to an internal_revenue_service irs settlement officer so mr harris met with the so and gave her documents he believed demonstrated that the irs had misapplied certain fund transfers mr harris requested that the irs reallocate the funds because he believed the reallocation would significantly reduce petitioner’s tax_liabilities mr harris also disputed respondent’s determination of petitioner’s tax_liability for the fourth quarter of mr harris then told the so that all additions to tax penalties and interest should be abated because all tax was eventually paid and mr harris was not qualified to handle petitioner’s tax_liabilities even though he was designated as petitioner’s tax_matters_partner after reviewing the evidence the so concluded that respondent had properly applied all of the funds the so further concluded that respondent had properly determined petitioner’s fourth quarter employment_tax liability and that the arguments presented did not justify abating the additions to tax and penalties for the periods at issue on the basis of these conclusions the so sustained respondent’s proposed collection action petitioner timely petitioned the court for review of the so’s determinations opinion i jurisdiction petitioner comes before us pursuant to sec_6330 to appeal the so’s determinations in its cdp hearing our jurisdiction under sec_6330 is established when there is a written notice that embodies a determination to proceed with the collection_of_taxes in issue and a timely filed petition 117_tc_159 petitioner received two levy notices and four lien notices for collection of the tax_liabilities at issue and it timely filed a petition challenging the notices therefore we have jurisdiction under sec_6330 ii cdp hearing and standard of review the lien and levy notices gave petitioner a statutory right to a cdp hearing with the appeals_office which petitioner requested during a cdp hearing a taxpayer may raise any relevant issue including challenges to the appropriateness of the collection action and possible collection alternatives sec_6330 at a cdp hearing a taxpayer may challenge its underlying liability if it has had no prior opportunity to contest the liability sec_6330 when the underlying tax_liability was properly at issue in the cdp hearing we review the appeals officer’s determination de novo 114_tc_604 when a taxpayer’s underlying tax_liability is not in dispute the court reviews the officer’s determination for abuse_of_discretion see id 114_tc_176 at the cdp hearing petitioner disputed respondent’s determination of its employment_tax liability for the fourth quarter of and its liability for penalties and additions to tax for all periods because petitioner had had no prior opportunity to challenge those liabilities they were properly before the so we will accordingly review de novo respondent’s determinations with respect to those liabilities petitioner also challenges the so’s decision not to have its remittances reallocated in accordance with its instructions there is some uncertainty in our precedents as to whether a de novo standard of review applies where as here the controversy concerns the proper application to the tax_liability at issue in the cdp hearing of a credit an overpayment or a remittance petitioner contends that respondent’s refusal to honor its designation was inconsistent with a published irs administrative position if that is so respondent’s proposed collection action would be impermissible under either standard we accordingly do not need to decide whether petitioner’s challenge involves a dispute concerning its underlying tax_liability as to which a de novo standard of review would apply compare 116_tc_60 applying de novo standard where taxpayer challenged application of overpayment credits reasoning that the validity of the underlying tax_liability ie the amount unpaid after application of credits to which petitioner is entitled was properly at issue with kovacevich v commissioner tcmemo_2009_160 applying abuse_of_discretion standard where taxpayer challenged application of tax_payments reasoning that questions about whether a particular check was properly credited to a particular taxpayer’s account for a particular tax_year are not challenges to his underlying tax_liability and orian v commissioner tcmemo_2010_234 same iii allocation of fund transfers from to petitioner attempted to direct the application of fund transfers totaling dollar_figure to the periods at issue the irs applied of those transfers as petitioner requested but not the remaining disputed transfers during the cdp hearing petitioner requested that the so have the fund transfers reallocated the so reviewed petitioner’s documents and respondent’s records and concluded that respondent had properly applied all transfers we must determine whether the so properly denied petitioner’s reallocation request for the disputed transfers totaling dollar_figure we hold that she did the code and our jurisprudence recognize a distinction between tax deposits and tax_payments see sec_6656 penalty for failure to make deposits a addition_to_tax for failure_to_pay_tax romano-murphy v commissioner tcmemo_2012_330 at a deposit represents a remittance that is held by the irs on behalf of the taxpayer in a manner similar to a cash bond whereas a payment represents a remittance that discharges or pays a deemed or assessed tax_liability 644_f3d_254 5th cir the distinction between deposits and payments is important when a taxpayer attempts to designate the period to which a remittance should be applied because the applicable designation rules depend on the remittance’s classification when the remittance is a deposit sec_6656 provides the rules under which the period may be designated taxpayers may designate the period to which late deposits should be applied only within days of receiving notice that the commissioner has imposed failure to deposit penalties when the remittance is a payment revproc_2002_26 sec dollar_figure and 2002_1_cb_746 provides the designation rules if additional taxes penalty and interest for one or more taxable periods have been assessed against a taxpayer or have been mutually agreed to as to the amount and liability but are unassessed at the time the taxpayer voluntarily tenders a partial payment that is accepted by the service and the taxpayer provides specific written directions as to the application of the payment the service will apply the payment in accordance with those directions if additional taxes penalty and interest for one or more taxable periods have been assessed against a taxpayer or have been mutually agreed to as to the amount and liability but are unassessed at the time the taxpayer voluntarily tenders a partial payment that is accepted by the service and the taxpayer does not provide specific written directions as to the application of payment the service will apply the payment to periods in the order of priority that the service determines will serve its best interest the parties disagree about whether the remittances at issue were deposits or payments we need not resolve this dispute because petitioner did not satisfy either set of designation rules petitioner never received a failure to deposit penalty notice and consequently could not designate the period to which its remittances should be applied under sec_6656 petitioner could not designate the period to which its remittances should be applied under revproc_2002_26 supra either because it failed to provide specific designation instructions to the irs it communicated the instructions to the depositary bank not to respondent so respondent was free to apply the payments according to the best interest of the irs petitioner submitted to the bank with its remittances ftd coupons indicating the periods to which it intended the remittances to apply petitioner cites the coupons’ instructions as the source of its right to designate the periods in particular petitioner relies on the following two provisions if the liability for form_941 was incurred in one quarter and deposited in another quarter darken the space for the quarter in which the tax_liability was incurred and caution do not use these coupons to deposit delinquent taxes assessed by the irs pay those taxes directly to the irs on the basis of these instructions petitioner concludes a that it was allowed to direct its remittances to satisfy liabilities from prior periods and b this phrasing varied somewhat over the years at issue but its substance remained the same that it was free to use the ftd coupons to deposit delinquent taxes as long as the irs had not yet assessed taxes for the designated period we disagree the instructions simply allow taxpayers to use ftd coupons to make current tax deposits in the month following the close of the quarter in which the tax arose for example the march deposit for a taxpayer making monthly deposits would come due on april the taxpayer would submit its deposit with the coupon and indicate that it was for liabilities incurred in the first quarter taxpayers may not use ftd coupons to direct late deposits to apply to prior periods even if its reading of the instructions were correct petitioner’s reliance on them would be misplaced the sources of authoritative law in the tax field are the statutes and regulations not government publications 94_tc_384 59_tc_456 sec_6656 allows a taxpayer to direct the application of past due deposits only during the 90-day period following its receipt of a failure to deposit penalty notice if the ftd coupon instructions were inconsistent with sec_6656 they would be invalid we also reject on policy grounds petitioner’s reading of the ftd coupons’ instructions respondent had not yet assessed petitioner’s employment_taxes in part because petitioner had not filed its employment_tax returns allowing petitioner to designate the period for application of its payments because respondent had not yet assessed the related tax would reward petitioner for neglecting its filing obligations petitioner cannot hide behind the nonassessment of its taxes when it prevented assessment by failing to file petitioner makes a similar argument in contending that revproc_2002_26 supra does not apply to its remittances petitioner notes that by its terms the revenue_procedure applies only to payments of additional taxes penalty and interest assessed against a taxpayer emphasis added petitioner argues that because respondent had not yet assessed the taxes for the periods at issue the revenue_procedure does not apply to the remittances even if this were true the result would not be that the irs was required to apply the remittances as petitioner had requested we would simply decide this case without relying on the revenue_procedure in the absence of the revenue_procedure our conclusion would be the same although courts have repeatedly recognized that the irs must honor a taxpayer’s instruction concerning how a voluntary tax payment should be applied dixon v the revenue_procedure also applies to unassessed taxes penalty and interest if the parties have agreed to the amount of the liability this is not relevant here commissioner 141_tc_173 that principle cannot apply when the taxpayer has not communicated its instruction to the irs petitioner communicated its instructions to the depositary bank but not to respondent consequently respondent was free to apply the remittances according to the best interest of the irs on the basis of our analysis we hold that respondent did not err in failing to apply petitioner’s payments as it had directed congress has created tax deposit requirements to protect the treasury against insolvencies and other events that may hinder its tax collection efforts to efficiently administer the deposit process the irs has authorized certain banks to receive and process tax deposits the banks are meant to receive only current deposits past due remittances should be submitted directly to the irs petitioner improperly used the deposit process to make past due remittances whether those remittances were deposits or payments petitioner failed to satisfy the requirements to bind respondent to its instructions accordingly respondent was entitled to allocate the remittances according to the best interest of the irs iv petitioner is not entitled to an abatement of tax additions to tax or penalties petitioner argues that it is entitled to a reduction in its underlying liability for the fourth quarter of and that it had reasonable_cause for failing to timely file returns and make payments there is some question about whether petitioner properly challenged its underlying liability during its administrative hearing we will assume that it did and that the liability is properly at issue a fourth quarter petitioner’s self-assessed employment_taxes of dollar_figure on its form_941 for the fourth quarter of on date respondent assessed dollar_figure of additional tax petitioner disputes this additional_assessment petitioner relies on the following documents to support its self-assessment a copy of its form_941 showing a tax due of dollar_figure a document purporting to be from its former c p a showing a tax due of dollar_figure with no computations and a copy of its ftd coupon and check for dollar_figure the taxpayer bears the burden of proving that the commissioner’s determinations are incorrect rule a if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the taxpayer’s liability the burden shifts to the secretary with respect to that issue sec a petitioner has not presented evidence sufficient to shift the burden on this issue none of the documents petitioner has presented demonstrate that petitioner owed less tax than respondent determined a taxpayer’s employment_tax depends on its employees’ wages petitioner’s documents contain no information concerning the wages it paid its employees the documents support the amount of employment_taxes petitioner paid and reported but they do not allow us to evaluate whether that amount was correct petitioner has failed to carry its burden of proving respondent’s determination incorrect accordingly we sustain respondent’s determination of petitioner’s employment_tax liability for the fourth quarter of b penalties and additions to tax petitioner bears the burden of proving that it is not liable for additions to tax and penalties see rule a petitioner argues that it had reasonable_cause for its failures to timely file deposit and timely pay the additions to tax under sec_6651 and and the penalty under sec_6656 apply unless the taxpayer proves that its failure to timely file failure to timely pay or failure to make deposits was due to reasonable_cause and not due to willful neglect courts have applied the reasonable_cause exceptions under these sections consistently see eg 251_f3d_210 d c cir aff’g tcmemo_1999_ the penalty under sec_6698 applies unless the taxpayer proves that its failure_to_file was due to reasonable_cause but the statute does not include the phrase not due to willful neglect found in sec_6651 and sec_6656 we decline to decide whether the sec_6698 reasonable_cause exception differs from that in sec_6651 and sec_6656 any minor differences between the standards would not change our conclusion here for purposes of this opinion we will assume the sec_6698 reasonable_cause standard is the same as that under sec_6651 and sec_6656 reasonable_cause exists if a taxpayer can establish that it exercised ordinary business care and prudence in providing for payment of its tax_liability and was nevertheless either unable to pay the tax or would suffer an undue_hardship if it paid on the due_date sec_301_6651-1 proced admin regs this is a heavy burden see 469_us_241 860_f2d_1235 5th cir aff’g tcmemo_1987_391 we determine whether a taxpayer exercised ordinary business care and prudence by applying a facts_and_circumstances_test specifically sec_301_6651-1 proced admin regs provides in determining whether the taxpayer was unable to pay the tax in spite of the exercise of ordinary business care and prudence in providing for payment of his tax_liability consideration will be given to all the facts and circumstances of the taxpayer’s financial situation including the amount and nature of the taxpayer’s expenditures in light of the income or other_amounts he could at the time of such expenditures reasonably expect to receive prior to the date prescribed for the payment of the tax thus for example a taxpayer who incurs lavish_or_extravagant living_expenses in an amount such that the remainder of his assets and anticipated income will be insufficient to pay his tax has not exercised ordinary business care and prudence in providing for the payment of his tax_liability petitioner contends that its failures to timely file deposit and timely pay were due to financial circumstances beyond its control as it relates to the failures to file we cannot accept petitioner’s argument although petitioner’s financial difficulties may have affected its ability to timely pay and make deposits they did not affect its ability to file its returns see 482_f3d_792 5th cir the court_of_appeals for the fifth circuit to which this case is appealable has acknowledged that there is a circuit split regarding whether financial difficulty alone can constitute reasonable_cause for the failure to pay or deposit taxes id pincite the court_of_appeals for the sixth circuit uses a bright-line_rule under which financial difficulty may never constitute reasonable_cause whereas the courts of appeals for the second third seventh and ninth circuits use a multi-factor test id the court in staff it assumed the multifactor test applied and analyzed the taxpayer’s financial circumstances to determine whether it exercised ordinary business care and prudence under the multifactor test the court primarily assesses whether the taxpayer favored other creditors over the government which weighs against a finding of reasonable_cause and whether the taxpayer demonstrated a willingness to decrease expenses and personnel which weighs in favor of finding reasonable_cause id pincite petitioner did not demonstrate a willingness to decrease its expenses reduce salaries or lay off personnel in an attempt to meet its tax obligations mr harris testified that petitioner did not have excess expenses to cut because it paid only for necessities however during the periods at issue petitioner continued to pay for christmas parties provide yearend bonuses to its employees and pay the partners all of their guaranteed payments petitioner’s preference for these expenses over its tax obligations does not demonstrate ordinary business care and prudence in providing for payment of tax_liabilities it is this type of spendthrift there is testimony that the partners’ guaranteed payments were often delayed but there is no corroborating evidence in the record behavior sec_301_6651-1 proced admin regs warns against the logical consequence of petitioner’s actions is the imposition of additions to tax and penalties we also reject petitioner’s other reasonable_cause arguments mr harris argued at trial that the penalties should be abated because all of the taxes were eventually paid and though he was designated the tax_matters_partner he was not qualified to handle petitioner’s tax_liabilities the code requires more than full payment of taxes it requires timely filing and timely payment sec_6651 also mistake as to or ignorance of the law does not amount to reasonable_cause 25_tc_13 rayhill v commissioner tcmemo_2013_181 petitioner has failed to establish reasonable_cause and we accordingly uphold the so’s decision to sustain respondent’s determination of penalties and additions to tax v conclusion petitioner has failed to establish that any of the so’s determinations were incorrect and we accordingly sustain them a taxpayer who incurs lavish_or_extravagant living_expenses in an amount such that the remainder of his assets and anticipated income will be insufficient to pay his tax has not exercised ordinary business care and prudence in providing for the payment of his tax_liability in reaching our holdings herein we have considered all arguments made and to the extent not mentioned above we conclude they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------------ ----------------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc ita b05 plr-137193-08 date october taxpayer ------------------------------------ ----------------------------------------- ---------------------------------------- year a ------- year b ------- dear ------------------------- this ruling responds to a request for the commissioner’s consent to revoke an election the representations supporting this request are summarized below the taxpayers are shareholders in an s_corporation a pass-through entity and file their federal_income_tax return on a calendar_year basis the s_corporation enters into long-term_contracts and accounts for them using the percentage-of-completion method pcm the taxpayers elected under sec_1 d ii b to use the simplified marginal impact method smim to compute the amount of look-back interest with respect to their share of long-term_contract income and expense reported by the pass-through entity the election was effective with the s election of the corporation on july in year a if consent is granted by the commissioner to revoke the election taxpayers will begin computing look-back using the actual method provided in sec_1_460-6 based on the facts and information submitted and the representations made the request to revoke the election under sec_1_460-6 is granted thus taxpayers may begin computing their look-back interest using the actual method rather than the smim beginning in year b however should taxpayers desire to re-elect the smim within the next six years they must obtain the commissioner’s prior consent a copy of this letter_ruling should be attached to taxpayers’ federal_income_tax return plr-137193-08 for year b no opinion is expressed concerning any other provisions of the code or regulations that apply to the taxpayers this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent enclosed is a copy of the letter_ruling showing the deletions proposed to be made when it is disclosed under sec_6110 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter_ruling to your authorized representative sincerely yours john m aramburu senior counsel branch income_tax accounting office_of_chief_counsel cc


id office uilc cca_2010100616544044 ---------------------------- number release date from --------------------- sent wednesday october pm to ---------------------- cc --------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- subject refund_suit sol --------- - you asked whether the general six-year statute_of_limitations for bringing claims against the government under u s c and applies to tax_refund suits brought under sec_7422 it is the position of the office_of_chief_counsel that the six-year statute_of_limitations set forth in u s c and does not apply in situations where a taxpayer has filed a timely claim_for_refund and the service has not issued a valid notice of claim disallowance in such situations the taxpayer may file a suit_for_refund at any time six months after a timely claim_for_refund was filed see revrul_56_381 1956_2_cb_953 -------------------------- ------------ --------- ---------------------


tcmemo_2007_45 united_states tax_court laura denise seidel petitioner v commissioner of internal revenue respondent docket no filed date laura d seidel pro_se jeremy l mcpherson for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined a dollar_figure deficiency in petitioner’ sec_2002 federal_income_tax and a dollar_figure addition_to_tax pursuant to sec_6654 as well as additions to tax unless 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 pursuant to sec_6651 and after concessions the issues for decision are whether dollar_figure petitioner received in connection with a settlement of a lawsuit is excludable from gross_income pursuant to sec_104 and whether petitioner is liable for an addition_to_tax pursuant to sec_6654 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time she filed the petition petitioner resided in yuba city california respondent conceded the sec_6651 and additions to tax respondent also conceded that petitioner paid dollar_figure for medical_expenses dollar_figure for taxes dollar_figure for interest and dollar_figure in charitable donations this amount equals settlement proceeds of dollar_figure net of petitioner’s attorney’s fees litigation expenses and the amount_paid to her as wages in 543_us_426 decided over months before trial in this case the supreme court held that as a general_rule when a litigant’s recovery constitutes income the portion of the recovery paid to an attorney as a contingent_fee is included in the litigant’s income at the beginning and the end of the trial pursuant to rule b respondent orally moved to amend the pleadings to conform to the evidence ie to treat the entire settlement proceeds of dollar_figure as income generally we do not consider issues that are raised for the first time at trial see 92_tc_376 affd 920_f2d_1196 5th cir 64_tc_989 additionally we denied respondent’s motion as it was prejudicial to petitioner to allow respondent to amend the pleadings this late respondent had sufficient time to amend the pleadings before trial in petitioner was hired by the california state automobile association now american automobile association or aaa she was employed as an insurance claims adjuster and a bodily injury claims adjuster for more than years over the years her workload increased causing her to feel overwhelmed petitioner complained to her supervisors but very little was done to address her concerns as the employment relationship deteriorated and work-related stress mounted petitioner sought medical attention in petitioner was diagnosed with attention deficit disorder add and obsessive compulsive disorder ocd in petitioner was diagnosed with posttraumatic stress disorder these conditions were aggravated by the demands and workload of petitioner’s position again petitioner complained to her supervisors and requested accommodations from her employer regarding her condition these requests were not granted and petitioner eventually became totally unable to perform her work functions petitioner took a series of leaves of absence because she was not able to work under these conditions in petitioner filed a lawsuit against her employer both in california state court and in the u s district_court for the eastern district of california in the district_court petitioner alleged three causes of action employment discrimination on account of mental_disability in violation of the california fair employment and housing act feha cal govt code sec employment discrimination in violation of the americans with disabilities act ada u s c sec and a state law claim based upon the failure to compensate for overtime in violation of california state regulations in her california state court complaint petitioner alleged four causes of action based upon the same facts as the district_court case discrimination on the basis of disability and failure to provide reasonable accommodation for disability feha cal govt code sec failure to provide an environment free of harassment and discrimination in employment feha cal govt code sec retaliation and alleged overtime violations on the part of her employer in both lawsuits petitioner prayed for damages for the loss of wages of earning capacity and of benefits of employment general damages for emotional distress incidental and punitive_damages and reasonable attorney’s fees and costs in march of petitioner and aaa entered into a settlement agreement and general release of all claims that settled all claims between petitioner and aaa settlement agreement the settlement agreement resolved the california state court complaint and the district_court complaint the settlement agreement provided payment to petitioner of the following amounts payable to petitioner with no amounts withheld payable to petitioner as wages with payroll tax withheld payable to petitioner’s attorneys for legal fees and costs with no amount withheld dollar_figure big_number big_number page of the settlement agreement provided that petitioner acknowledges that she considers the payment of the check payable to her without withholdings the dollar_figure payment to be compensation_for personal injury ie emotional distress damages only respondent issued petitioner a notice_of_deficiency for determining that dollar_figure of the settlement was not excludable from her gross_income pursuant to sec_104 opinion i deficiency a burden_of_proof generally the taxpayer bears the burden of proving the commissioner’s deficiency determinations incorrect rule a 290_us_111 petitioner has neither claimed nor shown that she satisfied the requirements of sec_7491 to shift the burden_of_proof to respondent accordingly petitioner bears the burden_of_proof see rule a b sec_104 it is well established that pursuant to sec_61 gross_income includes all income from whatever source derived unless otherwise excluded by the internal_revenue_code see 348_us_426 exclusions from gross_income are construed narrowly 515_us_323 the small_business job protection act of sbjpa publaw_104_188 sec 110_stat_1838 amended sec_104 as relevant here to provide sec_104 compensation_for injuries or sickness a in general --except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 relating to medical etc expenses for any prior taxable_year gross_income does not include-- the amount of any damages other than punitive_damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal physical injuries or physical sickness for purposes of paragraph emotional distress shall not be treated as a physical injury or physical sickness sec_104 as amended by the sbjpa generally is effective for amounts received after date sbjpa sec d 110_stat_1839 damages received mean amounts received through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution sec_1_104-1 income_tax regs in evaluating whether amounts received pursuant to the settlement agreement are excludable from income pursuant to sec_104 we look to the written terms of the settlement agreement to determine the origin and allocation of the settlement proceeds see 88_tc_834 affd without published opinion 845_f2d_1013 3d cir jacobs v commissioner tcmemo_2000_59 affd sub nom 22_fedappx_967 10th cir petitioner settled her claims against her former employer before trial the parties entered into a written settlement agreement the dispute between respondent and petitioner revolves around the following language in the settlement agreement petitioner acknowledges that she considers the payment of the check payable to her without withholdings to be compensation_for personal injury ie emotional distress damages only the parties agree that this sentence applies to the dollar_figure payment at issue petitioner contends that this language means that the settlement was compensation_for personal injuries including but not limited to emotional distress and that the abbreviation ie means for example respondent argues that the parenthetical phrase personal injury ie emotional distress damages only is a limiting phrase and the abbreviation ie means that is i e is an abbreviation for the latin phrase id est which means that is or that is to say black’s law dictionary 6th ed accordingly we agree with respondent that the parenthetical phrase in the settlement agreement limits and defines the phrase personal injury to mean emotional distress only furthermore the settlement agreement does not contain language indicating that any portion of the settlement was paid for a physical injury or physical sickness thus even if the court were to accept petitioner’s reading of the settlement agreement there is no apportionment of any of the settlement proceeds to a physical injury or physical sickness accordingly we conclude that none of the settlement proceeds of dollar_figure is excluded from gross_income ii addition_to_tax a burden of production sec_7491 provides that the commissioner bears the burden of production with respect to the liability of any individual for additions to tax the commissioner’s burden of production under sec_7491 is to produce evidence that it is appropriate to impose the relevant penalty addition_to_tax or additional_amount 118_tc_358 116_tc_438 if a taxpayer files a petition alleging some error in the determination of an addition_to_tax the taxpayer’s challenge will succeed unless the commissioner produces evidence that the addition_to_tax is appropriate swain v commissioner supra pincite petitioner challenged the sec_6654 addition_to_tax in her petition accordingly respondent bears the burden of production on this issue b sec_6654 sec_6654 provides for an addition_to_tax in the event of an underpayment of a required_installment of individual estimated_tax sec_6654 and b each required_installment of estimated_tax is equal to percent of the required_annual_payment which is equal to the lesser_of percent of the tax shown on the individual’s return for that year or if no return is filed percent of his or her tax for such year or if the individual filed a return for the immediately preceding_taxable_year percent4 of the tax shown on that return sec_6654 and b i and ii in order to if the adjusted_gross_income shown on the return_for_the_preceding_taxable_year exceeds dollar_figure percent is replaced with percent for sec_6654 satisfy his burden of production under sec_7491 regarding petitioner’s liability for the sec_6654 addition_to_tax respondent at a minimum must produce evidence necessary to enable the court to conclude that petitioner had a required_annual_payment under sec_6654 127_tc_200 petitioner credibly testified that she filed a return for respondent however has not provided evidence of the amount of tax shown on the return or that petitioner did not file a return for without this information we cannot determine the amount of the required_annual_payment therefore respondent has not met his burden of production regarding the sec_6654 addition and we conclude that petitioner is not liable for this addition_to_tax in reaching all of our holdings herein we have considered all arguments made by the parties and to the extent not mentioned above we find them to be irrelevant or without merit to reflect the foregoing decision will be entered under rule


person to contact department of the treasury ------------------------------ ----------------- ------------------- ---------------------------- --------------------- badge number ------------- contact telephone number --------------------- contact address -------------------------- internal_revenue_service number release date uil date date org num date petition org ------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- certified mail dear ------------------ this is a final revocation letter as to your exempt status under sec_501 of the internal_revenue_code recognition of your exemption under sec_501 is retroactively revoked to date for the following reason s you have not been operated exclusively for an e xempt purpose as required by internal_revenue_code sec_501 you have not demonstrated that you primarily engage in activities which accomplish one or more of such exempt purposes specified in sec_501 as required by sec_1_501_c_3_-1 contributions to your organization are no longer deductible effective date if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the 91st ninety-first day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment the last day for filing a petition for declaratory_judgment is petition employer_identification_number num you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call -877- and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to local office taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fi xed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above enclosures publication r c johnson director eo examinations sincerely


internal_revenue_service number release date index number --------------------------------- -------------------------------------------------- ---------------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number -------------------- refer reply to cc corp b04 plr-125806-07 date date ------------------------------------------- --------------------------------------- ----------------------------------- legend oldco ---------------------------------------------------------------- ----------------------------------------------------- -------------------------------------------------- sub ------------------------------------------------------ -------------------------------------------------- sub ------------------------------------------------------ -------------------------------------------------- buyer -------------------------------------------------- country x state a state b usrpi ----------------------------------------- usrpi ------------- --------- -------- ----------------------------------------- ------------------------------------------- ------------------------------------------------------------------------------------------ ----------------- ------------------- ------------------- --------------- ------------------------------------------- plr-125806-07 date a a b c d e dear -------------------- this letter responds to your letter dated date requesting rulings as to the federal_income_tax consequences of a proposed transaction the information submitted in that request and subsequent correspondence is summarized below submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings the rulings contained in this letter are based on the facts and representations ----------------- summary of facts oldco is a country x corporation with a u s branch in state b all the stock of oldco is owned by two country x citizens the oldco shareholder s oldco is currently a debtor in a bankruptcy proceeding under chapter of title of the u s code the bankruptcy on date a a plan_of_reorganization the chapter plan was confirmed by a united_states bankruptcy court in state b the bankruptcy court oldco’s debt claims and obligations exceed dollar_figurea an amount in excess of the fair_market_value of its assets oldco’s principal assets are a leasehold interest in usrpi a u s real_property interest under sec_897 dollar_figureb in cash held in a country x bank account and all the stock of sub a state b corporation the stock of which is a u s real_property interest under sec_897 sub 1’s principal assets consist of usrpi the estimated fair_market_value of oldco’s assets exceed their adjusted tax basis by an amount exceeding dollar_figurec oldco will also hold stock in sub a state b corporation as described in step i below corporation by engaging in a reorganization described in sec_368 the domestication as defined in step vi below to implement the chapter plan oldco intends to become a state a proposed transaction plr-125806-07 i ii iii iv following the entry of an order in country x court confirming oldco’s a country x judicial corporate_reorganization proceeding will be filed in after the confirmation of chapter plan oldco will transfer to sub a pursuant to the chapter plan a liquidating_trust that is intended to oldco has proposed and partially completed the following steps collectively the proposed transaction pursuant to the chapter plan newly-formed subsidiary the d assets associated with usrpi in a transaction treated as a taxable sale qualify as a liquidating_trust within the meaning of sec_301_7701-4 will be created for the benefit of certain of oldco’s creditors who will receive a beneficial_interest in the liquidating_trust pursuant to the chapter plan oldco will transfer certain assets excluding usrpi and usrpi and a promissory note to the liquidating_trust the plan note country x court country x plan_of_reorganization a date which is likely to be at least three months after the commencement of the country x proceeding oldco will begin to dissolve under country x law following oldco’s commencement of dissolution under country x law pursuant to the chapter plan and oldco’s country x plan_of_reorganization all of oldco’s debt will be discharged under both u s and country x law except for oldco’s obligation to pay the plan note and certain other obligations under the chapter plan collectively the plan obligations state a subsidiary newco will assume all of the plan obligations of oldco the newco stock held by oldco will be cancelled and new newco stock will be issued to the oldco shareholders oldco will then complete its dissolution under country x law and cease to exist the domestication issued to the oldco shareholders in step vi will be cancelled and buyer will contribute dollar_figuree to newco in exchange for new newco stock an amount approximately equal to the total fair_market_value of oldco’s assets that will be transferred to newco newco will transfer the amount received from the buyer to the liquidating_trust in satisfaction of the plan note the liquidating_trust will distribute the proceeds from the retirement of the plan note net of reserves for disputed claims and trust expenses to creditors as required under the terms of the chapter plan vi oldco will transfer all of its assets to newco a newly-formed wholly-owned vii at least one business_day after the domestication the newco stock v representations c d a b at the time of the domestication oldco will not have outstanding any immediately following the domestication newco will possess the same oldco makes the following representations with respect to the proposed immediately following the domestication the oldco shareholders will own the fair_market_value of newco stock received by each oldco shareholder plr-125806-07 transaction in the domestication will be approximately equal to the fair_market_value of the oldco stock deemed surrendered in the exchange all of the outstanding newco stock and will own such stock solely by reason of their ownership of oldco stock immediately prior to the domestication assets and liabilities as those possessed by oldco immediately prior to the domestication except for assets used to pay expenses_incurred in connection with the transaction no assets will be distributed in the domestication and there will be no dissenting shareholders assets used to pay expenses will constitute less than one percent of the net assets of newco immediately before the domestication warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in oldco domestication however after the domestication the stock issued to the oldco shareholders will be cancelled by u s bankruptcy law pursuant to the chapter plan assets of oldco acquired in the domestication except for dispositions made in the ordinary course of business liabilities if any to which the transferred assets are subject are based on liabilities that were incurred by oldco in the ordinary course of its business and are associated with the assets transferred oldco or use a significant portion of oldco’s historic_business_assets in a business incurred in connection with the transaction as of the date of the domestication sub will be a u s real_property holding corporation usrphc under sec_897 and its stock will be a u s real_property interest usrpi under sec_897 following the domestication newco will continue the historic_business of newco has no plan or intention to reacquire any of its stock issued in the newco has no plan or intention to sell or otherwise dispose_of any of the the liabilities of oldco assumed by newco ie the plan note plus the the oldco shareholders will pay their respective expenses if any f h g e i j k as of the date of the domestication the assets being transferred to newco plr-125806-07 represent usrpis under sec_897 therefore newco will be a usrphc under sec_897 and newco’s stock will be a usrpi under sec_897 activity and will hold no assets except for possibly having a minimal amount of assets i for the purpose of paying newco’s incidental_expenses and or ii if necessary for maintaining newco’s status as a corporation in accord with state a law corporation under sec_897 m oldco has not has made an election to be treated as a domestic immediately prior to the domestication newco will be engaged in no l ruling sec_3 newco will recognize no gain_or_loss on the receipt of oldco’s assets in based on the information submitted and the representations made we rule as follows the domestication as described in step vi of the proposed transaction will constitute a reorganization within the meaning of sec_368 oldco and newco will each be a party to the reorganization under sec_368 oldco will recognize no gain_or_loss on the transfer of assets to newco in the exchange for the newco stock and newco’s assumption of oldco’s liabilities in the domestication sec_361 and sec_357 the exchange for the newco stock as described above sec_1032 the assets immediately prior to the domestication sec_362 which the assets were held by oldco sec_1223 shareholders of the newco stock sec_361 of the oldco stock for newco stock sec_354 the same as the basis of their oldco stock exchanged therefor sec_358 newco’s holding_period in the oldco assets will include the periods during newco’s basis in the assets of oldco will be the same as oldco’s basis in the basis of the newco stock received by the oldco shareholders will be the oldco shareholders will recognize no gain_or_loss on their exchange oldco will recognize no gain_or_loss on the distribution to the oldco plr-125806-07 shareholders will include the period during which the oldco shareholders held their oldco stock provided the oldco stock is held as a capital_asset on the date of the exchange sec_1223 the holding_period of the newco stock received by the oldco the liquidating_trust will be treated as a creditor of newco the tax_year of oldco will terminate upon the date of the domestication further based solely on the information submitted and on the representations set forth above and provided that newco is a u s real_property holding corporation as defined in sec_897 and meets the filing_requirements of sec_1_897-5t of the temporary regulations as modified by notice_89_57 1989_2_cb_403 it is held as follows newco will succeed to and take into account all the items of oldco described in sec_381 except for foreign taxes described in sec_1_367_b_-3 net_operating_loss and capital_loss carryovers as described in sec_1_367_b_-3 and oldco’s deficit in earnings_and_profits as described in sec_1_367_b_-3 sec_1_367_b_-2 newco in exchange for newco stock under sec_897 and sec_1_897-6t oldco will recognize no gain_or_loss on the distribution of the newco stock to oldco shareholders under sec_897 and sec_1_897-5t as modified by notice_89_85 and notice provided that oldco pays an amount equal to any taxes plus interest that sec_897 would have imposed upon all persons who had disposed of interests in oldco during the ten year period as if oldco were a domestic_corporation on the date of each such disposition and the conditions of sec_1_897-5t and c are met newco in a reorganization described in sec_381 provided that newco files form_8848 consent to extend time to access the branch_profits_tax in accordance with the requirements of sec_1_884-2 oldco’s dividend_equivalent_amount for the taxable_year of the transfer if any will be determined under the provisions of sec_1_884-1 as modified by sec_1_884-2t oldco will recognize no gain_or_loss on the transfer of the usrpis to sec_1_884-2t will apply to the transfer by oldco of its assets to caveats except as specifically set forth above we express no opinion concerning the tax consequences of the proposed transaction under any other provision of the code or regulations or the tax treatment of any conditions existing at the time of or effects plr-125806-07 resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding the tax consequences of oldco’s transfer of the d assets to sub in addition except as provided above no opinion is expressed regarding sec_1445 sec_884 or other international tax consequences resulting from the proposed transaction procedural statements this letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling pursuant to a power_of_attorney on file in this office a copy of this letter_ruling will be sent to your authorized representative cc _marie c milnes-vasquez___ marie c milnes-vasquez senior technician reviewer branch associate chief_counsel corporate sincerely


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp plr-105271-00 date date b e f g f this letter responds to your date request for a supplement to our prior letter_ruling dated date the prior letter_ruling the legend abbreviations summary of facts and representations appearing in the prior letter_ruling are hereby incorporated by reference unless otherwise indicated the prior letter_ruling addresses certain federal_income_tax consequences of a then proposed restructuring of the distributing group that has since culminated in i the transfer by distributing of business d to controlled for controlled stock ii an initial_public_offering of less than a percent of the controlled stock the ipo and iii distribution of the remaining controlled stock pro_rata to distributing’s shareholders supplemental facts stock repurchase in the prior letter_ruling distributing represented that there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 distributing is now considering entering into an agreement with an unrelated financial_institution the financial party under which the financial party would purchase approximately e shares of distributing common_stock less than two percent of the stock outstanding in the open market and then resell the shares to distributing plr-105271-00 for a price initially market_value that would be adjusted one year later to reflect the average market price of the stock for the intervening period the stock repurchase distributing would thus be able to reduce its total number of shares outstanding immediately for the economic cost it would have incurred had the repurchase been spread ratably over twelve months distributing would pay the financial party a fixed fee for its services to reflect this change new step ix is added as follows ix after the completion of distribution distributing will purchase approximately e shares of distributing common_stock from an unrelated financial_institution the stock repurchase further distributing amends representation bb in the prior letter_ruling to read as follows bb there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution other than through the stock repurchase or stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 board composition the proposed transactions are justified in part by a fit and focus business_purpose in such situations revproc_96_30 1996_1_cb_696 appendix a sec_2 a requires that the service closely scrutinize continuing relationships between distributing and controlled such as common directors as a result of changed circumstances f one of distributing’s more than ten directors now serves on controlled’s more than five member board in both cases the member is an outside director we note that f is the son of a a five-percent shareholder of distributing and that if f actively participated in the management of distributing this relationship could cause f to be treated as a significant shareholder and could have prevented the service from ruling favorably on the fit and focus business_purpose id at sec_2 and we have not treated f as a significant shareholder however for a variety of factual reasons including but not limited to f’s direct ownership of less than one one-hundredth percent of the distributing stock a’s ownership of only slightly more than five percent of the distributing stock a’s estate plan which has been in place for at least three years f’s position as an outside director the fact that f did not and does not propose strategic initiatives the fact that the transactions were proposed by others f’s questions regarding and g the proposed transactions and f’s abstention from the vote to approve the proposed transactions the cash payment step vii of the prior letter_ruling states that in plr-105271-00 connection with contribution controlled will make a distribution of b dollars in cash to distributing the cash payment because the pricing of the controlled shares sold in the ipo was better than expected the amount of the cash payment was increased by f the legend b amount is amended to reflect this change supplemental ruling based solely on the information and representations submitted in the original and supplemental requests we rule that the above changes do not affect the rulings contained in the prior letter_ruling and those rulings remain in full force and effect we express no opinion about the tax treatment of the transactions under any other section of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered in the above rulings this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be attached to the federal_income_tax return of each affected taxpayer for the taxable_year in which the transactions covered by this letter are completed in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer and to the second authorized representative sincerely yours assistant chief_counsel corporate by wayne t murray senior technical reviewer branch